By Alex Kais Date：03 / 22 / 2017

In the latest episode of what now seems like a never-ending saga, Uber has announced a moratorium on its Taiwanese operations earlier this month due to record-breaking fines.

While tensions with local governments are nothing new to the former startup, the drawn-out nature of its legal controversy, as well as its entanglement in domestic interests have seen Uber maneuver itself into a dead end on the island. Add to that the string of bad press it has received on its home turf since January, and it becomes clear that Taiwan is a crucial aspect of Uber’s first existential and global crisis.

Applauded by some for its tough stance, the Taiwanese government has also come under scrutiny for protecting local monopolies from foreign competition, particularly since the collateral damage from the conflict are innovative domestic startups. Nonetheless, international commentators note that Taiwan’s dealing with Uber could serve as model for other nations to follow, thanks to its cyber-democratic platform VTaiwan.

Growing tensions

In its early stages, Uber’s development in Taiwan went according to plan. A local headquarter was set up in 2013 and the budget transportation model UberX was introduced only a year later. By 2015, the company’s vision of car-sharing had gained an impressive following among passengers and drivers.

In a market regulated by outdated laws and dominated by conservative taxi unions, Uber’s fresh approach not only provided cheap fares, but also won over users by virtue of the transparency it offered. Rather than being at the mercy of sheer luck when calling a taxi, users could avoid nasty surprises by filtering out badly-rated drivers within Uber’s app.

More so, in a country plagued by low wage levels, Uber offered a means for private citizens to bolster their income without actually having to repaint their car, apply for a license, and submit to the wiles of taxi alliances. Soon, however, criticism against the US company began to mount, led by, but not limited to, the very taxi fleets which, according to an AppleDaily estimate, faced losses of up to 30%.

Evasive tactics

Part of Uber’s global success is rooted in its self-representation as an internet platform, which allows it to evade almost all responsibilities that competing services in the sector face.

Upon its entry into Taiwan, Uber registered as a software company rather than as a transportation provider. This status, which it continues to claim today, allows it to employ the services of unregistered and uninsured drivers.

Additionally, since all transactions are done via credit card within the app, the Taiwanese state lacks the necessary records to tax Uber, despite the company collecting as much as 25% in commission.

Although Uber established representation on the island nation in the form of the Taiwan Uber Digital Service Corporation, this satellite lacks in executive rights and mostly figures as intermediary for the US headquarters.

In essence, the local branch functions as a buffer that allows Uber to deal locally with the initial brunt of opposition and organize public support, as well as stalling authorities and exploring different tactics according to its global interests.

Backlash

In 2014, amidst the previous government’s relatively lenient attitude towards Uber’s quasi- illegal operations, taxi unions began to stage large scale protests that resulted in an official requirement for transportation permits. After the 2016 election, the newly-elected Tsai administration asserted that it viewed Uber’s actions as illegal and would adopt a hard stance on the issue.

Part of this involved a return to the negotiation table and insistence on three key demands, namely control, taxation, and insurance. At the same time, authorities heightened their scrutiny regarding Uber’s business practices and began issuing fines.

In June 2016, Taiwan’s Fair Trade Commission ruled Uber guilty of employing misleading advertisements. In August, the Investment Commission of the Ministry of Economic Affairs (MOEAIC) then proclaimed that it would retract an initial investment, although the decision was ultimately postponed.

By November, the Taipei National Tax Administration presented a bill of over NT$135m in unpaid taxes to the Taiwanese office. In December, the Legislative Yuan then passed a reform of its business tax that would allow the government to collect 5% sales tax from foreign internet firms like Uber.

Literally taking the conflict to the streets was the Ministry of Transportation. Its third revision of the Highway Act, dubbed the Uber Law, introduced the world’s highest fines for illegal operation, with amounts ranging between $4,700 (NT$150,000) to $785,000 (NT$25m). Additionally, and controversially, the reform also introduced a “snitch-clause” that would reward customers who turned in their Uber driver.

By February 2017, Uber is said to have amassed a hefty $36m (NT$1.1b) in fines, while more than 300 of its drivers have been turned in by opportunistic passengers. Unsurprisingly, the former startup wunderkind on February 10 proclaimed a freeze of its Taiwanese operations and expressed the desire to reset negotiations.

