How Uber sought to avoid paying millions in taxes in the different countries in which it operates

In early 2015, European regulators set their sights on Apple, Amazon and Google, accusing the American tech titans of unfair competition and abuse of advantageous tax deals.

Uber Technologies Inc. executives took note: They feared their company could be next, documents recently leaked to the media show. global investigation known as The Uber Files. As he expanded his presence around the world, the transportation services giant had devised ways to save millions of dollars in taxes, funneling the profits through Bermuda and other tax havens.

“Our corporate tax structure is, in purely European political terms, the company’s Achilles’ heel,” wrote Mark MacGann, Uber’s chief lobbyist in Europe at the time, to the head of the company’s tax department.

As scrutiny increased, Uber devised a bold strategy to divert attention from its tax responsibilities: helping authorities collect taxes from its drivers.

In an email sent to other officials, MacGann stated that sharing information about drivers’ earnings could “contain” lawsuits from tax authorities. By doing so, Uber could “avoid expanding the investigation to other countries and/or other (corporate) tax matters,” he wrote.

The investigation known as The Uber Files, in which Infobae participates, includes emails and other internal company documents leaked to The Guardian newspaper and shared with the International Consortium of Investigative Journalists (ICIJ for its acronym in English). The records, which span from 2013 to 2017, reveal how the ride-hailing company’s executives have managed crises, including reacting to its aggressive tax avoidance strategy, since Uber was no longer a tiny tech company. Silicon Valley and became a global giant.

The documents also illustrate how governments have been fighting to make digital companies pay taxes in the countries where they operate, money that could be spent on healthcare, education and even the roads used by ride-sharing companies.

Under its founder, Travis Kalanick, Uber gained a certain reputation for its macho corporate culture. There were accusations of rampant sexual harassment, spying on rivals and hindering law enforcement investigations.

Leaked records indicate that the same cavalier attitude permeated Uber’s attitude toward tax laws.

According to the confidential emails, executives instructed regional managers on how to preempt government criticism by talking about “solutions” Uber had devised to ensure its drivers paid taxes. A digital tax filing platform tested in collaboration with the Estonian tax authorities was one of the solutions cited in the emails.

In a 2016 memo about meetings with local African officials, a senior political official described how, in Nigeria, the Uber team had succeeded in bringing the Uber tax debate to drivers.

“We met with the Lagos tax authorities, who praised our efforts to ensure compliance with tax obligations [de los conductores]and shifted focus from Uber ‘avoiding taxes’ to working together to ensure compliance [por parte de los conductores]”, wrote the director.

Uber officials knew the company’s aggressive stance would attract unwanted attention, the documents show.

“Certain topics, like corporate taxation, are very sensitive and draw a lot of criticism,” Uber CEO Pierre-Dimitri Gore-Coty wrote in a memo after a November 2015 phone call with then-CEO Travis Kalanick.

An Uber subsidiary in Bermuda, which held valuable patents on the company’s ride-sharing technology, was seen as potentially damaging to the company’s reputation. The fees for the use of the ride-sharing application went to the Bermuda headquarters, which drastically reduced Uber’s global tax bill.

“The thing about Bermuda or the Cayman Islands is what really bothers a lot of people in Europe,” wrote Rachel Whetstone, then head of communications for Uber, in an email to managers. “Even just not being in the Caribbean would put us way ahead of US tech companies,” Whetstone remarked.

“Anyway, let it stay between us, as it is a ‘must not be named’ issue,” he wrote, presumably referring to tax evasion.

Uber maintains that it is not a transportation company, but rather the operator of a digital platform that connects passengers with drivers, who are independent contractors, not employees. The agreement allows the company to avoid a series of costs and responsibilities, such as contributing to social security and collecting value added tax on journeys.

“Uber is committed to complying with tax laws and regulations everywhere it operates and to enabling Uber suppliers, partners and drivers to comply with their own legal and tax obligations,” said company spokeswoman Jill Hazelbaker. , in a written response to questions from ICIJ and associated media.

the dutch connection

Uber’s headquarters in San Francisco occupies two modern buildings facing the bay of that city. But The company’s financial center for its activities in much of the world is in the Kingdom of the Netherlands, a tax haven for companies.

