Taxi industry inquiry

44 These rates would now be lower given interest rates have fallen since this information was compiled in late 2011.

45 This is lower than some estimates provided to the inquiry or observed in overseas jurisdictions. It should be noted that this estimate is for the number of taxis that would work ‘full time’; it is possible that more taxis would be licensed but not work as many hours

46 Morrison, P.S. (1997), ‘Restructuring effects of deregulation: the case of the New Zealand taxi industry’, Environment and Planning A 29, pp. 913-928

47 Teal, R. and Berglund, M. (1987), ‘Impacts of Taxicab Deregulation in the USA’, Journal of Transport Economics and Policy USA 21, pp. 37-56

48 Dandenong Taxis E441, p. 3

49 TII hearings, submission by Mr David Samuel, VTA, 14 August 2012

50 $180,000 equates to an annual stream of around $28,000 per annum assuming a discount or borrowing rate of nine per cent (and $27,000 at eight per cent)

51 This is discussed in chapter 13 of the Draft Report

52 Gaunt, C. (1996), The Impact of Taxi Deregulation in Small Urban areas: Some New Zealand evidence, Transport Policy, Vol. 2. No. 4, pp. 257-262, p.259

53 See chapter 9 of the Draft Report. Also see Jaguar Consulting Pty Ltd (2012) Overview and analysis of possible transitional strategies: Moving from a tightly restricted supply model to an open entry taxi industry – Prepared for the Taxi Industry Inquiry and Hara Associates (2012), Taxicab Regulation in North America – Prepared for the Taxi Industry Inquiry.

54 This point is discussed in detail in chapter 10 and Appendix E of the Draft Report

55 One way to think about the inquiry’s approach is that it is a quantity trigger but one that uses as the trigger the change in the assignment price. Any tendency for the price to increase will be met by an increased quantity of licences.

56 If the nominal licence price is included as a ‘trigger’ to release more licences, the differences between the two approaches will be muted as higher licence prices will then drive more licence releases.

57 An example of such a scheme is proposed in Deighton-Smith, R. (November 2000), Reforming the Taxi Industry in Australia, National Competition Council Staff Discussion Paper

58 Industry Commission (1994), Urban Transport, Commonwealth of Australia, Melbourne

59 For example, banks will only loan money against taxi licences at higher rates of interest and with higher levels of security because there is greater inherent risk in the earnings and price of these assets than, say, housing or bonds. A safe asset with a guaranteed income stream of $30,000 per year, growing at three per cent per year, would be valued at upwards of $900,000. The difference between this value and current Melbourne licence values is indicative of the risk (including regulatory risk) that returns will be lower than this.

60 The approach proposed in Deighton-Smith (2000) provided for payments of around 27 per cent of the current market value of licences (in 2000). The inquiry’s proposals are likely to result in licence value reductions of no more than 50 per cent.

61 The annualised cost difference is calculated using an annuity formula. This provides for both a return of capital (depreciation) and return on capital invested (interest charges).

62 Anonymous submission 831, p.3

63 Dandenong Taxis submission E441, p.25

64 Mark Longton (SE Taxis) submission 1209, p.2

65 Russell Taylor submission 291, p.2

66 Anonymous submission E153, p.2

67 Scope submission E346, p.4

68 Geelong Taxi Network submission E465, p. 10

69 Yarra Ranges Shire Council submission L172, p.2

70 Goodwill is value attributable to a business that is distinguishable from the licence value. That is, the goodwill value would be what is left over even if an unlimited number of licences were available at a zero price.

71 The inquiry maintains that this view is not correct, and that the similarity in licence values between the metropolitan and outer suburban zone areas means that there would be little incentive for these taxis to leave their current service areas.

72 This issue was discussed in section 20.5 of the Draft Report.

73 Under A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No.1) hire car licence fees are exempt from GST. While new operators have paid the GST inclusive amount to the VTD, they have been able to claim back GST paid from the Australian Taxation Office as an input tax credit.

74 Southern Cross Chauffeur Drive submission L161, p.6

75 WCAV submission L050, p.5

76 TII hearings, submission by Mr George Kapnias and Mr John Kapnias, Southern Cross Chauffeur Drive, 14 August 2012

77 Minicabs were unregulated in England and Wales until 1976 and were completely unregulated in London until as late as 1998.

