Uber and taxis: solutions for a peaceful coexistence

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With an anti-Uber show of force from taxi owners in the works for this Wednesday, an MEI Viewpoint published today describes the broad strokes of two reforms put in place recently in Australia, which

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With an anti-Uber show of force from taxi owners in the works for this Wednesday, an MEI Viewpoint published today describes the broad strokes of two reforms put in place recently in Australia, which demonstrate that solutions exist for allowing the taxi industry and ride-sharing applications to coexist.

In New South Wales (which includes the city of Sydney), owners of taxi licences will be compensated for their financial losses stemming from the regulatory change. Long-time owners could receive an amount of $20,000 per licence, whereas compensation could go up to $175,000 for a licence purchased in 2015. This compensation will be financed in its entirety by a temporary $1-per-ride tax, applicable to both traditional taxis and services like Uber.

For its part, the Australian Capital Territory (which contains the city of Canberra) eliminated the privileged status of existing taxi dispatch companies in October 2015, putting them in direct competition with applications like Uber under the same legal status.

Ride-sharing drivers need to fulfill certain requirements in order to guarantee the safety of the service, and the new regulatory framework greatly reduces the administrative costs and training requirements related to operating a traditional taxi. One study estimated that after five years, this reform would generate a net annual benefit of $3.5 million a year for residents of Canberra.

“Today, everyone except for the most determined opponents realizes that this technological innovation is here to stay. Now it’s time to find solutions,” says Youcef Msaid, coauthor of the Viewpoint and Associate Researcher at the MEI. “The goal is both to allow ride-sharing applications to develop and to give taxi drivers the means to adjust and improve the service they offer. The consumer will be the biggest winner.”

“Our governments can take inspiration from these reforms,” adds Youri Chassin, Research Director at the MEI. “On the one hand, the Australian authorities recognize their share of responsibility for the difficulties facing certain taxi owners who have paid a hefty price to be allowed to ply their trade. But on the other hand, they are being pragmatic in legalizing an innovation that is much-appreciated by consumers.”

Two weeks ago, Edmonton became the first Canadian city to officially announce the legalization of Uber. However, no compensation has been offered to taxi drivers in that city.

The Viewpoint entitled “Uber and Taxis: Australia Opens the Door to Reforms” was prepared by Youcef Msaid, Associate Researcher at the MEI, and Youri Chassin, Research Director at the MEI. This publication is available on our website.

The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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