Executive Summary of the Investigation Report on

Taxi Licensing System

Introduction

1. The public transport system of Hong Kong carries a total of 10,670,000 passenger journeys a day in 1996, with taxis conveying some 1,293,000 passenger journeys which account for about 12% of the total number of passengers carried.

2. A preliminary study carried out by this Office in May 1997 revealed some areas of public concern about the rise in taxi licence premium in recent years. These included the rising taxi licence premium and its implications on the taxi trade as one of the major providers of public transport service, the effectiveness of the measures adopted by the Administration to discourage speculative activities in taxi licence premium, and the adequacy and effectiveness of the regulatory measures to facilitate the implementation of a fair system for the issue and transfer of taxi licences. The Ombudsman, by virtue of his authority vested in section 7(1)(a)(ii) of The Ombudsman Ordinance, announced on 16 June 1997 a direct investigation on the taxi licensing system.

Purpose of the Investigation

3. The purpose of the investigation is to study the taxi licensing system with a view to -

(a) examining the past and present regulatory measures and related administrative procedures on taxi licence ownership including the issue and transfer of taxi licences; and

(b) establishing whether such measures and procedures are effective and adequate for their intended purposes and whether they are fair and reasonable vis-à-vis the licensing systems for other non-franchised commercial vehicles.

Taxi Licensing System

4. Before 1964, taxi services were operated by eight taxi companies. The Commissioner of Police, as the then licensing authority, issued new taxi licences to those taxi companies on a quota basis from time to time in order to keep the number of taxi licences issued at about three percent of the number of private cars licensed. In 1964, the Administration introduced the policy of tendering out taxi licences for premium to individuals or companies.

5. In late 1970s and early 1980s, over 1,000 taxi licences were issued each year. After 1984 and until 1991, less than 300 taxi licences were issued each year. In 1992 and 1993, no public tender exercises had been conducted and no taxi licences had been issued pending the taxi policy review which was completed in 1994. Since 1994, there were only two taxi tender exercises. The first one was held in September 1994 for 300 urban and 100 New Territories taxi licences. The second one was in February/March 1997 in which the tendering of 10 Lantau taxis was invited. As at July 1997, there was a total of 18,138 taxi licences issued, consisting of 15,250 urban taxis, 2,838 New Territories taxis and 50 Lantau taxis.

The 1994 Taxi Policy Review

6. In view of the changes in the taxi trade since the last taxi policy review which took place in 1988 and a sharp rise in taxi licence premiums in the preceding 12 months, the Transport Advisory Committee (TAC) decided in December 1991 to set up a Working Group to conduct a comprehensive review of taxi policy with particular regard to the taxi licensing system, fare policy and quality of service. The report “Taxi Policy Review” was published by the TAC in March 1994.

7. The report had made the following recommendations to dampen speculation in taxi licences -

(a) there should be no pre-set quota on the number of taxi licences to be issued in a given period of time;

(b) taxi licences should be issued as and when necessary, having regard to the demand for taxi services, the financial viability of the trade and the capacity of the road system;

(c) in a public tender exercise for taxi licences, an applicant should be permitted to bid for only one licence;

(d) new taxi licences should not be transferable within 12 months after the date of issue; and

(e) procedures for the transfer of taxi licences should be tightened by requiring both the transferor and transferee to register the transfer in person.

Current Taxi Licensing System

8. Following the 1994 Taxi Policy Review, the then Executive Council advised and the then Governor in Council ordered in April 1994 that new taxi licences would be issued by public tender without a pre-set quota. Licences would be issued as and when necessary, having regard to the demand for taxi services, the financial viability of the trade and the capacity of the road system. The number of new taxi licences to be issued each year and the timing of such issues should be decided by the Administration without further recourse to the Executive Council.

9. The Administration set up a Taxi Licences Review Committee in June 1994 chaired by the Commissioner for Transport with representatives from the Transport Branch (now Transport Bureau), Financial Services Branch (now Financial Service Bureau), and Transport Department as members. The terms of reference of the Committee are to review and make recommendations on the number and timing for the issue of new taxi licences for the approval of the Secretary for Transport, and to review the conditions of tender as and when appropriate.

The 1997 Taxi Policy Review

10. In response to the public’s expressed concern about the sharp increase in taxi licence premiums in 1996 and early 1997, the TAC re-convened its Working Group on Taxi Policy Review in March 1997 to undertake another review of the taxi licensing system. The Working Group issued a consultation paper on 1 August 1997 to seek the views of the taxi trade, the public and other interested parties on the proposals and alternative measures to improve the existing taxi licensing system and the quality of taxi service. The public consultation exercise is not yet completed.