78 VTA submission 179, p. 13

79 Black Cab Combined submission E471, p. 2

80 TISV submission E347, p. 26

81 Ibid, p.26

82 Riviera Taxis submission L064, p. 6

83 TISV submission E347, p. 22

84 Yarra Ranges Shire Council submission L172, p.2

85 See chapter 14 of the Draft Report for a more detailed account of the operations of Addison Lee and the New York Livery

86 Wedding Car Association of Victoria, Meeting with the Taxi Industry Inquiry, September 2012

87 VECCI submission L180, p. 3

88 VDAC submission L186, p.5

89 Scope submission E346, p. 14

90 Ibid, p.14

91 See anonymous submissions 660 and 728

92 Geelong Taxi Network submission E465, p.20

93 ATDA submission E30, p. 2

94 YDAS submission E495, p. 16

95 CabFare submission E505, p. 4

96 TII hearings, submission by Mr John Vlassopoulos, Mr Jim Sikavitsas and Mr Ross Walker, TISV, 14 August 2012

97 VTA submission L179, p. 16

98 Andre Landman submission E427, p.35

99 Frankston Radio Cabs submission L119, p. 8

100 NYC TLC alternate technology program, accessed 5/9/2012 at http://www.nyc.gov/html/tlc/downloads/pdf/industry_notice_12_19.pdf

101 The broader implications for the regulator of collecting and analysing this data are discussed in chapter 11.

102 Cabcharge 2012 Chairman’s Report, p. 3, accessed 5/9/2012 at http://www.asx.com.au/asxpdf/20120823/pdf/428695d40fv3y3.pdf

103 This issue is discussed in greater detail in chapter 8.

104 In part, this is due to the fact that operators cannot appropriate the benefits of investing in better vehicles; nor do they take into account the benefits to drivers of safer vehicles.

105 In New York, the new Nissan taxi is available at a price of around $US50,000. A new London black cab can be purchased for around £32,000 ($A50,000).

106 Converting the capital costs into an annuity (covering both a return of, and return on, capital) with an interest rate of eight per cent, the following can be calculated:

Vehicle costNo. of periodsYearly payment$50,00010$7,451$23,0004$6,944The costs at $40,000 would be less than $6,000 per year  cheaper than for the standard conventional vehicle. At $60,000, the difference would increase to around $2,000 above the conventional taxi.

107 Further discussion of DSAPT is included in chapter 10.

108 Secondary networks are less formal taxi networks whose members pass bookings amongst themselves, typically by mobile phone or pager. Members of secondary networks must also have an affiliation with a primary NSP.

109 Accessibility of taxi and hire car services is discussed in greater detail in chapter 10.

110 The inquiry’s proposals for greater responsibility or service performance are discussed in chapter 9.

111 VTA submission L179, p. 17

112 Ibid, p. 17

113 Ibid, p. 18

114 TISV submission E347, p. 28

115 Ibid, p. 28

116 Bellarine Peninsula Taxis submission L158, p.1 and see ACCC White Top Taxis ruling, accessed 27/8/2012 at http://www.accc.gov.au/content/index.phtml/itemId/861095/fromItemId/142

117 Approximately 45 per cent of online submissions supported recommendation 5.2 to remove mandatory affiliation

118 Dr Peter Abelson submission E182, p. 3

119 VTA submission L179, p. 17

120 The reports of this research are available on the inquiry’s website.

121 VCOSS submission E494, pp. 10-11

122 Frankston Radio Cabs submission L119, p. 11

123 Anonymous submission E467, p. 24

124 Greg Kyritsis submission 1317, p. 8

125 Anonymous submission 865, p. 7

126 Patrick Holahan submission 1191, p. 7

127 Federation of Community Legal Centres (2012), In the Driver’s Seat, Melbourne, p. 31

128 VECCI submission L180, p. 3

129 TISV submission E347, p. 12

130 Also see the inquiry’s comments in the Annex to this report.

131 Anonymous submission E466, p.25

132 The cash outgoings for an operator who also drives will be lower than this.

133 Section 53 Associations Incorporated Act 1981

134 Sections 30 and 30A of the Associations Incorporated Act 1981

135 Mutual risk products (MPRs) are risk products that provide an alternative to conventional general insurance products. A MRP scheme involves members contributing money which is pooled and held by the entity operating the scheme (‘the MPR provider’). The MPR provider may use the pool of money to obtain group insurance to cover specified risks of the members and for paying claims by members up to a certain limit. In the case of a discretionary MPR scheme, the payment of claims or the provision of financial assistance is at the discretion of the MPR provider.

