Uber in Quebec: Innovation is not an excuse to escape the law

theglobeandmail.com
May 20, 2016
By Yves Boisvert

Is it reasonable to negotiate with a company that shows obvious disregard for the law? Under the friendly cover of the “sharing economy,” Uber hoped to gain a special legal status in Quebec, as it did all over North America.

Last week, the Liberal government in Quebec City just said no. The proposed bill would kill Uber’s business model in the province. It forces Uber drivers to work under the same restrictions as taxi drivers. Tough penalties are imposed on violators, such as suspending a driver’s licence and fines up to $25,000.

Suddenly, Uber’s general manager in Quebec softened his tone. After threatening to leave the province last week, Jean-Nicolas Guillemette admitted that Uber has “not always [sought out] the best methods to work with the Quebec government toward promoting...alternatives.” Indeed! Last week was a tough one for Mr. Guillemette. The day before the bill was introduced, a Quebec Superior Court judge used strong words against the corporation.

Justice Guy Cournoyer was asked to rule on the legality of a search and seizure of Uber’s financial data that took place in May, 2015. Based on “facts that were presented, the judge who issued the search warrants could conclude that there was evidence justifying the conclusion that Uber had committed the alleged tax offences,” Justice Cournoyer concluded.

But the judge did not stop there. He wrote that Uber is doing taxi transportation within the meaning of the law. In Quebec, taxis are provincially regulated by the Act Respecting Taxi Transportation Services. Paid transportation of a person, however you try to rename it, is just...a taxi. The Uber app, the judge says, is the modern version of a call-distribution service. As such, “Uber does not act as a neutral and passive intermediary. Its intervention involves potential penal liability.”

Quebec tax investigators alleged that data was destroyed remotely from the company’s headquarters in San Francisco during the search. This “has all the characteristics of attempted obstruction of justice,” Justice Cournoyer said, adding that there were good reasons for the judge who issued the search warrants “to conclude that Uber wanted to shield evidence of its illegal conduct from the tax authorities.” Justice Cournoyer added that Uber’s failure to divulge to the tax authority the 20-per-cent commission withheld on every trip is a “false or misleading” declaration. The law also makes it mandatory for the company to collect GST and the provincial tax, which Uber allegedly did not. There have been no formal accusations of tax evasion against Uber in Quebec.

This comes one month after another judgment in Quebec City, in which a judge noted that the same Uber cars were seized two, three and even six times. Uber would assist drivers by paying for rental replacement cars, legal fees and safety bonds to get the cars back. While supporting the drivers financially is perfectly legal, the judge noted that this “sharing” of car trips looked very much like taxis without permits. In other words, even before a bill that would almost certainly render its current operations illegal, Uber already appears to be flouting the law.

Why would you get a tax break or special status in the name of innovation? Fiscal disputes and permit debates are one thing. With a judge now raising the idea of criminal liability, arrogance might not be the best of strategies for Uber.

Is it game over for Uber in Quebec? Maybe not. But if it gets a deal, it won’t be as sweet as Uber thought.