Taxi fares: regulated or de-regulated

Abstract

It is widely accepted that taxi fare regulation in Hong Kong has been adopted for

a long time without posing serious problems. The government and most of the taxi

operators and passengers are used to such a regulatory measure. Nevertheless, a series

of economic downturn and fierce competition among various public transport modes

and within the taxi trade have emerged in the recent decades. These have gradually

changed this mindset. Some people start to question whether fare regulation is the best

option. Even Transport Advisory Committee supports that Hong Kong should, in the

long run, adopt a more flexible fare system which should allow taxi operators to set

their own fare. Against this background, this dissertation is conducted with a view to

answering a question: “to what extent should the taxi fare system in Hong Kong be

regulated or de-regulated”.

With a view to providing recommendations on the future taxi fare policy, this

dissertation examines thoroughly the theoretical principles and foreign experiences in

taxi fare regulation and de-regulation. Local market structure and public perception

(including the government, taxi operators and passengers) of fare regulation /

de-regulation are also explored to see if the theories and overseas experiences are

applicable to Hong Kong. This is a pioneering study on the feasibility of fare

de-regulation in Hong Kong. The study results should be significant and should point

a direction to the future of how to tackle the above question.

Overall, the dissertation shows that the concept of fare regulation is deep-rooted

in the mind of the general public. The government and taxi operators are very

resistant to fare semi-regulation (i.e. maximum and/or minimum fare) and

de-regulation on the grounds of potential cut-throat competition and adverse social

impacts, e.g. overcharging and consumer’s confusion. While taxi passengers are

generally worried about the loss of legal protection and fairness of charging secured

by the regulation. However, theoretical principles and foreign experiences do prove

some fruitful results that can be achieved by fare semi-regulation / de-regulation. For

instance, the availability of more price options and service improvements are

beneficial to customer welfare while the possible rise of fare level is favourable to the

business of operators.

To strike a balance between different interests, this dissertation recommends that

Hong Kong should adopt a taxi fare regulation in the form of a combination of

maximum and minimum fare. That is, a price ceiling and floor are prescribed by the

government and taxi operators are allowed to set their fare level within this range. The

only requirement for the operators is to file the fare to the government for record

purpose as and when the fares are changed. These fares should be widely publicized

before implementation.

To save the effort by customers to ascertain and compare the prices, it is

suggested that all taxi operators are required to be affiliated to radio-dispatched

centers (DCs). DCs will take up the role of fare setting and all subordinated taxis must

follow suit. The government should closely monitor the level of maximum and

minimum fares and make necessary adjustments in response to market conditions.