Thursday, November 22, 2018

Are Lime tax-cheats?

The playbook of silicon-valley startups is simple: disrupt (ignore the law), disintermediate (insert yourself as the middle party of a transaction), profit (by selling your loss-making company to a bigger sucker, while selling the information of your customers to everyone you can). Uber ignores laws on taxi services. AirBnB ignores laws on both rental properties and hotels. But with Lime Scooters, the law they seem to be ignoring in New Zealand is GST:

At the risk of adding another “maybe Lime is bad” article to the pile, the electric scooter hire company could be dodging a shitload of tax by charging users via a US company and not adding GST.

Don’t get me wrong, aside from Lime being a bit pricey I quite like the thrill of caning it along a bumpy footpath with the wind flowing through my unhelmeted hair, weaving perilously between the pedestrians and councillors making their merry way on boring old foot.

But from what I can tell, when you hire a Lime scooter using the company’s app your credit card is charged by a US operating entity, Neutron Holdings, and these charges do not include GST. I say “from what I can tell” because, despite repeated questioning, Lime won’t actually tell me.

The law is pretty clear: if your turnover is more than $60,000 a year, you need to register for GST. There's no question that Lime's service is taxable, so if they've failed to register and are failing to collect or pass on GST, they've committed a criminal offence. The Spinoff estimates the amount of tax being avoided at a million dollars a year. And that's getting into some pretty serious tax cheating territory, the sort of stuff which should see people prosecuted and in jail. And the fact that Lime's answer is anything other than "of course we are paying GST, we obey local law because we're not sociopathic grifters" is worrying.

But there is an easy way to find out: while Lime doesn't have to provide a tax invoice for most rentals because they're under $50, they are required to provide one on request to any GST registered person (and failure to do so within 28 days is a criminal offence). So, The Spinoff or some other publicly-minded journalist could rent a scooter "for work", then demand an invoice. If Lime doesn't provide one, both publicise the fact and report them to IRD, then watch the latter like hawks to ensure that the law takes its course.