Vehicle Ownership Taxation evidence on performance

Evidence on performance

Singapore

The material cited here is taken from May AD (2002), Singapore: The Development of a World Class Transport System, Transport Reviews, forthcoming; and Phang S-Y and Asher MG (1997), Recent Developments in singapore’s Motor Vehicle Policies, Journal of Transport Economics and Policy, 31(2), pp 211-220.

Context

Increases in vehicle ownership taxation have been introduced in Singapore to complement usage charges. As usage charges have become more widespread and sophisticated, the amount of vehicle ownership taxation has been reduced to gradually transfer the majority of transport pricing to point of use.

The first increases in ownership taxes were introduced in 1972, with subsequent increments (in various forms) over the following two decades. These are outlined in Early Vehicle Ownership Taxes in Singapore.

Early Vehilce Ownership Taxes in Singapore

Year	Tax	Level
1972	Import duties	Increased from 10% of open market value (OMV) – 1968 level - to 45%
?	Additional registration fee	Introduced at10% of OMV
1976	Additional registration fee	Increased to 100% of OMV
1980	Basic registration fee	Increased from S$15 to S$1000
1980	Additional registration fee	Increased to 150% of OMV
1983	Additional registration fee	Increased to 175% of OMV
1985	Annual road tax	Increased from 10c/cc – 1972 level - to between 60c and 150c/cc depending on engine size.

Source: May (2002).

Despite these taxes vehicle ownership was increasing by 7% per annum throughout the 1980s, and despite usage charges such as urban road charging, parking charges and fuel tax, car owners still tended towards car use as their dominante mode of transport. This resulted in significant congestion and pollution problems. Road user charges could not immediately be raised sufficiently, or applied to all roads for equity and visual intrusion (of electronic pricing gantries) reasons. Consequently, a vehicle quota system (VQS) was introduced in 1990.

Vehicle Quota System. The VQS “was designed to limit growth in ownership to 3%pa and involved setting a quota for the number of vehicles which could be purchased in any month in each of seven categories. Would-be purchasers placed bids for a certificate of entitlement (COE) [at monthly auctions facilitated through ATMs.] … the cost of the COE for any category in any month was set at the level of the last bid which could be included in the quota. The COE is valid for ten years, and can then be extended for five ot ten years at the then current rate, after which the vehicle has to be scrapped. It can also be traded in if the vehicle is scrapped within the first ten years” (May, 2002).

The cost of a COE and other vehicle ownership taxes in 1997 are shown in Vehicle Ownership Taxes in 1997.

Vehicle Ownership Taxes in 1997

Customs Duty
41% of OMV (Cost Insurance Freight (CIF), handling and other incidental charges paid)
Goods and Services Tax
3% of CIF + customs duty payable
Registration Fee:
S$1,000 for private registration; S$5,000 for company registration
Additional registration
150% of OMV for private registered cars
300% of OMV for company registered cars
Certificate of Entitlement (nb prices vary monthly, March 1997 prices quoted)
Type of Vehicle	Registration of new vehicles (S$)	Prevailing quota premium (S$)*	Highest COE prices (S$)
Small cars (1,000 cc or less)	27,220	21,446	31,246 (Nov 94)
Mid-size cars (1,001 to 1,600cc)	45,008	44,855	58,600 (nov 94)
Big cars (1,601 to 2,000cc)	53,000	49,442	95,100 (Nov 94)
Luxury cars (2,001 cc or more)	60,888	51,031	110,500 (Dec 94)
Goods vehicles and buses	30,610	29,602	39,000 (Dec 94)
Motorcycles	3,350	2,808	4,202 (Dec 95)
Open category**	60,810	n/a	105,000 (Nov 94)
*the prevailing quota premium is the average of quota premiums over the past twelve months. The owner of a ten year of vehicle who wants it to remain on the road for another ten years has to pay the prevailing quota premium. The fee is halved for five year extensions.
**An open category COE can be used to purchase any kind of vehicle. It can be converted to a motorcycle licence for one third of the quota premium. Company registerd cars and heavy vehicles pay double the quota premiums.
Annual Road Tax (S$ per cc)
1,000 cc and below		S$0.70
1,001 to 1,600 cc		S$0.90
1,601 to 2,000 cc		S$1.05
2,001 to 3,000 cc		S$1.25
Above 3,000 cc		S$1.75
The road tax for a company registered car is twice the above rates, which are for private registered cars. for a diesel powered car, a diesel tax whioch is six times the road tax of a similar petrol driven vehicle is payable. Off-peak cars enjoy a flat S$800 discount subject to a minimum road tax payment of S$50. Between May 1997 and april 1998, the government will give road tax rebates of S$20 for motorcycles, S$10 for weekend and off-peak cars, and S$60 for cars and other types of vehicle, to cushion the impact of introducing the RPS on two expressways.
Surcharge on Imported Used Cars
S$10,000 (imported used cars must be under three years old)
Registration fee rebate for Off-Peak Cars (only used at off peak times)
S$17,000
Preferential Additional Registration Fee (PARF) benefit for deregistering (scrapping or expeorting) a car under ten years
Age of vehicle at Deregistration
Below 5 years		130% OMV
Between 5 and 6 years		120% OMV
Between 6 and 7 years		110% OMV
Between 7 and 8 years		100% OMV
Between 8 and 9 years		90% OMV
Between 9 and 10 years		80% OMV
The PARF benefit can be used to offset the additional registration fee of any new car. Imported used cars and company registered cars are ineligable for PARF benefit.

S$1 was approximately US$0.71 in 1997

Source: Phang and Asher (1997).

Impacts on demand

The vehicle quota system has been held at the 3% growth per annum level since introduction. This has constrained growth in the vehicle fleet significantly. The total vehicle fleet was 228,500 in 1967 and had only grown to 700,000 by 1999, despite being forecast to reach 1 million (LTA, 1996 in May, 2002).

Impacts on Supply

Supply will have been constrained in line with demand.

Contribution to Objectives

Objective	Comment
	Reduced congestion will have contributed positively to efficiency
	Reduced congestion will have contributed positively to liveability
	Reduced congestion will have contributed positively to protection of the environment, primarily through minimising pollution
	Those on low incomes will have been penalised most by vehicle ownership taxes, especially if alternatives are not available
	Reduced car useage will have contributed positively to safety
	Reduced congestion will have contributed positively to economic growth
	The vehicle ownership taxes are a significant income generator for the government.

Gaps and Weaknesses

There are few examples of vehicle ownership taxes being used to control car ownership levels as much as they have in Singapore. If readers are aware of other examples, we would be grateful for any contributions they are able to make.