Protracted negotiations

Uber, the government, as well as taxi union leaders had sat down repeatedly over the past years to debate the issue, but actual progress was sparse. More recently, and strangely at odds with the deterioration of relations, some of these meetings took on a more conciliatory tone.

In October, the Tsai administration introduced a reform based partially on recommendations of the public, which was invited to participate through the VTaiwan platform created under digital minister Audrey Tang’s auspices.

Among other changes, authorities agreed to implement a diversification of taxis that allowed specialized transportation services for women or schoolkids, as well as providing Uber with a more lenient channel to legally operate in Taiwan.

Uber itself, too, expressed willingness to find common ground and asserted that it was taking initial steps to meet the government’s demands, both by establishing an insurance policy and by cooperating with taxi alliances. More so, it claimed to be working with legislators on the e- commerce bill for foreign businesses.

And even amidst the recent withdrawal, Uber still outlined plans for cooperation with rental companies, the introduction of a service for remote areas lacking public transportation, and Uber Taxi, its cooperation with select fleets.

Nonetheless, the general problem persisted. Due to the limitations of the existing legal framework, the diversification reform, for instance, fell short in achieving any of its ambitious goals.

Neither could Uber be enticed to register as a proper transportation service and thereby let go of its tax advantage, nor were individual Uber drivers willing to shackle themselves to a taxi fleet to obtain legal status.

Similarly, while the draconian fines imposed by the authorities may have hit individual drivers and forced Uber to halt the core part of its service, the company still pushed forward with its local expansion via the introduction of two new services, uberASSIST and UberEATS.

Publicity Battle

On February 16, the government organized yet another meeting, with participants being Uber Taiwan and the Taiwan Uber Drivers Alliance on the one hand, and representatives of taxi driver unions, taxi alliances, rental car drivers’ groups, the Consumers’ Foundation, and the Directorate-General of Highways on the other.

Despite high hopes for a solution, the debate quickly returned to the old he-said-she-said accusations. With both sides insisting on their viewpoints, the meeting ended without any palpable results, as Uber alliance spokesman Adam Shen reported.

The above meeting demonstrates how the Uber dilemma is exacerbated by the publicity- centered tactics of all participants, which primarily seek to win over the public without actually committing to meaningful concessions.

For the government, Uber’s actions are rendered invalid not only through its blatant disrespect for local laws, but also in its irresponsible failure to pay taxes.

Representatives of taxi alliances in jingoist fashion highlight the foreign status of Uber and how it supposedly threatens hardworking locals. Finally, even a natural ally like Audrey Tang proclaimed that “Uber [is] an

epidemic of the mind,” further stating that “you don’t negotiate with a virus.”

Uber instead insists that it is not a taxi company, but merely represents a platform for car- sharing that in turn drives innovation. More so, thanks to its good will, badly-paid white collar workers may improve their economically dire situation, a sentiment which initially at least reverberated with its more than 10,000 drivers and parts of the public.

Not unlike its opponents, the company relies on visible means such as public campaigns to sway public opinion.

Late last year, an open email by its CEO urged president Tsai to cooperate and, in essence, accept Uber’s status quo.

This was followed by an open letter of the lobbyist American Internet Association, which lamented the government’s decision to curb Uber’s expansion via heavy fines, insinuating that such policy would not only undermine innovation, but also alienate foreign investors.

All talk, no action

If public statements are to be believed, all parties are concerned about Taiwan’s future and its workforce. Yet as BNext’s Guo Zhirong has recently argued, neither Uber nor taxi fleets seem to truly care about any of the lofty ideals they espouse. Rather, they are quite alike in their self- interested ways, seeking to maintain structural advantages while marginalizing competitors.

For example, although Uber’s complaint about low quality taxi rides may strike a nerve with many passengers, it does little to legitimize the company’s shying away from its tax responsibility.

Former minister Jaclyn Tsai, who oversaw the negotiations of a previous e- commerce reform, bluntly points out that irrespective of its idealistic rhetoric, Uber basically seeks to maximize profits. FindTaxi’s founder Zhou Liwei, too, argues that governmental regulations are concerned with control, not the quality of services.

