The City of Ottawa and police want tougher penalties for illegal taxis that operate without a license, offering cheap rates and robbing the taxi industry and Ottawa taxpayers of millions of dollars each year.

"Every day these businesses continue to operate is a concern for us. And safety is an ultimate goal," said Susan Jones, the director of Ottawa Bylaw Services.

"We have individuals who are assuming they are getting a cheaper fare. Have no idea what car they are getting into. It is not inspected. It may not be properly insured. And you don't know who the driver is."

Bandit taxis are a big business in Ottawa; drivers of unlicensed vehicles cost the taxi industry an estimated $3 million to $5 million each year.

Unlicensed cabs often get their business by circulating phone numbers around bars, campuses and online. Those who use the service say they're lured by lower rates.

"The (phone) numbers used to just get tossed around college and university. Yeah, it was like 50 per cent less," said Kevin Kowbel, a bandit cab user.

The toughest penalty for bandit taxis is a $100,000-fine, and the city must go through a collection process to get the money. The average fine, though, is much lower – usually hundreds of dollars.

Ottawa's police chief says many drivers are able to pay off those fines within a few hours of operating.

"The fines are quite low. Maybe there needs to be vehicle seizures. We seize vehicles for many other things. They are committing a crime," Vern White told CTV Ottawa.

He says it's time to crack down on bandit cabs, and there's talk of getting provincial legislation to do it.

With a report from CTV Ottawa's John Hua