Overall Observations

11. This Office notes that the existing taxi licensing system, though already tightened in 1994, may still be prone to manipulation for speculative purposes. This Office has identified some areas of deficiencies. They include: loopholes in the conditions of tender such as shareholders of a limited company may simultaneously each submit a tender in their own names and another for the company they collectively own, the lack of regulatory measures to monitor changes in the transfer of taxi licence ownership within and after the 12-month restriction period, the lack of control mechanism to ensure the maximum number of licensed taxis are under active operation, and the lack of monitoring on the accommodation facilities and maintenance service for registered taxis. This Office recognises that proving genuine ownership is a tedious and complicated process which may not yield quick results. However, if the taxi licensing system is intended to be a fair one, the Administration should take active steps to plug the identified loopholes.

Conclusion

12. The Ombudsman makes the following conclusion in this investigation -

(a) The existing system for the issue and transfer of taxi licences does not match the intended objectives of the 1994 Taxi Policy Review to curb speculative activities in taxi licence premium.

(b) The present monitoring mechanism is inadequate to ensure that the taxi licences issued are used for their intended purposes to provide public transport services to the public.

(c) There is a need to review and compare the licensing systems for taxis and other non-franchised public vehicles such as public light buses, particularly on the validity and transferability of these licences, to ensure that a fair and consistent approach is being adopted.

Recommendations

13. In addressing the deficiencies identified in the overall observations above, The Ombudsman has made the following 13 recommendations for consideration by the Administration -

(a) Reviewing the Taxi Licensing System and Procedures

i) To review the tendering conditions in conjunction with the legislation on registration and transfer of taxi licences so as to remove the loopholes in the current taxi licensing system.

ii) To review the taxi licensing system vis-à-vis the licensing systems for other non-franchised public vehicles.

(b) Stepping up the Control of Taxi Licence Ownership and Transfer of Licences

iii) To devise a more effective control system to prevent taxi licences from being manipulated for speculative purposes.

iv) To review and tighten up the procedures for the transfer of licence ownership and to monitor the post-transfer changes.

(c) Devising a Monitoring System to Ensure a Maximum Number of Licensed Taxis are providing service on the roads

v) To reduce the time allowed under Regulation 15 of the Road Traffic (Registration and Licensing of Vehicles) Regulations for taxi owners to hold the taxi licences without actually providing taxi service to the public.

vi) To reduce the time allowed for a successful tenderer to actually register for a taxi upon notification of acceptance of the application.

vii) To devise an effective system to ascertain the actual number of registered taxis providing service on the roads and to monitor the changes.

(d) Reviewing the Effectiveness of the Measures adopted to Curb Speculation

viii)To further review the effectiveness of the measures adopted since 1994 to curb speculative activities in taxi licence premium.

(e) Increasing the Transparency of the Taxi Licences Review Committee

ix) To review the role and function of the Taxi Licences Review Committee so as to increase the representation and the overall transparency of the decision making process.

(f) Taxi Service Quality

x) To consider imposing more severe penalties on taxi drivers for misconduct or acts of malpractices. Overcharging visitors may also damage Hong Kong’s image as an international city.

xi) To pursue on the suggestions to improve the taxi service with the taxi trade, such as the introduction of an incentive scheme to reward taxi drivers having a good performance over a certain period of time, upon completion of the public consultation process and the relevant policy considerations.

xii) To tighten the monitoring on the accommodation facilities and maintenance service for registered taxis.

xiii) To devise an overall control and management system for the taxi trade.

Response from the Administration

14. The C for T has responded to the result of the investigation and expressed her comments and opinions on the various aspects covered in the investigation report. In the main, TD’s comment is that measures were recommended in the 1994 Taxi Policy Review, which have since been implemented, to make it more difficult to speculate in taxi licences by reducing the flexibility in the licensing system. It has never been the intention of the Administration to remove all flexibility in order to stamp out speculation.

Final Remarks

15. The Ombudsman has noted the comments from the Administration on this investigation report. As elaborated in paragraphs 2 and 3 above, the purpose of the investigation is aimed at studying and making appropriate recommendations on the taxi licensing system so as to improve the overall standard of taxi services provided to the public in Hong Kong. The investigation report has brought to the attention of the Administration the observed areas where relevant improvements might need to be made, and the Administration has considered and initially responded to the conclusion and recommendations made in the report. In formulating the licensing and other related policies or administrative measures for taxis, the Administration must never lose sight that the primary function of taxis is to provide a mode of public transport to Hong Kong.

16. Lastly, The Ombudsman would like to be kept informed by the Administration on the further actions and revisions to be implemented to the taxi licensing system subsequent to this investigation report and the deliberations in the TAC Working Group on Taxi Policy Review in due course.

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Office of The Ombudsman

Ref. OMB/WP/14/1 S.F. 19 II

December 1997

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