Amendments to the Carriage by Road Law adopted eight years ago, which were supposed to regulate ride-sharing, have failed, and the situation in the taxi sector has now reached critical mass.
Since 2019 the number of issued taxi licence cards has fallen by half, the VAT paid to the state, despite inflation, has not changed, and the amendments to the law have not achieved their goal. Instead, the previously regulated taxis (with yellow licence plates) are now being replaced by cars with white plates – vehicles with lower requirements, whose drivers often do not even know the Latvian language. This discriminates against local regulated taxi drivers who have not been silent for quite some time, but still have not been heard.
The idea to allow IT platforms providing ride-sharing into Latvia appeared in 2017, and in essence it was not a bad one. In the USA there was already a successfully operating platform Uber, and similar ones started to appear in Europe, such as Bolt. The core of the idea was the wish to save fuel. Any private person who owns a car and has a driver’s licence could register on an online platform (app) to take a fellow passenger along on the way home from work or, when meeting a relative at the airport, pick up someone else headed to the city centre. In this case, information technology companies provide only the IT platform, without becoming taxi companies, hiring drivers, or providing vehicles.
Back in 2017, when this issue reached the Saeima, the head of the Taxi Drivers’ Trade Union, Ģirts Mazurs, warned that he was categorically opposed to including ride-sharing separately in the law, because this would split carriers and create unequal conditions. “As a result of the amendments, the same taxis will emerge, only bypassing the law and with a number of relaxations. Quite recently there was a conference of taxi carriers in Latvia, where our colleagues from Lithuania talked about how ride-sharing had destroyed the sector there – there are no longer taxi companies, everyone hails taxis on the street. The number of taxis has supposedly increased, but their tax revenues have fallen fourfold,” wrote LA.lv, quoting Mazurs. He suggested postponing the bill at least until the court proceedings initiated in the European Union against ride-sharing giant Uber were concluded, as its entry into Europe was not going smoothly for the time being. However, at that time neither he nor other industry organisations were listened to. Today Mazurs’ trade union still exists legally but has withered. His forecasts, however, have been fully borne out.
White or yellow?
How do regular taxis with yellow plates differ from “ride-sharing cars”, for example the Estonian Bolt, which is currently in practice the only one? A taxi has responsibilities: a licence must be obtained every month. To do this, social contributions must be paid in advance at least on the basis of the minimum wage. The car must undergo a vehicle roadworthiness test twice a year instead of once, because passengers are being carried. Third-party liability insurance for a taxi costs at least 150 euros per month, because a taxi is a higher-risk vehicle. A car with white plates is just a car. In theory, all the same rules apply to its drivers, but in reality they are hardly monitored due to a lack of resources, and the requirements for the vehicles themselves are lower.
Although the original idea was good, in reality it can be seen that the number of licences for carriage in Riga has decreased… because why pay for a licence if you can drive without one?
Data from the Riga Outdoor Space and Mobility Department show that the number of issued licence cards has shrunk by half in five years: while in 2019 more than 15,000 cards were issued, in 2024 – only 7,900. Taxis must obtain licence cards every month and, in order to do so, not only slightly more than 17 euros must be paid for the licence itself, but also social tax in advance.
Where does the money go?
In short – it flows to Estonia. The company in a dominant position at the moment is the Estonian Bolt, which in theory should only be an IT intermediary enabling the client to find the nearest available car and make payment, but in practice things are different. A private person who, as originally intended, might pick up a ride-sharing passenger on the way, currently cannot even register as a driver on the Bolt platform, but can register as a company or a sole trader with all the associated consequences and liabilities to the State Revenue Service. It might seem logical that the money (including VAT) paid by the customer would then go into the account of this driver’s company, but this is not the case. The money goes to Estonia, where Bolt deducts its 30% commission from the total, including VAT, and only then transfers the remainder back to the specific carrier. Moreover, Bolt also sets the tariffs in Latvia, which is not entirely lawful, because tariffs must be set by the carrier, not by the platform – the intermediary.
