Gorilla in the Mist: Uber’s opaque business

APAC News Uber a market gorilla with very little transparency

In March 2019 a director of Uber Australia told a conference in Paris that Uber accepted OECD anti-tax dodging reforms for multinationals and acknowledged the company would face “additional tax”.

He didn’t mention, Uber was in the process of shifting assets from Bermuda to the Netherlands in order to create a US$6.1 billion tax deduction.

29 January 2020 | Marcus Reubenstein

Short of paying for an ASIC (Australian Securities and Investments Commission) search, it’s pretty hard to determine from public information that Francois Pascal Chadwick has any direct connections to Australia.

The 47-year old from Lancashire in England, sits on the board of numerous Uber subsidiaries around the world – among them at least five Uber businesses in Australia. Now working in San Francisco, he is Vice President of Finance, Tax and Accounting for Uber Technologies Inc.

His role is little different from that of similar executives at global tech giants like Google, Facebook or Amazon – maximise returns and minimise tax.  

Last year he spoke at an OECD Paris conference on Addressing the Tax Challenges of the Digitalisation of the Economy. “Change, I believe, is needed,” he told the audience. “We as a company are leaning into this heavily. We as a company know, because we’ve done some modelling, that this will lead to additional tax.”

APAC News Francois Chadwick of Uber tells conference Uber accepts more tax
Director of five Uber subsidiaries in Australia, Francois Chadwick says Uber is “leaning” into tax changes (source: OECD)

It seems, at the same time, Uber was leaning quite heavily into existing global tax arrangements. By shifting billions of dollars in assets from a company in Bermuda with no employees to the Netherlands, Bloomberg says: “Uber created a US$6.1 billion Dutch weapon to avoid paying taxes.”    

The March 2019 tax arrangement was put in place prior to Uber’s listing on the NYSE; and was only reveled after Uber Technologies released its Second Quarter Earnings Report in August.  

Chadwick is also a director of Uber’s New Zealand subsidiaries, a jurisdiction where Uber has come under criticism for its tax arrangements. Of his Paris speech, Auckland-based tax adviser, Terry Baucher says, “I think you can take at face value their expectation that they will pay more tax in the future but at the same time they are going to set themselves up for what they think the future tax system may operate.” 

Uber is the rideshare market gorilla in Australia but, even for those at the coalface of its business, it is a corporate gorilla shrouded in legal mist.

According to figures published in the Australian Financial Review in 2018 Uber Australia Holdings Pty Ltd., a company of which Francois Chadwick is a director, generated gross revenue of $935 million from drivers, delivery riders and restaurants. That report revealed the Australian operations of Uber listed $691 million in “service fees” and ended up tipping just $8.5 million into the coffers of the tax office.

While these reported numbers were delivered by Uber Holdings, there’s little disclosure on the relationship this business has with a web of other Uber companies in Australia and around the globe.

The need to know business

An Uber driver working in a major Australian city recently called the company’s driver helpline with a seemingly simple question: “What is the name of the business entity that is depositing Uber payments into my bank account?”

He explained this request came from his accountant who was preparing for a tax audit. Every Tuesday Uber deposits money into the bank accounts of its Australian drivers, of which Uber says there are more than 60,000.

This driver was confused because, following a query some months earlier, Uber had emailed him telling him:

Driver-partners, including yourself, are not employed, contracted or sub-contracted by any Uber entity.

Given this, his accountant’s question was seemingly very simple: where is the money coming from?

Thus, the phone call to Uber.   

Lawyers make the rules… a Filipino call centre explains them

Uber Australia’s driver support representative, employed at a call centre in the Philippines, put the driver on hold while she sought the advice of a supervisor. When the representative returned to the call, she told the driver that Uber payments come from passengers and not Uber.

When pushed to give the name of the actual company depositing payments into his bank account, the representative told him, “Uber does not disclose this information to driver-partners.”

It’s the kind of information Uber’s two main rivals have no trouble in sharing with their drivers.

APAC News Uber Driver Statement and DiDi statement
Uber driver statements in Australia, short on detail compared to DiDi

The latest entrant to the Australian ridesharing market is Chinese giant, DiDi (owned by Didi Chuxing Technology Co.). On all relevant correspondence and transactions with drivers the company makes it very clear that they are dealing with – just one company – DiDi Mobility (Australia) Pty Ltd (ACN 623 144 963).

