CEO ARTICLE

Sep 01 2016

Let me say at the outset how concerned I am about both the financial and emotional welfare of many inside our industry.  We have obviously already taken a large volume of calls and enquires since the government announcement. We will continue to do so, and if you need help please do not hesitate to ask.

Let me also be clear and say that we do not support the compensation package as it stands, or the structure of the proposed 'levy'. We understand the need to change and move with the times. However, we have been clear that as a part of this process people who invested in, and contributed to, our industry (whose structures were determined by government for decades) must not be simply left behind. We will continue to update industry in an ongoing manner via our various communication platforms.

Much of the public commentary I have seen regarding licence holders since the announcement is cruel, unfair and just out right incorrect. Rather than ramble on myself, I want to use an email I received from Linda, someone whose family has contributed a great deal to our industry over many years, as my editorial this month. What it shows is that licence holders are aware of the changing world they inhabit, and all they ask for is a fair go.

David Samuel
Chief Executive Officer


 Dear Premier Andrews and Minister Allan,

I understand the motivation behind the recent announcement proposing extraordinary and revolutionary changes to the commercial passenger vehicle industry, however the compensatory model being outlined for existing taxi plate holders is grossly disproportionate to the collective assets and annual turnover of the business.

Changes to remove the antiquated regulations that are reminiscent of a time where different economic models predominated are undoubtedly needed. However, this should not detract in any way from the government’s culpability in creating the current operating model and in sharing the responsibility in how it has performed.

Taxis themselves may have failed in some areas of service delivery but overwhelmingly the failure is in the underlying business model that has created an environment that does not meet the expectations of the consumer. The regulatory framework has strangled the business and made it difficult to meet the changing nature of supply and demand in the present day, particularly when price and choice and experience are just as much a part of what the public demands in addition to point-to-point travel. The business model for passenger transport will be irrevocably changed on the promise that consumers will be offered discounted transport through the removal of costs associated with regulatory compliance and an ability to now negotiate a price for service in a commercial, competitive setting. The changes may also lead to a more flexible industry and this elasticity may be what is required to meet demand in peak times – Green Tops did not solve this problem.

Where successive governments have sat on its hands you have acted with courage to make radical lateral changes to address today’s transportation considerations. Courage also because this decision may cost you political capital, particularly if the new operating model backfires for the consumer, many of whom rely on this essential service as their only form of transport. Despite any merit in the proposed changes or any blame you wish to bestow upon existing participants, an industry worth collectively well over a billion dollars and turning over nearly as much in gross revenue annually cannot be erased in a day or stolen, only to be delivered on a silver platter to someone else. I do not doubt that if the inherent value of the industry was significantly less, there would be no question of due compensation.

Existing industry participants cannot be cast aside in favour of a new vision without offering fair and reasonable compensation for the costs they bore while abiding by the rules of the old model. The old business model of taxi transport is based upon the government selling small business opportunities to trade within an environment that it controlled. A licence in perpetuity is largely what has contributed to its capital growth. Further, the government cannot ignore multiple contracts because they have been signed with one individual. Each one stands alone.

I don’t encourage any protection for the industry the likes of which some private enterprises have enjoyed such as Avalon airport or international car manufacturers where the government has sought to preserve failing businesses through tax payer funded incentives and bail outs. Quite unlike these businesses, the taxi industry never failed as a business as such, people are still making a living, collectively turning over in excess of $800 million annually.

Quite unlike anything else, the government has been entrenched in the operation of the taxi industry having orchestrated, controlled and coordinated every aspect.  From the vehicle used to engage passengers (right down to the colour of the duco), the security features which must be installed, in some cases the times taxis are able to be on the road, the price they must charge consumers (ie., direct control over the revenue stream), whether the fare be upfront or not, the GST they are obligated to collect, their mandatory affiliation with larger corporations, what drivers wear, where they are trained – the list goes on. Further, it is the only industry I know where the government acts as lawmaker, regulator and investor holding and leasing the licenses of a third of cabs on the road.

The goal posts are being changed though and if allowed to proceed as is currently planned, these changes will destroy my parents, their livelihood and their income. Since 1961, my parents actively serviced successive governments by offering transportation to the general public on their behalf and under their terms. They did this for 46 years. It took them 35 of those years to accumulate the 6 perpetual metropolitan taxi plate licenses that they own today, each one purchased at an equivalent cost at the time of a modest home in inner Melbourne. This IS their superannuation and the lease payments due to them their only form of income. The government offer of compensation to my parents is laughable, particularly so given that their income will also be reduced to nil.

I can’t help but compare this situation with proposals to abolish the capital gains tax discount and negative gearing. For those in government who support this reform, no one has ever suggested that this should apply retrospectively. The sentiment is that this would be unfair and that we should instead draw a line in the sand. The thought of applying retrospective changes that would affect financially people who made a sound business decision under a different historical context would be unconscionable. Not in the case of taxi plate holders though - perhaps there are no taxi moguls in government.

My parents worked until they were 70 years of age before leasing the taxi plates and finally retiring. I only tell you this because the time of their retirement 10 years ago coincides with the government listing taxi licenses as tradeable assets on the Bendigo Stock Exchange. This was heralded as a world first by the then Transport Minister Peter Batchelor. You couldn’t ask for a better advertisement promoting an investment in taxi licenses, the best endorsement there could be.

My parents and others like them do not deserve fair and reasonable compensation because they worked hard. Nor do they deserve it because they were poor migrants or good law abiding citizens. These people deserve fair and equitable compensation because the government operated the overarching business, sold them the franchises, dictated their conduct and spruiked the benefits of investment.

This game was your game and now you win seemingly without any obligation toward those who invested in and operated the business on your behalf. There may be new players in the field and a promise of better outcomes for the consumer but one can’t help but think that the government is playing the role of Robin Hood in reverse. Lawfully the government may be entitled to remove the regulatory framework of the industry but it is unjust to put the business out to tender to competitors who hold no such right to operate under the prevailing model without first fairly settling all existing business contracts.

I feel like I should plead with you to reconsider your model of compensation but I am sure you have been duly advised of all aspects of your lawful responsibility. In a way, I can accept your offer of compensation as an admission of the government’s financial obligation to the industry – this is a positive thing. However, there are now some very good arguments that need to be independently explored that may challenge the valuation at which you have arrived. Only time will tell if these will come into play.

Linda 

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