Taxi owners cry foul over proposed reforms

The $5 billion taxi industry, state politicians and Reg Kermode's Cabcharge are waiting with bated breath for the Victorian government's verdict on a final report and set of recommendations that were handed to it days ago on the taxi industry.

The $5 billion taxi industry, state politicians and Reg Kermode's Cabcharge are waiting with bated breath for the Victorian government's verdict on a final report and set of recommendations that were handed to it days ago on the taxi industry.

The findings, which are yet to be released publicly, are believed to be as controversial as those outlined in the draft report, including slashing the value of taxi licences from a current market value of up to $500,000 to $20,000 a year to encourage competition. Other recommendations are designed to loosen Cabcharge's tentacles, which are all over the sector.

With the report now in the Transport Minister's hands, the clock is ticking for a decision on whether to implement the findings and turn the industry on its head or keep the status quo. Other states, particularly NSW, are understood to be using the Victorian fallout as a test case on whether to launch their own inquiry to reform the sector.

Since 1981 there have been seven inquiries into the taxi industry, but all have come to nought.

The latest inquiry was told to make some sweeping reforms, given the poor standards and service plaguing the sector, but the draft recommendations have split the industry.

Taxi drivers and customers are largely pleased that the sector will be opened up to competition, while many taxi licence owners are outraged at the prospect of watching their assets fall rapidly in value.

Not surprisingly, owners of taxis are about to step up lobbying in a last-ditch effort to get the report buried. In the past few days taxi licence owners have been writing to Premier Ted Baillieu outlining the financial and emotional impacts of the reforms on their families.

Taxi licence owner George Katsis wrote: "I cannot understand why the Victorian government is even considering what amounts to a retrospective seizure of assets from small business people ... Thousands of owner-drivers like me have spent a lifetime working hard, making sacrifices and instilling a good work ethic and family values in my children. Now we are faced with

an uncertain future and potential ruin."

Yuri Kaini wrote to Baillieu on October 2 that he would be made bankrupt if the reforms go ahead. "A massive devaluation in my investment would mean that the bank would call in my loan, forcing me to sell my family home and car. This would leave me with a remaining debt of approximately $400,000 and force me to declare bankruptcy, with no form of income to pay it off," he said.

Others are calling for compensation from the government if the reforms go ahead. Ibrahim Fakhry said he bought a plate in March this year, borrowing the full amount against his home. "I strongly feel this is unfair to me that I have to pay for an investment that has lost such a significant amount of value because the government decided to change what my assets are supposed to be worth," he said.

The stakes are high and the Victorian Taxi Industry Stakeholders Association hired Deloitte to do some modelling into the impact of the recommendations after the draft report was released.

Using the findings, accounting firm Demir & Co - which has several taxi owners as clients - wrote a letter yesterday to all Victorian and some federal politicians.

The letter sounds a clarion call about the detrimental impact on the banking sector and the taxi industry if the recommendations are implemented in full. It argues that the banks would "immediately" be forced to call in more than $500 million in loans, triggering defaults of between $100 million and $200 million.

Deloitte estimates that total Australian bank debt exposed to Victorian taxi licences is between $800 million and $1.2 billion and that 50 per cent of this is secured against the licences and the rest predominantly by family homes. "If, as a result of implementing the Taxi Industry Inquiry, Victorian taxi licences fall to an average value of $150,000 each, the Australian Authorised Deposit Taking Institutions will have an immediate shortfall of between $200 million and $400 million," the letter to politicians warns.

Demir & Co's letter warns that for most owners, their taxi licence is their superannuation, and most banks have allowed a loan to value ratio (LVR) of between 50 per cent and 60 per cent against taxi licences. "That is to say, when licences were trading at $550,000, banks were lending between $250,000 and $300,000 against those licences," the letter says.

The final report is also expected to target Cabcharge, which is one of Australia's most powerful vertically integrated companies. The recommendations include slashing the Cabcharge fee and removing mandatory network affiliation, which is dominated by a duopoly including Cabcharge.

Under the current system, taxi drivers have to be affiliated with a network service provider, which costs $7000 a year. In return for this, the networks accept bookings from customers and transmit booking details to data terminals installed in taxis.

The Fels taxi review reports that several taxi operators believe the networks exert too much control over the industry.

Fels said he was sceptical of the warnings contained in the letter. "The industry has had 18 months to provide information. I am suspicious of anyone who, after the inquiry is finished, submits information which is not exposed to scrutiny," he said.

"On the face of it there looks like a number of extremely dubious conclusions are being made."

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