In 2012, just months after its European debut in France, Uber created a Dutch company, Uber BV, to collect payments from customers using Uber cars in New Delhi, London, Sydney and hundreds of other cities around the world. world.

Uber BV returned up to 80% of each ticket to the driver. Most of the rest was sent to its operation in Bermuda, where the company’s income is not subject to tax.

The deal made it difficult for national tax authorities to know how much drivers earn because they are paid through the Netherlands.

The leaked documents include an email exchange between lobbyist chief MacGann and an Uber spokesperson on how to respond to questions from a Tech Crunch reporter who had asked why the company’s international headquarters were in the Netherlands, and how taxes fit into the picture.

“It could be that anything we say is perceived as defensive at best,” MacGann wrote. “We have to show that hundreds of large international companies have settled in [Ámsterdam] during decades. … Amsterdam and the Dutch government have shown that the Netherlands is ‘open for business’”.

Uber’s special connection to the Netherlands became apparent in the spring of 2015, when tax authorities in France, Germany, Sweden, the UK and Belgium contacted their Dutch counterpart to request that Uber BV share driver information. .

Authorities wanted to know the name and date of birth of the workers, their license plates, the number of trips, bank accounts and other details to determine their tax obligations, according to a leaked email.

The request initially alarmed Uber officials, leaked records show. They feared that the authorities would start going after the drivers ー the company “offer” ー demanding back taxes and sharing data with other agencies. They worried that drivers would leave the company and go to work for Uber’s competitors.

In confidential emails sent to managers, one of Uber’s international tax managers, Rob van der Woude, listed the pros and cons of complying with the authorities’ demands.

“Little financial risk for Uber,” he wrote. “Immediate financial responsibility for driver-partners”.

As Uber executives debated how to respond, the company was hoping Dutch authorities would give it more time, the leaked messages say.

“The Dutch tax authorities are trying to stop the exchange of information and will probably do the same if new requests arise from other countries,” van der Woude wrote in an email.

The documents do not explain what form that slowdown took. But meeting minutes on file with Uber indicate that in April 2015, company officials met with five senior Dutch officials at the Dutch consulate in San Francisco to discuss the company’s activities in the world. European country and when the audit by the European authorities would take place. The documents also indicate that Uber was used to Dutch authorities shielding the company from regulatory scrutiny in other countries.

“This relationship is of great importance and value, taking into account our corporate structure and tax efficiency,” said van der Woude in a confidential message. “The Dutch tax authorities have been cooperative and protective of us.”

The five EU countries were also investigating Uber to assess whether the company was paying income tax where it was due, and whether it had to charge value-added tax on rides.

“It will be an important battle that we will need [las autoridades fiscales holandesas] free for us ”, affirmed van der Woude in an email.

Following internal discussions in late 2015, Uber officials decided to comply with European authorities’ request for driver information to demonstrate that the company was taking drivers’ tax compliance “seriously,” van der Woude wrote. .

Dutch officials had given the company ample time to “get our affairs in order,” he noted.

Uber Files

In December 2015, van der Woude shared “positive updates” with his colleagues: a contact working for the Dutch tax agency had assured him that once the countries involved in the audit received the information from the drivers, “they would not adopt a punitive approach” to taxing drivers.

Officials also did not want to reveal that Uber provided the information used to remind drivers to pay their taxes, van der Woude explained in an email to colleagues.

The five EU countries, plus the Dutch tax agency, agreed that Uber’s policy of not charging value added tax on the service fee was “sensible” and would not give rise to claims against the company, said van der Woude in another post.

Both MacGann and van der Woude have left the company. They have not commented on their role in dealing with tax authorities.

The experts interviewed by the ICIJ journalists pointed out that Dutch officials could have violated local laws if they in any way hindered or delayed European authorities’ request for information and shared audit details with Uber.

A spokesman for the Dutch tax agency stated that the officials did not breach any obligations or delay the investigation, nor did they show any “favouritism” towards Uber.

The tax authorities followed the procedures “correctly” and “are firmly committed” to complying with international agreements, the spokesman said. He did not comment on the Uber case.