Uber’s other major Australian competitor, Ola clearly indicates the name of its operating entity is Ola Australia Pty Ltd (ACN 623 472 202).

The “Uber Pool” of subsidiaries

After scratching the surface, it would seem that Uber drivers are getting their payments from a private company called Rasier Pacific Pty Ltd.

This company name does not appear on driver statements, only on invoices which are not sent to drivers and do not appear on the driver app, they can only be accessed through driver accounts on the Uber website.  

Though Uber has been trading in Australia since 2012, Rasier Pacific Pty Ltd was only registered in October 2017. Prior to this Australian Uber drivers were ‘engaged’ by a Netherlands-registered company, Rasier Pacific V.O.F.

There are at least six Uber companies registered in Australia, Rasier Pacific Pty Ltd, Portier Pacific Pty Ltd, Uber Pacific Pty Ltd, Uber Pacific Holdings Pty Ltd, Uber Australia Pty Ltd and Uber Australia Holdings Pty Ltd. Washington-based Keir Devon Gumbs and, Australian-based, Nicholas Falzon are directors of all those companies. Francois Chadwick is a director of five, while PwC partner Craig Heraghty is a director of one.

On the operational side, the General Manager of Uber’s ride business in Australia and New Zealand is Dom Taylor, a former investment banker with Morgan Stanley and Macquarie Bank, and a consultant to PwC.

While the global CEO of Uber, Dara Khosrowski, is the former CEO of online travel agent Expedia. Michael West Media has reported on Expedia as being one of the multinational leaders in offshoring income from its Australian operations in order to avoid Australian taxes.  

Hardly a taxing directorship

Aside from his directorship of Uber’s Australian businesses, an internet search reveals Francois Chadwick is a director of a host of Uber controlled companies in India, New Zealand, United Kingdom, Denmark, Czech Republic, Germany, Cambodia, Myanmar and Panama.    

In 2015, Fortune Magazine analysed Uber’s corporate structure finding it then operated 60 subsidiaries in the U.S. On top of this there are dozens of subsidiary companies around the world, of which it says:

“Outside the U.S., the company’s network of subsidiaries has been carefully pieced together to create a state-of-the-art structure for minimizing taxes.”

Against this this backdrop, it’s hardly surprising that one of the top Uber executives responsible for managing the company’s tax arrangements should hold numerous directorships across these foreign subsidiaries.  

On Uber’s US$6.1 billion Dutch deduction, Bloomberg reported, “Uber’s windfall was created last March when it pulled intellectual property out of a paper entity in Bermuda with no employees and put it into a Dutch entity that’s ultimately controlled by a holding company in Singapore.”

Six subsidiaries in Australia, part of what Fortune calls Uber’s state-of-the-art tax minimsation arrangements

Analysts say this deduction can be used to offset any future profits the currently loss-making corporation accrues. New York-based tax expert Robert Willens, telling Bloomberg, “It’s safe to say that Uber will not be paying any taxes for the foreseeable future.”

Little surprise that, Uber’s VP of tax, Francois Chadwick opened his remarks at the Paris conference with:

“This must be one of the most exciting times in tax and I do appreciate this because it has actually made recruiting for people into tax much easier.”

Uber Australia Director, Francois Chadwick

Says New Zealand tax adviser, Terry Baucher, “Uber stands as a poster child for the tech industry’s aggressive, and at worst frankly immoral business activities… like other tech companies Uber established a network of subsidiaries in tax havens as part of its tax planning.”

More lawyers than drivers

The second director of Uber’s Australian subsidiaries, Keir Devon Gumbs is an attorney currently registered to practise with the State Bar of California. The State Bar lists his address as being in California, while ASIC filings in Australia list his address as Washington DC.

Given Uber drivers are contractors, not employees, it is safe to say the world’s biggest facilitator of passenger vehicle rides employs more lawyers than drivers.

Aside from Australia, Gumbs is a director of a number of Uber subsidiaries including those in the Czech Republic, New Zealand and Cambodia. He is employed by Uber Technologies as Associate General Counsel, Global Corporate, M&A and Securities and Deputy Corporate Secretary.

