Taxi drivers claim they are facing the brink of the gray area due to tax burdens
In recent times, Russia's taxi market has been facing a series of challenges, with the introduction of higher taxes and the implementation of the localization law causing ripples in the industry.
The Russian government's decision to increase taxes on taxi businesses has had a significant impact on profitability. With the actual tax burden rising to 30-40% of net profit, many taxi drivers and operators are considering moving into the gray economy to avoid these taxes. This shift could potentially threaten the legal taxi market's stability and growth.
The localization law, aimed at promoting import substitution and local production, tightens requirements on vehicles used in taxis. While this law is supported by incentives such as tax benefits, subsidies, and access to government procurement, it could lead to increased operational costs for taxi businesses. They may need to invest in locally produced vehicles that meet new standards, resulting in higher vehicle costs and compliance expenses. Consequently, transportation prices are expected to rise.
Despite these challenges, there are signs of growth in the taxi market. Russian carriers have turned to the Ministry of Industry and Trade to create a special adapted vehicle for taxi work. According to forecasts by VTB Leasing, the taxi fleet in Russia is expected to increase by 75% from the end of 2019 to 2025, reaching 700,000 units.
However, the market growth rate could be affected by the higher tax burden. Dmitry Ivanter, General Director of VTB Leasing, suggests that under an optimistic scenario, the market growth rate could reach up to 15% per year.
Notable figures in the industry have expressed concerns about the impact of the VAT and the localization law. Ruslan Satretdinov, head of the "Rythm" taxi park, stated that the taxi market is facing tough times due to the introduction of VAT. Valery Korneyev, chairman of the "Digital World" union, predicted that if the taxi localization law is implemented, the prices for transportation could increase by up to 40%.
Moreover, Omar Bagamaev, general director of "Avenue Group", mentioned that taxi parks with more than 50 vehicles and an annual turnover of over 60 million rubles are particularly affected by the tax burden.
In a bid to avoid these taxes, some taxi drivers may resort to operating illegally. This could further complicate matters for the industry and the government. Vladimir Putin signed a law on the localization of vehicles used as taxis in May, and it remains to be seen how the industry will adapt to these changes.
In conclusion, while the higher tax burden and localization law present challenges for Russia's taxi market, they also offer long-term opportunities for market players who successfully adapt to local production requirements with government support. The coming months will be crucial in determining the future of the industry.
The Russian government's increase in taxes on taxi businesses, together with the localization law, could potentially shift some operators towards the gray economy to evade the high tax burden. This move might threaten the legal taxi market's stability and growth, thereby affecting the overall industry and finance sector.
With the localization law pressuring taxi businesses to invest in locally produced vehicles, operational costs could surge, possibly escalating transportation costs due to higher vehicle costs and compliance expenses, and potentially increasing prices up to 40%, as predicted by Valery Korneyev.
