Online Taxis to be Taxed: Legislative Draft

The provision of passenger transport services via electronic platforms is widely used in the country; however, the sector is not legislatively regulated. Organizations that have created electronic platforms are essentially conducting illegal passenger transport activities by accepting orders and handing them over to individual drivers, adjusting passenger transport tariffs through their platforms, and setting transportation requirements without tax obligations and oversight.

This was stated by the Deputy Minister of Territorial Administration and Infrastructure, Armen Simonyan, during the discussion of a legislative package proposing amendments and additions to the laws on "Automobile Transport" at the regular session of the National Assembly’s Standing Committee on Economic Affairs.

To address existing issues and fill legislative gaps, the legislative package proposes to regulate the activities of organizations or individual entrepreneurs that establish and transfer orders for passenger transport through electronic platforms as subject to notification, introduce a state duty for passenger transport services via electronic platforms amounting to 1 million dram annually, and set a licensing state duty for each irregular transport using light passenger vehicles via electronic platforms which, from September 1, 2024, will be 1.5% for cashless payments, increasing to 2.5% by January 1, 2025, and 4% by January 1, 2026, while for cash payments, the rates will be 2%, 3.5%, and 5% respectively for the same years.

Moreover, a compulsory use of an electronic cash register and the requirement for an electronic license for passenger transport by individual taxi drivers has been established, as well as the enforcement of administrative liability measures in case of violations in the sector.

The representative of the ministry believes that the adoption of the legislative package will create equal competitive conditions for passenger transport with light vehicles and taxi services, enhance transparency and control over the process of passenger transport via electronic platforms, and establish tax obligations for operating in the sector, thereby increasing revenues to the state budget.

Additionally, to facilitate a unified railway network for regular passenger transport within Armenia, make the investment environment more attractive, and reduce tax burdens for those conducting intercity and intra-region regular passenger transports, it is proposed to remove the licensing requirement imposed by the law on state duties for such transport providers.

Babken Tunyan, the Deputy Chairman of the National Assembly’s Standing Committee on Economic Affairs, noted that the aims are fiscal; the regulations will allow those providing transport through electronic platforms to come out of the shadow economy and organize civil and safe passenger transport.

The vice-chairman of the committee expressed concern about whether the acceptance of the proposal will cause service fees to rise and whether there will be regulations that force transport drivers to meet certain standards.

“I’m not sure whether regulation will lead to higher prices or not, but if there is no abuse of a dominant position and fair market conditions prevail, then the market will regulate the situation and there shouldn’t be significant price increases. Regarding quality standards, it isn’t specified in this proposal. Once we have comprehensive statistics, quality standards for drivers will be established,” said Armen Simonyan.

Babken Tunyan also asked what would happen to citizens who provide taxi services without the required licenses. Armen Simonyan replied that such individuals would face penalties.

Arsen Torosyan, a representative of the “Civil Contract” faction, inquired about the anticipated increase in tax revenue if all individual taxi drivers currently working on online platforms began operating within the legal framework. “Approximately 80-100 billion dram in annual turnover is generated from online taxi services according to average annual order statistics; if the tax rates defined in the law are applied, then about 1-5 billion dram in state duty should be paid annually,” said the ministry representative.

Hayk Tsirunyan from the “Civil Contract” faction suggested that the State Revenue Committee should acquire a controlling taxi program for passenger transport, as safety issues are also a concern. He inquired who would verify whether licensed taxi drivers meet the transportation requirements.

“Should applicants wishing to drive taxis through online platforms undergo training to acquire skills and meet quality standards? It’s also possible to increase the shadow economy; an online platform-registered taxi driver providing irregular services might transport many passengers without providing a cash register receipt—how can we address this issue?” questioned the MP, to which Armen Simonyan reiterated that this proposal does not solve the issue completely and further regulations would be needed in the future.

Another member, Hovik Aghazaryan, proposed that the annual state duty of 1 million dram is insufficient for taxi services that provide transport through electronic platforms, suggesting an increase in the duty amount.

Vice-Chairman Babken Tunyan noted that there should be minimum requirements that must be established to prevent individuals with problematic backgrounds from joining an online taxi service. “It’s obvious that if a person has been convicted for drug addiction multiple times, they shouldn’t be allowed to join an online taxi service,” he stated.

Tunyan also referred to recent reports that Russian security services have access to all user information from the 'YandexGo' taxi service, raising concerns about how this issue is regulated in Armenia and whether it conflicts with personal data protection laws. Armenuhy Harutyunyan, Deputy Minister of Justice, explained that when users input their data at the beginning, they consented to these personal data usages. Only specific law enforcement agencies can have access to this data within criminal investigations. “I cannot imagine why there would be a need for Russian law enforcement to compile such information in bulk. I have not encountered any official information about its accuracy,” she added, warning that by downloading the application, citizens consent to their personal data being accessible.

The committee approved the project. The package of legislative drafts proposing amendments to the Law on Subsoil and the Code of Administrative Offenses has been removed from circulation.