The cost of Uber and taxi trips in WA is set to rise, with operators to be hit with a new 10 per cent levy as part of a State Government plan to compensate taxi drivers hard hit by the Uber invasion.

The levy, a temporary four-year measure be imposed directly on operators rather than passengers, will fund a voluntary buyback of taxi plates, which have seen their value plummet in recent years.

Transport Minister Rita Saffioti conceded passenger charges would likely rise as a result of the announcement, but urged operators not to pass the full 10 per cent increase onto the public.

Operators, such as Uber and taxi dispatch services, will be required to hand over 10 per cent of fare revenue to the Government.

Under the buyback scheme, owners of conventional metropolitan taxi plates will be entitled to at least $100,000 in compensation, rising to as much as $250,000, with payments based on when the purchase was made.

Ms Saffioti said the regulatory reform would reduce costs on operators, particularly in the taxi industry. This meant there was no justification for passenger fares to rise by the full 10 per cent.

"I expect all the booking services to sharpen their pencils and get the best deal for customers," she said.

"Taxis will have a better chance to compete with Uber, Uber will have a better chance to compete with others."

Levy faces Parliament hurdle

Transport Minister Rita Saffioti conceded passenger charges would rise in response to the levy. ( ABC News: Robbie Koenig Luck )

The levy is set to come into force in 2018, but requires legislation to get through State Parliament first.

Due to the Government's lack of an Upper House majority, it again requires Labor to win support from the Liberals, Nationals or crossbenchers to be able to proceed with a key policy.

One crossbencher, Liberal Democrat Aaron Stonehouse, was quick to attack the policy, describing it as "disgusting".

Shadow transport minister Liza Harvey would not give a guarantee as to whether the Liberal Party would support or oppose the Government's plans.

"You have to question whether it is in the best interests of consumers," Ms Harvey said.

"In principle, our party supports some kind of compensation for those small business owners who have been impacted."

Ms Saffioti rejected suggestions the announcement was another breach of Labor's pre-election commitment not to raise taxes on West Australians, even though passenger costs will increase and many locally-owned operators will have to pay the levy.

"This is a levy for the restructure of an industry," she said.

"We made it very clear, we had to reform the industry and that is what we've done."

The Government's announcement follows years of uncertainty for the taxi industry, since the arrival of Uber into the West Australian market in 2014.

The value of taxi plates subsequently crashed and many drivers struggled to make a living, as passengers flocked to Uber and other rival transport providers.

The previous government offered assistance payments of $20,000 per taxi plate to owners last year, with any amount received through that set to be deducted from buyback amounts.

Uber says tax 'disappointing'

An Uber spokesman said "it was disappointing to see the government squander an opportunity to embrace reform to drive down the cost of transport".

"[This] is a new tax on transport and it's the highest of its kind in Australia," the spokesperson said.

"The commercial realities faced by all industry participants will mean consumers ultimately end up footing the bill."

But the Taxi Operators' Legal Defence Group, a body representing about 1,000 plate owners, cautiously welcomed the move.

"It is a monumental change to our industry and the first time since 2014 that there has been something firm about change," spokesman Athan Tsirigotis said.

"We now have something, finally, that we can put down on paper, evaluate and go from there."