4 impediments to Waze's carpooling service


Problems of insurance, taxation, regulation, and safety are liable to interfere with the new RideWith service.

Waze, which operates a popular navigation app with 2.9 million users monthly, today launched a new app named RideWith designed to interface with the existing app and facilitate carpooling.

The idea is to enable drivers using Waze to collect passengers using RideWith from home on the way to work and back. The passengers will pay a sum for the trip determined in advance by the parties, with the system suggesting an average and maximum amount, subject to fuel consumption and wear and tear on the vehicle on the proposed route.

Google, Waze's parent company, defines the new app as a pilot that will initially work in the greater Tel Aviv area, with a focus on Tel Aviv, Herzliya, and Ra'anana. In the initial stage, the service will be available only to Android users.

Despite Waze's declared intention of reducing congestion on roads by lowering the number of drivers and vehicles, there are several bureaucratic obstacles blocking Google and Waze's way to the their objective. "Globes" has singled out four of them:

1. Insurance

The compulsory insurance policy for private vehicles currently excludes transporting passengers for pay. In other words, drivers of private vehicles carrying passengers for payment will not have compulsory insurance coverage for damages and bodily injury that passengers are liable to suffer in an accident.

Adv. John Geva, owner of the John Geva law firm and the legal advisor of the Association of Insurance Brokers and Agents in Israel (AIBAI), explains that according to the Road Accident Victims Compensation Law, the insurance company pays compensation if there were injuries within the vehicle - referring to passengers- or outside it - referring to pedestrians. If the trip was for payment, however, the passengers are usually not covered by the insurance, unless the insurance policy explicitly states otherwise.

"In order to release this restriction, the insurance company must be contacted and either cancel the restriction or sell an extension to the policyholder. This could have an effect on the premium, with the driver having to pay more," Geva said in a talk with "Globes."

What happens when the insurance company does not want to compensate the passengers? According to Geva, there is a solution for this also, but it poses problems for the driver. "Anyone injured can contact the insurance company for the vehicle. The company will check its liability under the law, and will examine whether the insurance policy covers paying passengers. As soon as it finds a restriction or exclusion, it will disavow its liability , and notify the injured passengers of this.

The passengers can then contact the Karnit Road Accident Victims Compensation Fund, because the insurance company refused to pay. Karnit will pay all those injured, but will then demand payment from the driver," Geva adds.

Waze said in response, "Drivers must have insurance coverage for all their trips, but they do not need commercial insurance or an extension for general insurance. The RideWith service is designed so that drivers will receive a nominal payment for expenses (such as gasoline), and provide trips on a personal basis, not as a business. We therefore believe that this will not be excluded from the compulsory insurance policies."

2. Payment of taxes

As part of the new service, not only will Waze benefit from a new source of revenue (in addition to various advertising tools), but the drivers will also have revenue from the joint journeys. Under the existing model, the company charges a 15% commission (as of now) on the amount paid for the journey, with the rest going to the driver.

Former Israel Tax Authority legal advisor Moshe Mizrachi, however, who is currently part of the Moshe Mizrachi, Noach, Kriegel law firm, asserts that in view of the fact that the drivers are likely to profit from providing the service, they may have to pay income tax.

"The Income Tax Ordinance examines income according to its source. If this is a gift that someone gives you, or you found 100 shekels in the street, then you don't owe tax, because there is no source. According to how the service is described in the media reports, however, the providing of a service is involved, and it is therefore unquestionably taxable," Mizrachi said in a talk with "Globes."

Mizrachi adds, "Anything you get wealth from, and which has a business character of providing a service, is subject to tax, unless it is a one-time trip for payment." The only question is whether there is any profit on the journey - meaning that the revenue from providing the service will be offset by the driver's fuel and wear and tear expenses. If there is no profit, Mizrachi makes clear, no income tax need be paid. At the same time, as soon as drivers get fuel from their place of employment or reimbursement for travel expenses, they are likely to make at least some profit from their trips, and will therefore have to pay income tax.

"It can work only if the Tax Authority cooperates," Mizrachi adds. "If the Tax Authority really cooperates by ruling that the price of the journey amounts merely to a share of the expenses, that will be useful and great. If it does not cooperate, then it will be difficult to prove that no profit is involved, and people may give up on it."

As far as VAT is concerned, given the fact that only negligible sums are involved, the drivers will not have to pay VAT on their revenue, but Mizrachi says that they will have to go to the VAT office and obtain confirmation of being an exempt dealer, which means that they do not have to pay VAT on income up to NIS 70,000 a month.

The Tax Authority said in response, "In general, tax must be paid on any business income, with all that involves. The question of whether sharing of expenses is considered business income must be examined individually, because it includes a series of tests established in legal rulings. At the same time, the service was launched only yesterday, and will therefore be referred for evaluation by the Tax Authority professional department according to the individual conditions of the proposed service."

Waze did not respond directly to the taxation question, merely saying, "The pilot of the new service is designed to find out whether users want to help each other without any financial profit. Will a small payment to cover travel expenses motivate people to help their neighbors? The Waze community is used to working together in order to overcome traffic jams and sharing critical information about the roads - we believe that what is involved is a natural evolution of this relationship."

3. The Ministry of Transport

The Ministry of Transport has not yet had to take a position on Waze's new service. Under the existing Ministry of Transport regulation, however, other than a certain list of vehicles (including taxis, buses, and touring vehicles, among others), a person is not allowed to carry passengers for a fee or other remuneration. A Ministry of Transport source told "Globes," "It's irrelevant for the regulations whether one or two trips a day is involved, or one or two a week."

Waze said in response, "The RideWith service operates in compliance with the law in Israel. Carpooling is fairly common in Israel, and the RideWith service is a natural evolution of the carpooling field. It gives the Waze community a simple way of working together and improving their daily travels. Carrying passengers for pay is illegal. The RideWith service does not provide a wage or other benefits. A driver cannot make a living with RideWith. Collecting a passenger is forbidden, and even impossible if the request to be collected is not on the driver's ordinary route."

4. Safety of the users

It is not clear whether Waze intends to include certain selection and safety mechanisms for the purpose of excluding undesirable users. Ostensibly, it appears that anyone who wants to be a driver can join easily, and thus a real safety problem is liable to emerge. In such a case, the driver could be a terrorist or criminal, who is liable to kidnap, rape, or murder his passenger. The security risk also works in the other direction, with drivers having no idea who the passengers getting into their vehicle are.

Waze said in response, "The safety of users is critical in anything we do. During the pilot, we ask users to type in their real name and telephone number in order to participate. Furthermore, many of the workers' workplaces will be verified on the basis of the workplace's e-mail address, which they can type in, so that drivers can collect only work colleagues, or in order to be surer that the passenger really is who he claims to be.

"If they wish, the users can SMS each other (the telephone number remains confidential) before the journey. In the end, drivers will receive thanks that will provide an indication of their reputation as drivers. A driver or a passenger can refuse or block a passenger or a driver, if he wishes. Both parties must confirm their partner for the ride. The RideWith service only provides the platform; the driver and passenger are the ones who are responsible if any problem arises, as is common in other cases in an economically cooperative world."

Published by Globes [online], Israel business news - www.globes-online.com - on July 7, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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