Spruiking its long-awaited new regulatory framework for the Victorian taxi industry, the Andrews government this week claimed to be leading the nation in establishing a unified commercial passenger industry – one that will create 3,500 new jobs and give Victorians greater transport choices than ever before.
In a root-and-branch re-drawing of the existing licensing regime, over the next two years the system will be replaced by one that incorporates Uber and other ride-sharing services. It will also see taxi and hire-car licence values reduced to zero.
The previous government was instrumental in bringing down licence values. Now they’ve brought us to our knees and want to pay us out. Well, be fair and reasonable… – Harry Katsiabanis
A levy of $2 on every taxi, hire car or Uber trip taken in the state from 2018 will foot the bill for a $378m compensation fund for existing licence holders, with operators left to decide whether the fee is passed on to passengers.
Premier Daniel Andrews said the reforms were about putting all operators “on an even playing field”.
“This is not just about changing the law for one company, only to go through the whole process again when another app is with us in a week or month or a year,” he said.
Under the new system, traditional licences will essentially be scrapped, with all operators registering as a network service provider, and all subject to the same standards.
For many operators, there will be grave concerns over how the government’s compensation fund will work “to provide fair and reasonable assistance” to licence holders to help them transition to the new legislative framework.
Within hours of the government’s announcement, many taxi licence holders said the compensation on offer – $100,000 for an owner-operator’s first licence, and $50,000 for that operator’s second licence – fall woefully short and significantly below what is the current market rate. Hardest hit will be operators who bought their licences decades ago and who have relied on them as a nest egg to fund their retirement.
An additional $75m ‘fairness fund’ is also to be established to provide support to industry participants experiencing immediate financial hardship as a result of the changes, but details are yet to emerge as to the criteria for such compensation.
The reforms will see drivers of any kind of taxi, hire-car or ride-share vehicle needing to be accredited by the Taxi Services Commission, with the accreditation process involving police, medical and driving history checks. Every driver will also be subject to ongoing criminal data matching, and the widely discredited ‘Knowledge Test’ will be abolished – replaced by what the government describes as a “simple system of industry accountability”.
Meanwhile rank and hail work will be open to any provider, but only providing they meet stringent requirements including having cameras and fare meters.
Undoubtedly bold and far-reaching, central to the Andrews government’s strategy is to open the door for more ride-sharing and other taxi services, with the targeted end result being greater choice and better services for passengers.
Responses from the industry in Victoria to the proposed new system have been swift and critical, largely focused on the plans for compensation.
George Kapnias, managing director of Southern Cross Chauffeur Drive, has spent up to $300,000 on four ‘VHA’ hire-car licences since 1998. Mr Kapnias told Neos Kosmos the government, which is offering compensation of $25k for a first VHA licence, and $12.5k for a second licence, is selling the industry short.
“They were selling hire-car licences for between $40,000 and $60,000, and now it offers only a fraction of that as compensation,” he said.
Frustrated at the government’s inaction, Mr Kapnias feels it’s a case of too little too late.
“The government could have easily made this same decision two years ago. Instead it has deliberately procrastinated and allowed Uber to establish a beachhead at no cost, while maintaining the shackles on existing industry participants.
“Labor will be forever condemned for trashing the life savings of thousands of small business operators.”
Another Greek Australian veteran of the industry in Melbourne agrees. Harry Katsiabanis, founder of taxi network CabiT, which represents over 1,500 drivers, says that while the new system “makes some sense”, the compensation on offer for taxi licence holders is paltry.
“Licence holders will be devastated, they’ve been absolutely destroyed,” he told Neos Kosmos.
“The buy-back deal is very distressing; $100k for the first licence, and $50k for the second, and nothing thereafter. That’s very unfair on people who have worked all their lives, and currently owe more to the bank than their taxi assets are worth.”
In the past six years, taxi licence values have been in virtual freefall due to uncertainty in the industry. In Melbourne, market values recently were in the order of $150,000, down from around $500,000 in 2010-11.
Many will see the need for a new campaign to change the Victorian government’s thinking on compensation, but its likelihood of success is slim.
The industry’s government payout will be larger in Victoria than most states. In Sydney, average taxi licence values peaked at about $425,000 in 2011 and have been in decline ever since. Licence owners in NSW can expect to receive just $20,000 in compensation per licence, with multiple licence owners receiving a maximum of $40,000.
In Victoria in recent years, licence owners asking for a fair deal, supported by vocal associations like Victorian Taxi and Hire Car Families, have been largely ignored.
Harry Katsiabanis says the government has a responsibility to rethink its approach.
“The previous state government was instrumental in bringing down licence values. Now this government have brought us to our knees and want to pay us out. Well, be fair and reasonable, and do the right thing by the community – and that means paying the market value,” he says.
“Is it a done deal, just because someone sits in parliament and says so? We’ll see.”
The Andrews government will introduce the new legislation – first by reducing licence fees to zero – into parliament within months. Secondary legislation will be introduced in 2017 to implement the long-term reforms.
Uber welcomes new approach
Uber Victoria general manager Matt Denman has said the Victorian government’s decision to regulate ride-sharing services has finally recognised the positive role Uber is playing in the state.
But with reportedly 500,000 Victorians using the service, Mr Denman said the company was disappointed by the $2 per trip levy.
“Uber’s position is that anything that makes transport more expensive is a bad thing for consumers,” he said.
“We would urge and ask the government … to provide a full justification and economic modelling for any proposed levy.”
Mr Denman has declined to say if the $2 increase would be passed on to customers, or if it will mean Uber drivers would earn less per trip.
Opposition slams $2 tax
Within minutes of the announcement on the state’s new regulatory framework for the taxi industry, Victorian Opposition leader Matthew Guy took to Twitter to voice his criticism of the approach Labor was taking.
“Daniel Andrews slaps a new tax on every Uber and taxi fare[s] then says it’s all good news. Straight out of the Labor playbook” he wrote
Echoing his remarks, Opposition Deputy Leader, David Hodgett said Labor’s leader went to the last state election promising no new taxes, “now he’s going to slug Victorians with a $2 fee on every taxi and Uber ride.”
While welcoming many of the proposals to deregulate the industry Mr Hodgett said the levy was unjust.
“Daniel Andrews is basically setting up a slush fund to buy the votes of the companies that hold these taxi plates, and it’s Victorians that are going to pay for this with this new tax on each and every Uber ride and taxi ride for the next eight years or beyond.”
The Opposition have as yet remained silent on the concerns of licence holders over the planned compensation limits.
VTA supports ‘broad framework’ of reforms
The Victorian Taxi Association ‘s CEO David Samuel has responded to the Andrews government’s plans for the industry with cautious optimism, saying “the market and the world in which we exist is changing rapidly [and] we need to adjust and adapt to that.”
Mr Samuel added that any transition had to be managed ethically and that the government had a responsibility “to ensure… we get fairness for our people, for our stakeholders, and for people who’ve invested heavily in this industry.”
On the issue of licence value compensation Samuel said that while the majority of taxi licences were held by single owners ” there are those that own more and we are concerned for those people, and we’ll work with them and the government to try to achieve an equitable outcome for everyone,” he said.
“The $2 fee is a large one by all standards… however regulatory reform is necessary and that does come at a cost.”