Govt cuts card charges for cabs

The reason NSW taxi customers have had to pay a 10 per cent surcharge if they want to use their credit or debit card has never been made clear.

But they will soon no longer have to, after the O'Farrell government said it would introduce legislation to cap the surcharge on paying for taxis by card at 5 per cent.

The announcement by Premier Barry O'Farrell and Transport Minister Gladys Berejiklian dealt an immediate blow to the industry giant Cabcharge.

Shares in Cabcharge dropped 6 per cent on the news, and it predicted the measures could cost it about $14 million a year.

But Mr O'Farrell and Ms Berejiklian's announcement on Tuesday could be good news for fast-growing mobile phone booking apps that are not connected to major taxi networks.

The Transport Minister said that for the first time mobile phone apps - such as GoCatch and ingogo - would be encouraged and regulated by the government.

When the NSW Parliament investigated the 10 per cent surcharge on taxi fares in 2009 and 2010, it could not find out the origin of the fee. Cabcharge founder and executive chairman Reg Kermode told the inquiry that a 10 per cent surcharge had just always been around.