Uber’s professed dedication to its drivers is also relativized when taking into account that the losses in revenue incurred by special offers are usually shouldered by the latter.

Similarly, the decision to halt operations hurts, first and foremost, the 10,000 drivers who already rely on the platform. Moreover, keeping in mind that Uber is already preparing for driverless fleets of autonomous cars, the future outlook for its human workforce is bleak to say the least.

Taxi alliances, too, are quick to portray themselves as defenders of local interests. In reality, however they have long responded to innovation and new challenges through kneejerk responses such as mass protests and lobbying. Rather than adopting new technologies for the benefit of both drivers and passengers, fleets are quick to drum up support from individual drivers and maintain that only “no change is good change.”

It is not only Uber that is falling victim to these machinations. New Taiwanese startups like FindTaxi, which provides taxi calling services with the added benefit of feedback and quality ratings à la Uber, are obstructed too.

On the one hand, taxi fleets discourage their drivers from cooperating with FindTaxi, as it is perceived as threat by alliances since it does a better and more convenient job.

More serious, however, is the impact of restrictive “Uber laws,” which do even more damage through the introduction of inflexible regulations.

For instance, due to the rigid and incomplete existing legal framework, FindTaxi is barred from monetization and forced to offer its service for free. KMT legislator Hsu Yujen thus sees the government’s approach as misled, arguing that the current revisions have “effectively killed the market” for domestic startups.

Part of a bigger problem

A look at the international perception of the issue relativizes such a negative image of the government’s handling, however.

The BBC praises the island nation as “the place Uber couldn’t crack,” while Fortune is questioning Uber’s business strategy and highlights the company’s many troubles in other East Asian countries.

At the same time, Taiwan’s Uber dilemma is presented as part of a bigger picture. CityMetric’s Max Rashbrooke argues, for instance, that national governments are increasingly “outpaced by innovation.”

As a result, they are unable “to achieve the difficult feat of standing up to big, disruptive companies [while] harnessing the benefits their technology brings.”

Yet Rashbrooke praises the unconventional way in which Taiwan chose to deal with the challenge. By creating the VTaiwan platform, digital minister Audrey Tang used grassroots “cyber-democracy” to democratically legitimize the government’s standpoint, ultimately gaining some leverage to obtain tentative concessions from Uber. Liz Barry, too, believes that this pioneering approach provided the government with sufficient tangible public support to maintain its hard stance.

To be sure, Uber until now has not given in concerning the dispute over taxation, yet here, too, the broader perspective shows just how complex the problem has become.

As Richard Bartlett points out, Uber’s ongoing legal battle over the same issue in California, a dramatically more important market, basically prevents it from conceding in Taiwan or anywhere else, as the company’s global behavior is constantly under scrutiny by local lawmakers and judges.

Uncertain future

Ultimately, however, the progressive handling of the affair in democratic terms cannot hide the government’s conservative attitude.

Rather than actively guiding the development of e- commerce, legislators are still merely reacting to new business models and technologies, in the end all too often caving in to vested interests. Whether they like it or not, dealing with Uber will be a crucial benchmark for national administrations, both in Taiwan and elsewhere.

To be sure, Uber is an easy target for criticism thanks to its evasive tactics. The recent string of bad press in the United States, which culminated in the #DeleteUber campaign, further demonstrates that the company has long outgrown the idealistic startup image it still seeks to utilize at times for publicity reasons.

At the same time, Uber’s massive investments in future technologies like autonomous cars, as well as its strategic alliances with carmakers such as Volvo render it an important partner.

For now, the interests of both consumers and drivers are often neglected amidst the razzle- dazzle of public campaigns.

Additionally, the roadblocks used to stop Uber’s expansion are similarly obstructing local startups, all the while protecting old monopolists unwilling or unable to embrace innovation.

Rather than allowing either Uber or taxi fleets to dominate the market, solutions should be found that provide for fair competition, all the while enabling those charged with driving to be more than mere pawns.

In the end, for the current gridlock to be resolved, all parties must begin making real concessions if they finally want to move forward. That willingness, however, is what seems to have been missing all along.