Uber planned to send the requested information about its drivers to the Dutch tax agency in January 2016, and then the Dutch would share it with other European officials, according to the leaked files.

It is unclear which countries received the data at the time. But in 2018, Danish tax authorities required some 1,200 Uber drivers to pay $1.9 million in taxes, after analyzing data provided by the Dutch.

In response to questions from the ICIJ, the Uber spokeswoman said that the company was “obligated to maintain an open and transparent working relationship with the tax authorities.”

“As part of our tax reporting and tax audit obligations, Uber routinely provides tax data to tax authorities, in accordance with tax laws and data protection regulations,” it said.

India: Embracing Chaos

Travis Kalanick’s “idyll” with India began when, as a young coder, he spent a month in the southern city of Varkala, working from the beach, he once remarked in a television interview.

Leaked files, corporate records and investigation by financial experts paint a different picture of Uber’s contribution to the Indian economy. show how the company devised ways to reduce its tax bill, fought tax authorities in court, and used Dutch subsidiaries to conduct its main business activities in the country.

In 2014, months after it was formed, Uber’s operations in India drew scrutiny from regulators. The Central Bank accused it of not complying with the rules on credit card transactions and the tax authorities claimed that the company did not pay service taxes on fees, as required by law.

Officials from the Indian collection department asked Uber’s manager in India to appear before them and give a statement, according to the leaked files.

Uber has hired lawyers – and accounting giant E&Y – to fight the authorities’ lawsuits.

As Uber’s lawyers defended themselves against the government’s claims, Allen Penn, then running Uber’s operations in Asia, emailed the Indian team with a smiley emoji encouraging everyone to stay focused and work hard. “dominate the market :)”.

“Embrace the chaos. It means they are doing something valuable,” Penn wrote in the email. “You and UBER are the ones who are making India better.”

Penn and Martinez did not respond to requests for comment from the ICIJ and its media partners. E&Y also did not comment.

By early 2015, it was clear that Uber had lost its first battle with the Indian authorities. The Ministry of Finance required all trucking companies to pay a service tax on all journey fares. It also asked Uber to hand over information about the drivers, who had to register with the tax authorities. But the company had a solution for the new tax.

In April 2015, Uber announced that it would include the service fee in the cost of the ride. Leaked records indicate that the company wanted to “show its commitment to comply” with Indian standards, opting for a strategy similar to that adopted in Europe.

“We guarantee the compliance of the driving partners and we will improve the relationship with the local authorities”, affirm the guidelines of the project in PowerPoint. “The goal is to become facilitators of tax collection and payment.”

In the years that followed, Uber resorted to various tax rulings in India. It reduced its corporate tax bill from $35 million to $8 million for the years 2018, 2019 and 2020, according to financial statements. The company received a favorable ruling after challenging tax claims from 2016 and 2017 and was waiting to see if the authorities would appeal, according to the latest financial statements.

India is estimated to lose $16 billion each year to corporate tax evasion and other tax abuse, according to a recent report by the Tax Justice Network.

global reorganization

In 2019, the idea of ​​closing operations in Caribbean tax havens was partially fulfilled. Before going public on the New York Stock Exchange, Uber restructured its global business.

A Dutch affiliate bought the intellectual property formerly owned by Uber’s holding company in Bermuda, using a $16 billion loan from Uber’s Singapore unit. The move came after the EU cracked down on tax evasion, an Uber spokesperson told Bloomberg News.

But the new deal contained lucrative tax breaks. Uber structured the loan from its subsidiary to reduce its taxable income in the Netherlands by about $1 billion a year over two decades, the term of the loan, according to a report by the International Center for Corporate Tax, Responsibility and Research, or CICTAR.

Tax justice advocates were outraged. One called Uber “the Champions League of tax evasion.”

CICTAR researchers estimated that in 2019, the year of its IPO, Uber evaded at least $556 million in taxes globally. In recent corporate filings, Uber claimed that it currently faces numerous audits by tax agencies in the United States and abroad.

According to Jason Ward, the CICTAR researcher who reviewed Uber deals in the Netherlands, India and other countries, companies like Uber “continually reshape” their structure in an effort to avoid taxes and confuse tax authorities. “The more it changes,” he declared, “the harder it is to keep track of it.”


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