136 Under section 51(1) of the AI Act, an incorporated association must not (a) trade; (b) secure pecuniary profit for persons who are members of the incorporated association; or (c) as trustee, trade or secure pecuniary profit for persons who are members of the incorporated association

137 See chapter 13 of the Draft Report

138 In considering the outcome of the CAV investigation, it is important to note that taxi clubs are formed for a variety of reasons to provide a range of services that are not mutually exclusive. The focus of the inquiry has been on the provision of mutual risk products. However, CAV has a different focus and its investigation is being conducted parallel to, and not in conjunction with, the inquiry. CAV’s remit under the AI Act is to ensure the clubs furnish annual reports, provide rules for endorsement and provide contact details and notify of any changes to these. To date, its investigations have found that a number of clubs failed on some or all of these requisites.

139 See chapters 7 and 8 of the Draft Report

140 Minister for Public Transport, Media Release, 15 March 2004

141 VTA submission L179, p. 24

142 Riviera Taxis submission L064, p. 9

143 VCOSS submission E494, p. 10

144 VTA submission L179, p. 24

145 VEOHRC submission E349, p. 8

146 TII hearings, submission by Assistant Commissioner Chris O’Neill and Inspector Phil Green, Victoria Police, 13 August 2012

147 See chapter 5

148 CabFare submission E505, p. 5

149 VTA submission L179, p. 24

150 Public Transport Ombudsman submission E253, p. 3

151 VTA submission L179, p. 28

152 Anonymous submission E466, p. 38

153 Public Transport Ombudsman submission E253, p. 5

154 See chapter 15 of the Draft Report

155 VCOSS submission E494, p. 3

156 VEOHRC submission E349, p.12

157 This report is available from the Documents page of the VCOSS website: http://vcoss.org.au

158 TII hearings, submission by Ms Carolyn Atkins and Mr Llewellyn Reynders, VCOSS,13 August 2012

159 Scope submission E346, p. 45

160 Zebra Alliance submission, E348, p. 2

161 See TISV, VTA and Black Cabs Combined submissions.

162 TII hearings, submission by Mr Andrew Gilmartin, Silvertop Taxis, 14 August 2012

163 TII hearings, submission by Mr Kevin Dunn, Frankston Radio Cabs, 13 August 2012

164 VCOSS submission E494, p.15

165 See report of DARU-VCOSS forum, 13 July 2012, Op. Cit.

166 Scope submission E346, p. 14

167 Issues associated with this recommendation are discussed in greater detail in chapter 5

168 VDAC submission L186, p. 5

169 Scope submission E346, p. 14

170 VCOSS submission E494, p. 5

171 Ibid, p. 6

172 Ibid, p. 6

173 Driver training is discussed in greater detail in chapter 7

174 VCOSS submission E494, p. 11

175 VEORHC submission E494, p. 13

176 See Scope, VCOSS and VDAC submissions

177 Scope submission E346, p. 25

178 See VCOSS and VEOHRC submissions

179 VEOHRC submission E494, p. 13

180 VTA submission L179, p. 30

181 Zebra Alliance submission E358, p. 4

182 Frankston Radio Cabs submission L119, p. 21

183 See chapter 5 of the Draft Report

184 TISV, Draft proposals for transition, September 2012, p. 1

185 As discussed in chapter 7, the inquiry sees these opportunities as being an important aspect of its proposals to increase driver remuneration as they provide the potential for operators to offset higher driver payments with increased revenue.

186 VTA submission L179, p. 34

187 Manningham City Council submission E497, p. 3

188 See chapter 13

189 See, for example, the discussion of the Paynesville to Bairnsdale Share-A-Fare service set out in chapter 19 of the Draft Report.

