Part D – Understanding and improving industry performance (PDF ...

However, unlike most other goods and services, all
electronic payments in Victorian taxis attract a total
‘service fee’ of at least 10 per cent of the total fare (the
metered fare, any flagfall, booking fee, tolls and GST
payable). GST is also payable on service fees, which
brings the total surcharge to 11 per cent of the value of
the fare, except when a consumer uses a Cabchargebranded
card. 1 The surcharge on electronic payments
substantially increases the total cost of taxi travel. For
instance, a passenger paying with a credit card for a
typical trip to Melbourne Airport from the CBD will pay
around $6.00 on top of the total fare.
12.1.1. Submissions and consultations
Payment systems in taxis are raised in submissions
by taxi users and industry participants. Taxi users and
drivers commonly view the service fee as excessive, anticompetitive
and even a cause for anger directed against
taxi drivers:
There is no excuse for this. It is simply anticompetitive
behaviour and adds to the cost of
taking a taxi. 2
The fees charged are ‘robbery’ and unfairly increase
the price of our service to our customers. 3
…the service fee and the GST on service fee charged
by… Cabcharge is outrageous. It really needs to be
reconsidered. 11% extra is good enough to make
passengers angry on driver. 4
The cost to passengers using non-cash payments is
excessive – the standard 10% plus GST is an
outrageous imposition by a corporation abusing its
monopolistic market power. 5
The unreasonableness of the surcharge is particularly
evident for large organisations that spend substantial
sums of money on taxi travel, including some government
agencies. For example, the Transport Accident
Commission (TAC) spends approximately $4.5 million
each year on taxi travel for its clients. This implies that the
TAC is charged approximately $450,000 in service fees
each year. 6
Cabcharge responded to an information notice issued by
the inquiry about how it sets the level of the surcharge.
Cabcharge maintains that this was the level of fees
generally applying when it first began business and is
the level of fees charged by a range of other providers
of like services. However, the inquiry is unable to make
a judgement on the level of fees, as Cabcharge has
provided no data on its costs.
Gange Corporation provided clarification about the
nature of Silver Top Taxi Services Ltd relationship with
Cabcharge and the degree of vertical integration of
Silver Top. Gange Corporation noted that Silver Top
did not own any shares in Cabcharge, while Gange
Corporation, its subsidiaries and directors each
owned a very small number of shares in Cabcharge
(less than 0.2 per cent of total issued shares). There
are also no common directorships between Gange
Corporation and its subsidiaries and Cabcharge. 7
Another provider, CabFare, shared information about
the payment systems industry and its views on areas
needing reform.
12.2. Background
Since the mid-1990s, when the first electronic payment
processors were used in Victorian taxis, the use of
non-cash payment instruments by taxi users has grown
significantly.
While precise figures are unavailable, data from a large
Melbourne operator indicates that, on average, 40 per
cent of taxi fares are paid electronically. This includes credit
and debit cards, taxi-specific charge cards and vouchers.
Cabcharge’s own published results show strong growth in
the use of bank-issued cards in taxis in Australia over the
past five years, as shown in Figure 12.1.
The inquiry also received comments from taxi operators
who supplied information about their dealings with
payment system providers.
1 Cabcharge chooses to absorb the GST on these transactions, making
the service fee 9.1 per cent
2 Ms Gold, Submission to the Taxi Industry Inquiry, SS31, p.1
3 Keith Murdoch, Submission to the Taxi Industry Inquiry, SS230, p.2
4 Omer Farooq, Submission to the Taxi Industry Inquiry, SS169, p.1
5 Australian Taxi Drivers Association (ATDA), Submission to the Taxi
Industry Inquiry, SS27, p.3
6 Correspondence with the TAC, 30 March 2012
7 Gange Corporation, Submission to the Taxi Industry Inquiry, SS124A, p.3
Understanding industry performance CUSTOMERS FIRST 251