Previously Gumbs was a partner in a top Washington DC law firm. Before that he spent six years as a lawyer with the US corporate regulator the U.S. Securities and Exchange Commission (SEC) – the regulator which Uber had to file documents with before listing on the New York Stock Exchange.  

The only Australian director of the six listed Uber’s local subsidiaries is Nicholas Falzon, partner with accounting firm PKF Australia – unsurprisingly, Mr. Falzon is a tax adviser.

Whilst, Uber saw fit to put at least one Australian on the board of its local subsidiary it did not extend any such courtesy to the kiwis. Uber New Zealand Technologies Limited (4451818) lists no New Zealanders as directors.

Uber partner or Uber contractor? Whatever’s convenient

In a legal sense, drivers do not have contracts with, or are directly engaged by, Uber rather they have a Services Agreement. While such agreements look like contracts, they are generally not legally binding.

As for Uber telling its drivers in writing that they are not contracted to any Uber entity, says Andrew Stewart, Professor of Law at Adelaide University, “If you take Uber’s contracts at face value then that is absolutely right.

“Uber’s primary argument is that it is a technology support company and that it is the contractor. That position doesn’t normally survive when cases get into the Fair Work Commission and that’s when Uber goes to its fallback that ‘even if we are more than a technology support company’ these drivers are not our employees.”

Uber was taken to the Fair Work Commission in 2017 by Melbourne driver Michail Kaseris whose access to the driver app was revoked by Uber. The Commission ruled in favour of Uber and this has been held up as the precedent that determines the status of Uber drivers as not being employed by the company.

Even though Mr Kaseris had been an Uber driver for nearly 12 months, he could not name the company for which he was actually driving. He nominated Uber as the respondent, however:

The Fair Work Commission had to amend the application when it discovered Uber Australia had no legal relationship with its drivers

In untangling that web, the Commission wrote:

The Respondent (Rasier Pacific V.O.F.) is an unlimited partnership that is registered in the Netherlands. There are two partners operating under the Uber brand namely Uber Pacific Holdings B.V. (a private company registered in the Netherlands) and Uber Pacific Holdings Pty Ltd (a company registered in Australia). Uber Pacific Holdings B.V. is solely responsible for the day-to-day affairs of the Respondent.

The Commission rejected Rasier Pacific’s (Uber) claim that it was a technology provider of “lead-generation software” saying the “reality” was Uber provides transport services in Australia.

Its meticulously crafted Service Agreement aside, this visit to the Commission was a lay down misere for Uber which was represented by one of Australia’s top silks, Richard Dalton QC. Former Uber driver, Mr. Kaseris represented himself.

A schizophrenic approach   

Despite Uber’s written directives to drivers that they are not contracted to Uber or any Uber-related entity, according to the judgement of the Fair Work Commission, the first thing Uber/Rasier Pacific’s lawyers told the commission was that Mr Kaseris was in fact a contractor.

Commission Deputy President Val Gostencnik wrote: The Respondent says that the Applicant’s application should be dismissed on the ground that the Applicant was engaged as an independent contractor.

“It brings to mind the term schizophrenic in relation to their legal arrangements,” says Law Professor Andrew Stewart. “If you read an Uber contract what you find is that half the document is emphasising that we are here to help you, the driver, to conduct your business and that all the flexibility is on your side.

“And then the other half of the document is that Uber can change the terms of the contract whenever they like and that they can withhold payment. It’s a schizophrenic approach but it’s also a kind of structured chaos.”

APAC News copy of Uber Driver Service Agreement Australia
DOUBLE DUTCH: Australian Uber drivers must enter an Agreement with a Dutch company in order to access the driver app

Says Professor Stewart, in Australia Uber can get away with calling its drivers contractors, “Because there are only one or two statues that depend on whether someone is a contractor or not; but that doesn’t include the Fair Work Act or taxation laws.”

“The Fair Work Commission is not making a finding about whether someone is a contractor they are making a finding as to whether they are an employee.”

According to the Australian Transport Workers Union, national secretary, Michael Kaine, “Uber workers have zero control over their work. They cannot set rates and are entirely directed by an algorithm which allocates work based on an arbitrary ratings system.

