Uber Faces Hefty Tax Bill as IRS Begins Investigation

Uber

A number of Uber’s key markets, including the UK, the US, the Netherlands and India, could be affected.

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Ride-hailing company Uber has confirmed it could face charges in key markets, including the UK, after coming under examination by tax authorities.

The announcement, contained in a regulatory filing, marks another detrimental blow to the company, which has lost around $12bn or 9% in value since its first day of trading as a public company on 10 May 2019.

Last week the transportation network company reported losses of $1bn in 2019, among the largest of any public company.

In its filing to US regulators submitted in April, Uber said the Internal Revenue Service (IRS) was examining tax years 2013 and 2014. It also revealed that it is under examination by other state and foreign tax authorities, and that its tax advantages are to be cut due to its “transfer pricing positions”.

Transfer pricing concerns have often been referred to as the infamous “double-Irish” manoeuvre utilised by large companies in order to evade tax exposure. In order to achieve this, a company books the transactions of goods and services among corporate subsidiaries, often as a way to shift reported income to low-tax jurisdictions.

However, is not the only one coming under investigation, as regulators prepare to uncover anti-competitive practices at Google, Facebook and Amazon. In 2017, Amazon was fined $294 million by European authorities for booking profits in a tax free unit located in Luxembourg.

The IRS investigation suggests that political and regulatory bodies are turning against tech giants.

Uber has also highlighted that tax years from 2010 to 2019 could be an issue in a number of its key markets, including the UK, the US, the Netherlands and India. However, the company said it has adequate cash reserves to meet its exposure.

Many banks have started research coverage of the company and many analysts seemed to ride over Uber’s disastrous IPO, which was originally guide-priced at $120bn. Uber eventually went public at $80bn and its current market value is $69bn.

Uber’s revenues are predicted to increase by 24% this year to $14bn, but the company is on track to lose $4.4bn. According to Refinitiv data, three analysts from banks not involved in the Uber IPO recommend buying the stock, five have neutral ratings, but none recommend selling. The IPO has also brought the probability of higher prices for customers.

Last week, Uber CFO Nelson Chai said: “We expect to deploy fewer consumer promotions.”

In 2016, industry expert Hubert Horan calculated that Uber riders were only paying an estimated 41% of the cost of their trips.

“Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance,” Horan stated. It seems Uber’s fares must double if the company hopes to break even.



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