The Analytical Center has analyzed the taxi segment in the urban public transport market. The study, whose findings were presented at an expert panel titled “Role of IT Services in the Development of Taxi Services and Self-Employment among Taxi Drivers”, found that in the past five years the taxi market in Russia has seen 85% growth while the number of vehicles employed as taxis has gone up 20%.
In recent years the taxi segment has been growing explosively in Russia both in terms of quantity and in terms of quality and affordability for the general public. Consumers note that the quality of taxi services have improved in terms of convenience, the ease of ordering a taxi, wait times and affordability of the fare.
Experts believe that such explosive growth was made possible by a very liberal approach to regulating the segment. Regional governments never put any restrictions on the number of licenses issued, never attempted to regulate the fares. This kind of laissez faire approach has helped promote competition, free market price formation and small businesses. Thus, in the past five years the number of legal entities offering taxi services has increased more than twofold.
“Today, the average annual number of taxis in Russia is 338,000 and we are talking legally operating cabs that generate RUB 441 billion in revenue and RUB 26.4 billion in potential tax revenue for the treasury,” Svetlana Ganeeva, Deputy Head of the Analytical Center, said.
Even as the industry is slowly but surely being legalized, the problem of black market taxis is still very much in evidence. Illegal taxies make up at least 26% of the market in Russia and in some regions their shares is as high as 50-60% of the market. The study of the Analytical Center has shown that unregistered taxies may generate in excess of RUB 116 billion every year, which translates into RUB 7 billion in potential tax revenue that never gets paid.
“Today, the bulk of unofficial taxies are moonlighters who do it to make the extra ruble on the side while they are away from their main job. We also have to remember that the so called gray market also has a sizeable share: here we are talking about licensed drivers that conceal their income and do not pay taxes on it,” comments Nikolai Sevastianov, Leading Advisor of the Department for state-run programs and budgeting of the Analytical Center.
However, a number of experts believe the state should stay out of these kinds of activities for the most part. The Federal Antimonopoly Service is against state regulation of the fares and quoting, at least unless the introduction of such measures is preceded by very serious systemic research. “This would significantly limit competition,” says Aleksey Gorlinskiy, Deputy Head of the Department for transport regulation of the FAS Russia.
Svetlana Ganeeva believes the issue of taxis should be regarded in context: taxis are an integral part of the development of our cities, information technologies and small businesses. Thus, experts note that the emergence of taxi aggregators is a key factor in the qualitative leap we currently see happening in the taxi market. The transition to outside online services has completely upended the way orders get assigned, making the whole process far more effective due to access to all free cars. Thanks to the optimization of internal costs of keeping call centers and a more efficient order assignment process, shorter idle time, and lower cost of fuel, fares have gone down.
“The emergence of a large number of small and medium-sized companies as well self-employed drivers created a lot of demand for independent order assignment companies, or aggregators, that then further facilitated development of small players. As a result, today the taxi segment provides jobs for large numbers of budding entrepreneurs and self-employed individuals,” Nikolai Sevastianov said. - “You do not need any capital to start working as a taxi driver, a car can be rented on a day-to-day basis while getting fares has become a standardized service that any taxi driver can afford easily.”
“In order to make it easier for economically active people and specifically taxi drivers to start doing business legally, a new legal category of self-employed individuals was created. If a person wants to work as a taxi driver, he/she can get registered as a self-employed individual and get a license whose price already includes all the necessary taxes and fees. This measure significantly reduces the amount of red tape that taxi drivers have to go through that is important as most of them do not really care about the subtleties of law and taxation. In general this reduces the tax burden and serves as an incentive to start working above board. The self-employed status bill should get proper support in the near future,” believes Viktor Yermakov, Ombudsman for the protection of small and medium-sized business.
The taxi segment also performs a number of public functions, offering transportation services for remote infrastructure locations (train stations, airports), ensuring availability of 24/7 service as well as playing a social role in helping move mobility impaired individuals and residents of small settlements. The experts noted, however, that a lot of potential taxi customers are unable to use modern taxi calling apps, especially in the country.
“Taxi aggregators are growing as part of the global trend towards deregulation and decentralization of cities. However, as taxis become more popular and more affordable, the interests of people who still cannot afford them must be taken into account and measures must be put in place to ensure that taxis do not completely replace other types of public transport,” Kseenia Mokrushina, Head of the Center for Urban Research at Skolkovo, explains.
Most experts tend to believe that in the rather near future the entire taxi segment is going to evolve into a highly competitive free market of independent drivers. Internet Ombudsman Dmitry Marinichev believes that aggregators are helping decentralize and diversify the market, allowing large numbers of small independent players to join in. “Acting pretty much in the same way as the old-fashioned taxi ads in the telephone directory that we had 20 years ago, the aggregators are automating the process and are getting increasingly better at collecting information. I would not be surprised if they started using social media to share information about and assign orders. So when we talk about regulations and the responsibility of aggregators, we have got to understand that the model we have got today is not permanent and will be keep changing all the time. In my opinion, any data-based taxi services must guarantee that all users get full information and reasonable minimal measures are taken to check the service providers and that appropriate actions will be taken to promptly respond to any calls for help from customers who believe their life or health might be in danger,” the Internet Ombudsman believes.