“It is not the hallmark of an independent contractor to have to be logged on for hours to an app in the hope of getting some orders, then having to accept whatever comes in and carrying out the work in quick time for as little as six dollars.”

Making a meal of public disclosures

Last month Uber announced its most popular landmark destinations for Uber Eats food deliveries in 2019. On the list of top venues were the Eiffel Tower in Paris, Golden Gate Bridge in San Francisco… and Australia’s top landmark delivery destination? Parliament House in Canberra.

Perhaps odd that Uber would trumpet the Australian Parliament – whose legislation helps deem Uber’s army of drivers and delivery riders are contractors not employees – would be among its best customers.  

The “army” of Australians driving Uber cars and riding for Uber Eats is greater than the number of active personnel in the Australian Defence Force

It’s not just food but policy advice that Uber has been serving up in Canberra. In 2017 the government announced the House of Representatives Standing Committee on Infrastructure, Transport and Cities, would conduct an Inquiry into the Australian Government’s role in the development of cities.

Uber was among 174 different groups and individuals to make a formal submission to the inquiry. Yet its was the only submission devoid of any information as to who actually wrote it, there was no address, registered company name nor company number.

Canberra’s Parliament House among the top destinations for Uber Eats

Even big four accounting firm PwC – which is hardly held up as an exemplar of corporate transparency – included its full company details in its submission. Not only that, PwC provided the names of all six contributors to its submission, a photograph of each, their personal email addresses and direct phone numbers.

Yet Uber refuses to disclose a scintilla of information as to which of the company’s dozens of subsidiaries actually made this public submission.

An opaque Service Agreement

Apart from unhelpful phone support, Uber drivers in Australia are hampered by the structure and terms of a Service Agreement they must consent to before driving for the company.

Says, Sydney-based Uber driver, Anthony (who asked for his full name not to be published), “I don’t understand what I am signing; and every time Uber updates the agreement, I don’t know what it means. All I know is if I don’t say yes Uber will kick me out.”

Uber’s Service Agreement is arguably the most opaque, and potentially most confusing to drivers, of the big players in the rideshare business. Almost all of its drivers consent to the eight-page agreement without any legal advice.  

According to Adelaide University law professor Andrew Stewart, Uber’s Service Agreement is drafted in such a way as to deter drivers from entering into disputes with the company. For drivers with grievances, he says, “The fact that you’ve got this network of companies it would deter some applicants, it potentially imposes greater costs. It certainly adds a degree of complexity that is potentially to Uber’s benefit.”

“The same goes for these contracts which insist they are governed by foreign laws, so an applicant looks at a contract and says we’ve got to go somewhere else in the world.”

Uber agreements stand alone

Compared to Uber, China’s DiDi agreement, which it calls a Driver Agreement is not only far more straightforward, it is unequivocally an agreement with a single Australian entity.

Like Uber, DiDi is a multinational ride-sharing business, however it chooses not to rely on foreign entities and foreign jurisdictions when contracting drivers.

In addition, DiDi’s agreement acknowledges that drivers have rights under Australian Consumer Laws, telling drivers: If we fail to comply with those consumer guarantees, then you may have rights against us.

While the DiDi contract is far less vague and far more comprehensive in acknowledging the rights of its drivers, it nonetheless follows Uber in asserting the company is a technology provider and that drivers are contractors.

Indian ridesharing company Ola has a similar approach to DiDi, with a spokesperson for the company saying its Australian driver agreements are not with any foreign entities and are solely with an Australian-owned company.

Over and above the legal mist and opaque agreements with foreign entities, the one line Uber pushes hardest with its drivers is that they are “driver-partners

Says Professor Andrew Stewart, “Driver Partner is a term that is designed to reconstruct these arrangements in a form different than they appear to people in the outside world. It’s what (legendary Australian political speechwriter) Don Watson would call a weasel word”.

Profits v Prophets: in our final installment in the rideshare saga we look at the business model of Uber and its rivals DiDi and Ola. According to a top Wall Street analyst one model is a loss-making “fantasy” while the other two seem far more committed to actually delivering profits.

Related Story: China’s DiDi makes Uber look like a driver sweatshop