New taxes in Sindh likely to raise ride hailing fares by 26pc

KARACHI: Bringing ride hailing services under heavy service tax net in Sindh is likely to increase fares by 26 percent, analysts told The News.

The Sindh government in its finance bill for budget 2019-20 has proposed 13 percent service tax each on the ride hailing service and the service providing drivers, known as captains by some services.

Contrary to measures taken by Sindh, Khyber Pakhtunkhwa government has proposed only two percent tax on these services. “We highly appreciate the efforts of Taimur Jhagra, the Minister of Finance KP and his cabinet for understanding the business model of Online Marketplaces which have immense means to create jobs in Pakistan,” said a spokesperson of Careem.

“We welcome the introduction of the sub-category of ride-hailing and the measures taken to regulate it without hampering its growth potential. This will allow for the creation of thousands of new jobs and attract investment in the province,” she said. Careem is further partnering with the government of Khyber Pakhtunkhwa to bring their Rescue 1122 Ambulance services onto the platform.

“We will continue to work with other provinces like we have been doing in the past to develop regulatory framework, which encourages growth and investment in the tech sector,” she said.

Analysts were of the view that neither the ride-hailing service providers nor the drivers would work under losses and the rise in the cost of doing business would be passed on to consumers.

Majority of people in the mega cities of the country, especially Karachi used unpleasant buses, old taxis and rickshaw services as the mode of communication in the past at higher fares.

The concept of expensive unpleasant rides was changed by the ride-hailing services with arrival of Careem in Pakistan that was later joined by Uber. They provided luxurious rides at lower fares, even lower than rickshaws, said one citizen. Besides, these services were available at the door-step.

A Pakistan made bike hailing service Bykea came in the market and provided very low fare bike rides to the low income commuters. The service was so popular in the country that the big names also followed it and started bike services.

In April this year, Bykea received Venture Capital of $5.7 million from international and local investors, which is the highest for any local start-up. All these services provided jobs to thousands of Pakistani drivers, said one analyst. Even the jobless people with higher education joined these services as drivers or captains and earned their livelihood.

They worked more than 12 hours a day to earn their livings, as reaching out to the minimum targets of the ride hailing services was not an easy task, said one captain.

However, an increase in the fuel prices and a drop in the investment by the ride-hailing service providers have resulted in a large number of captains moving away from the business, said a former captain who moved to another business. The ride-hailing services kept 20 to 30 percent commission on the total fares.

In addition to such miseries, an increase of 13 percent on the income of captains would add to their woes, the analyst said. The increase in the taxes was likely to be passed on to the consumers, he added.