190 See chapter 19 of the Draft Report

191 Ibid

192 VTA submission L179, p. 35

193 Hans Zonneveldt submission L081, p. 76

194 Ms Yota Vlassopoulos submission E359, p. 2

195 TISV submission E347, p. 34

196 TII hearings, submission by Mr John Vlassopoulos, Mr Jim Sikavitsas and Mr Ross Walker, TISV, 13 August 2012

197 VTA submission L179, p. 36

198 ESC submission L192, p. 7

199 VTA submission L179, p. 35

200 ESC submission L192, p. 11

201 VECCI submission L180, p. 3

202 See report of DARU-VCOSS forum, Op. Cit.

203 VTA submission L179, p. 36

204 Scope submission E346, p. 68

205 ESC submission L192, p. 13

206 See chapter 12 for further discussion on this development

207 See chapter 12

208 For example, the Australian Competition and Consumer Commission (ACCC) has associate members the chairs of the Australian Communications and Media Authority (ACMA) and the New Zealand Commerce Commission. There are reciprocal arrangements between these two regulators and the ACCC, with the ACCC chair sitting on the board of ACMA and an ACCC Commissioner on the board of the NZ Commerce Commission.

209 See chapter 3

210 Share rides are discussed further in chapter 12

211 The inquiry’s analysis of the effects of fare rises on driver incomes is set out in section 13.5 of the Draft Report.

212 The inquiry understands that Cabcharge absorbs the GST for payments made with Cabcharge cards (and so charges a fee of 9.1 per cent plus GST). All other cards are charged at 11 per cent, regardless of payment processor.

213 Only if a driver’s third party card transactions exceed those done with Cabcharge cards and E-tickets

214 Anonymous submission, E479

215 Letter from Cabcharge, 16 December 2011, p. 10

216 This term is discussed in a guidance note released by the RBA: “Accordingly, for each of the designated schemes mentioned above, the Standards prevent the scheme rules (or any participant in the scheme) from prohibiting merchants from recovering ‘part or all of the reasonable cost of acceptance’ of the scheme's cards through surcharges to the cardholder. The Standards state that for this purpose, the reasonable cost of acceptance includes, but is not necessarily limited to, the merchant service fee.” RBA (June 2012), Payment Systems Issues: Guidance Note for the Varied Surcharging Standards, Attachment 3, accessed 25/9/2012 at http://www.rba.gov.au/payments-system/reforms/cards/201206-var-surcharging-stnds-fin-ref-ris/attachment-3.html. See also RBA (August 2012), Guidance Note: Interpretation of Surcharging Standards, Revised Draft, accessed 25/9/2012 at http://www.rba.gov.au/payments-system/reforms/cards/201208-var-surcharging-stnds-draft-guidance/guidance-note.html

217 The World Today, ABC, 13 June 2012, accessed 10/8/2012 at http://www.abc.net.au/worldtoday/content/2012/s3524080.htm

218 Trade Practices Tribunal, Re Queensland Co-Op Milling Association Limited and Defiance Holdings Limited (QCMA), ALR 515[40]; ATPR 17,246]

219 Section 46 Competition and Consumer Act 2010

220 Section 7 Payment Systems (Regulation) Act 1998

221 See Visa International Service Association v Reserve Bank of Australia [2003] FCA 977 (19 September 2003), which discusses the application of the Payment Systems (Regulation) Act 1998

222 RBA (June 2011), Review of Card Surcharging: A consultation document, p. 7

223 Donna Ablett submission 304, p.2

224 Anonymous submission 1036, p.13

225 Anonymous submission 472, p. 2

226 Jason Tully submission 1058, p. 16

227 TII hearings, submission by Mr Tuna Guclu, Crown Cabs, 14 August

228 Anonymous submission 369, p. 8

229 TII hearings, submission by Mr Stephen Armstrong, Ballarat Taxis, 14 August 2012

230 TII hearings, submission by Mr Max Hood, 14 August 2012

231 Howard Pascoe Consulting submission L149, p. 4

232 East Gippsland Shire Council submission, E506, p. 9

233 Yarra Ranges Shire Council submission L172, p. 2

234 Simon Holloway submission 91, p. 2

235 Westmont Aged Care Facility Ltd submission E357, p. 1

236 B-Line submission E431, p. 8

237 The suitability of using the IRR to assess profitability is well established in economic theory and practical investigations. See

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