By Leo Mirani, August 12, 2014
Cabbies around the world have protested the rise of Uber, an app that helps people find taxis, by staging noisy protests, blocking the streets and creating snarling traffic jams. Their counterparts in India—where the traffic is frequently gridlocked anyway—are deploying a much more powerful tool: legal nitty-gritty.
According to the Economic Times, three Uber competitors—Meru Cabs, Easy Cab, and Mega Cab—have written to the Reserve Bank of India, complaining that Uber is violating foreign-exchange laws. Unlike black-and-yellow street taxis, “radio taxis” like Meru must be pre-booked, so they are the ones most likely to lose business to Uber. The Association of Radio Taxis (ART) alleges that Uber violates the Foreign Exchange Management Act (FEMA) and the central bank’s rules on credit card transactions.
The ART points out Uber accepts payments in Indian rupees, and then transfers it to a Dutch Bank. (The Netherlands, as Quartz has explained before, has no “withholding taxes,” allowing money to flow unmolested through the country.) The payment to the Indian cabbie is then sent from a U.S. bank. In its letter, the ART argues: “Collection of fares by Uber on behalf of a taxi driver in India should qualify as a capital account transaction under FEMA, and since such a transaction is not specifically permitted under the regulations, it is our understanding that the transaction is in gross contravention of the Indian exchange control regulations.”
Moreover, the complaint alleges that Uber is just a middleman and that the transaction is between two Indians—the driver and the passenger. Indian citizens cannot do business in a foreign currency, making Uber complicit in helping them break the law.
Uber India does appear to think in dollars and pounds sterling rather than rupees. According to Uber’s Mumbai support page, “Our secure payment gateway uses a £1 (Rs 80) or a $1 (Rs 60) authorization charge to verify your card is valid when you sign up, add a new card, or in some cases when you book an Uber ride.” (Exchange rates have since fluctuated.)
Will the ART complaint bring Uber India to a screeching halt? The last time anyone cited legalese to stop Uber, it came to nothing: In June, London’s cabbies argued that Uber’s app qualified as a meter, and therefore contravened rules that only black cabs can provide metered fares. Regulators didn’t agree. London’s minicabs, which can only be booked over the phone, also brought up the same Dutch company cited by the ART, saying that it is unlicensed to book fares in London. The court declined to accept the case because it is too busy dealing with complaints against individual drivers. Uber’s tax affairs are also under scrutiny in the U.K.