Hong Kong needs to move car-ride hiring services forward. Up till now, only licensed taxis may offer car-ride hiring services to passengers, even though Uber, the pioneer in car-ride online booking “shared economy” services, hit Hong Kong streets as early as 2014. Last week, the Transport and Logistics Bureau finally presented a document indicating it will legalize and regulate ride-hailing services in the city. However, the document is short on detail. This is great, as it leaves room for different stakeholders and policy analysts to put forward their ideas.
The bureau proposed, quite reasonably, that service providers must purchase insurance that will cover protection for passengers and third parties involved in the event of accidents, and to ensure that drivers complete health checks and background screenings. There is certainly also a need to regulate the platform on which customers book their services and to ensure that the vehicles meet certain standards.
However, if separate licenses are issued to vehicles that identify them as eligible for providing the services, it could go counter to the “shared economy” concept, particularly if the license fees are calculated on the assumption that the vehicle is used full time in that capacity. Shared-economy drivers may have another full-time job, and offer for-hire services not much more than 10 hours a week.
My proposal, which addresses taxi drivers’ and taxi owners’ concern about unfair competition, is that, instead of issuing special shared-economy licenses to specific vehicles, the Hong Kong Special Administrative Region government would simply collect a percentage of total gross income from all “shared economy” cars (say, 15 percent). In principle, a high enough levy on gross income will produce sufficient offset to the “unfair advantage claim” from taxi drivers and taxi owners. Taxi owners have paid a big sum to secure their medallions that allow them to run taxi services. The price of an urban taxi medallion has fallen significantly, from a peak of almost HK$6.8 million ($870,950) in 2014 to a recent low of less than HK$3 million. Owners have understandably complained that the decline in medallion prices was the result of unlawful competition from ride-hailing service operators who never paid any medallion fees. I propose that the insurance fees should also be charged according to the time the cars are hired in the ride-hailing services, which means that they can be charged as a separate levy on total incomes derived. I also would argue that the levy can be adjusted to limit the number of cars operating for passenger services on the road.
As long as the company hosting the booking platform and coordinating the services complies with the government’s regulations to ensure that the cars are adequately equipped as required and are roadworthy, the cars can be used for personal purposes as well as for delivering the booked car-hiring services. Singapore has required that drivers hold a Private Hire Car Driver’s Vocational Licence, which requires that the driver must be within an age limit and clear of serious criminal offenses. As the 2018 Law Reform Committee paper on the regulation of ride-hailing services noted, in 2017, a class-action lawsuit was launched in the United States against Uber that alleged its failure to do thorough background checks resulted in assaults. It makes sense to follow Singapore’s model to protect passengers’ safety.
My proposal offers many advantages, apart from addressing taxi operators’ concerns about unfair competition; the government will also collect recurrent revenue to alleviate the fiscal deficit problem. What’s more, it’s simple to administer. The owners of the platforms would have a strong incentive to offer a quality service to passengers and would closely monitor the quality of services. If the proposed plan is adopted, taxi owners would have the incentive to improve their services, benefiting their passengers. Those who use the newly introduced platforms to book ride-hailing services will also benefit given the increased choice.
Hong Kong taxi services have been subject to an “original sin” that had prevented taxi operators from improving their services — lack of competition. Because the medallions are permanent, owners of medallions typically care only for having their taxis rented out to whoever will pay their required rentals. Poor services will not lead to withdrawal of their medallions. Still, their complaint about unfair and illegal competition is legitimate because the government appears indecisive about legalizing or not legalizing the “shared economy” practice of Uber operations.
Let bygones be bygones. The medallions are now private property. However, the licenses for the online shared vehicle service platforms have not yet been issued, nor is the nature of these licenses clear. It is important that we make a wise choice. Secretary of Transport and Logistics Lam Sai-hung said that the government will “act in the interest of the public”, keeping an open mind on improving both taxis and online ride-hailing services. Instead of issuing permanent licenses that will become objects of speculation and which are not revocable, “taxing” the companies on their incomes will preserve the incentives to improve services and allow more room for the government to increase or decrease the number of “shared economy” cars on the road.
The author is an adjunct professor at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.
The views do not necessarily reflect those of China Daily.