The Riga City Council’s Outdoor Space and Mobility Department points out that the issue of the coexistence of two in fact identical types of commercial passenger transport – by taxis and by passenger cars – has been raised repeatedly by the department, but without result. In the department’s view, the regulation introduced in 2017 has not achieved its aim. Although the legal framework has already been amended several times, the distinction between the differing characteristics of these two types of carriage has now become even more questionable than it was initially. Differences remain in the requirements for vehicle equipment, but not in the service provided. As inflation increases, the remaining differences directly affect the cost of the service provided, thereby placing providers of commercial passenger transport by passenger car in more favourable market conditions.
The department has also drawn the attention of the responsible institutions to the fact that, in its view, website or mobile app service providers, including Bolt, do not comply with the competences assigned to them by regulatory enactments. Such service providers perform not only an intermediary function similar to, for example, Mobilly or BezRindas.lv, but actually interfere with the carrier’s competence by setting the tariff (fare) and also applying additional charges to passengers for waiting and cancelled trips, discounts, etc., the department notes. It has also turned to the Competition Council, which has launched an investigation.
The Bolt management does not see a problem, stating in the mass media that the Bolt ride-sharing platform uses a dynamic pricing policy, which is standard practice in the digital platform sector and complies with the applicable regulation. According to the company’s management, dynamic pricing balances supply and demand in a given time period and geographical area. “For example, when demand for rides is high, including during large-scale events or peak hours, the fare is increased to encourage partner drivers to go on the road,” a Bolt representative added. It has previously been observed that, for example, on New Year’s Eve or during the Song Festival, fares increase several times over.
Meanwhile, both the Association for the Development of Licensed Commercial Passenger Carriers (LPKAA) and the Employers’ Organisation of the Latvian Light Taxi Sector are adamant: Bolt is driving Latvian taxi companies out of the market by creating unfair competition and applying practices that often force drivers to work below cost price – if drivers refuse to accept orders that are not profitable for them, Bolt blocks them in the app, preventing them from working at all.
LPKAA head Ella Petrova has previously pointed out that by engaging in unfair commercial practices Bolt is violating the Latvian Commercial Law, the Carriage by Road Law and the Accounting Law by issuing invoices in the name of other persons, and by applying “dynamic” tariffs at its own discretion.
A new twist
A new twist occurred this September, when Bolt, having failed to get its way in the spring, turned to the Saeima. Specifically, amendments to the Carriage by Road Law were proposed that could have allowed the use of leased vehicles in passenger transport, but, taking into account the opinions expressed, once the public consultation ended in May, the amendments were not pursued further. Now the Carriage by Road Law has been reopened as one of the laws included in the state budget package. Bolt had written a letter to the Saeima Budget and Finance Committee, in response to which the Subcommittee for Combating the Shadow Economy was convened. There Bolt presented a slide deck stating, among other things, that around 250 unique drivers are unable to meet the requirements for providing the service (licensing requirements, choice of business form, registration in the driver register and obtaining a licence card), and therefore there is a high probability that the service will be provided without a licence or licence card and possibly even, as Bolt interestingly termed it, “in the informal economy”. Bolt also notes that the taxi sector is not growing because of the administrative burden.
It should be noted here that, in order for a driver to register in the driver register, they must prove their knowledge of the state language, have a driving licence, and must not have more than eight penalty points.
Although Latvian should be known when working with consumers, an exception has been made for Ukrainian citizens in the context of support for war refugees. LPKAA head Ella Petrova has previously pointed out that in implementing this good and generally justifiable objective, a situation has emerged in which both other migrants and Latvian citizens who do not know Latvian or do not have a driving licence are buying Ukrainian documents and driving. At the same time, no one checks this due to a lack of resources.
Originally published at https://inc-baltics.com/ka-iznikst-nozare/
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