Uber and Lyft are household names across the world, in the absence of which in Iran, two startups, Snapp and Tap30, set up online ridesharing platforms that have become vastly popular.
From their inception, these firms have faced harsh resistance from old-school transport firms and urban authorities, which has literally drawn blood in Iran with angry cabbies mobbing the offices of online mobility service providers.
As the firms’ fortunes improved, the angry clashes subsided in Iran but were replaced with a new challenge: national and urban authorities eying a cut of these companies’ profits.
Following long-drawn talks between these startups, Iran’s ministries of ICT, industries and interior plus urban administrations, spearheaded by Tehran Municipality, introduced a guideline in late September. While taxing the startups, the guideline has left them some room to wiggle.
As per the text, the ride-hailing companies need to forge a deal with each city's municipality by paying a 2% tax on each ride’s fare. In return, they will be exempted from paying value-added tax and municipalities won’t tamper with the company’s pricing system.
So far, Tap30 has signed a deal with Tehran Municipality while its archrival Snapp says the guideline needs to be modified. The latter is demanding guarantees that they would be exempted from paying the 9% VAT.
During an event held in Tehran on Tuesday, Tap30 CEO Milad Monshipour, the company’s director for legal affairs, Negin Ansari, and its COO and cofounder Hooman Damirchi took questions about the deal.
Monshipour called the deal a “win-win agreement and a breakthrough” that can be referred to as an example of “fruitful negotiations between the private sector and state agencies”.
On the other hand, prominent figures in Iran’s startup ecosystem have cautioned that the deal has opened a Pandora's box that no one would be able to close. They speculate that soon other state agencies will attempt to claim a share of local startup’s revenues.
User Privacy
In addition to the 2% tax and VAT exemption, one of the sticking points in the negotiations was the extent of oversight state and urban authorities would have over the activities of online taxi firms.
Privacy advocates have always been alarmed that the authorities would demand unbridled access to the travel logs of users.
Monshipour says, “User privacy is a redline for us. Fortunately, the guideline safeguards users’ privacy.”
However, the guideline includes a clause demanding the companies hand over compact discs containing all “travel logs” to the Interior Ministry.
Ansari, the company’s head of legal team, says, “The text explicitly defines ‘travel logs’ as each trip's duration, distance and fare, plus the vehicle’s number plate.”
Ansari further said that in view of the mobility firms’ social impact, they are highly regulated across the world. She believes that taxes and regulations imposed on the operations of online taxi firms are not likely to be extended to other startups.
A clause in the guideline requires municipalities to spend the money collected from online taxi firms on expanding urban transportation services and curbing air pollution.
Monshipour called on the media and citizens to keenly monitor the implementation of this clause.
Possible Price Hike
The Tap30-Tehran Municipality deal has drawn mixed reactions from observers, with many cautioning that if the government does not agree to give the firm VAT exemption, fares will soar.
Tap30 CEO is hopeful that the government will stick to its commitments but does not rule out the possibility of a price hike. In the worst-case scenario, Tap30 would have to pay a 2% tax to municipalities plus a 9% VAT to the government.
In a talk with Financial Tribune, Iran IT Organization’s deputy for legal affairs said, “Finally, the case of regulating and taxing online taxi firms has come to a close.”
Mohammad Jafar Nanakar added that the deal would provide a legal framework for companies to expand their operations while protecting citizens’ rights.
Only time will show the long-term impact of the guideline. But one thing is clear, the online taxi firm’s case showed Iranian startups have a strong footing.
Neither traditional businesses nor state authorities can ignore these companies' economic impact or saddle them with draconian regulations. They have finally claimed a seat at the table.
