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How about a fairer road tax?

By Blogger on 04 Mar 2010

Attached Image: road_tax.jpg
It is widely acknowledged that our road tax system is heavily skewed in favor of the small engine capacity car. I will not bore you guys with the detailed mathematical formula of the road tax system here on our sunny island (you can read about it here). It will suffice to say that any car with an engine capacity larger than 1,600cc is likely to face a pretty hefty road tax bill. A 3,000cc car attracts an annual road tax of $2,386 compared to $744 for a 1,600cc one. The road tax on the 3,000cc car can pay for both my road tax and insurance with a couple of hundreds to spare! With such a policy in place, it doesn't take a genius to figure out which cars will sell best in Singapore. No wonder Kah Motors brought in the 1,600cc Civic specially for the Singapore market!

The main justification why drivers should be taxed lies in the economics concept of negative externalities. Drivers create pollution which affects others; they also consume scarce fossil fuels. These are costs which society as a whole will bear rather than the individual driver. The tax aims to impose some of these costs back on the driver when they are deciding whether to drive or to use other forms of transport.

However, by taxing based on displacement, the assumption seems to be that a larger displacement vehicle will consume more fuel and pollute more (and thus should pay more tax). However, this assumption no longer stands. With current advances in automotive technology, I am sure we all know that there can be larger but more frugal and less pollutive engines. Using displacement as a benchmark is a poor and blunt proxy for the true purpose of road tax. If I drive a larger displacement vehicle but it is actually greener because the engine technology is advanced, I still get penalised! That doesn't seem fair, does it?

And I believe that I am not the only one who thinks this way. There is, in fact, some acknowledgment globally that vehicle owners should be taxed based on the pollution their vehicles generate rather than displacement. In the UK, for vehicles registered after 2001, road tax is imposed mainly based on the amount of CO2 emissions that the vehicle emits. Before 2001, UK had a road tax based on displacement as well. This is indeed a welcome trend and one I believe that the LTA should look into.

But if I have my way, I would abolish road tax altogether and replace it with a higher fuel tax. Now, before you readers rush to flame me in the comments section, hear me out! While a pollution based tax is in the right direction, it is still too blunt an instrument. That is because the buying and ownership of a highly polluting or a big displacement car will not in itself create pollution. We pollute and consume scarce fuel only when we drive! Now, if you drive more, you create more pollution, you pay more! Isn't that even fairer than simply taxing based on pollution? After all, if I own a Range Rover Sport but only drive it 1km to the market on Sundays, surely I pollute less than the person who travels >100km in his Toyota Altis daily? So, shouldn't he be taxed more?

Of course, I must admit that my system is not without its flaws. For one, it is possible that in some cases, an extremely polluting car, driven a short distance can still outweigh the pollution caused by a year's driving for an extremely green car. Well, I believe that these are the outliers and are likely to be very very rare and that my system will be fairer to the majority of Singapore drivers than what we currently have. What say you?

Road tax, motoring, Singapore

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Not only do their passion for cars burn pavements, their thoughts and ideas on cars are as fast as the word go.

  • 1
Mustank Mar 04 2010 05:31 PM
End up:

up petrol tax from 40c to $1


road tax down from current road tax payable to
(actual HSU result / permissable HSU index) * current road tax payable


up petrol tank from 3/4 to 1 when going jb
Joseph22 Mar 05 2010 08:26 AM
Wah the displacement on larger cc car product more pollution is just an excuse lah.

the real reason is he want to taxed more against those who can afford bigger cc car lah.
NissanGTR35 Mar 05 2010 09:10 AM
Actually I suggest:-

Lower road taxes, lower insurance, lower COE

Raise the amount of ERP gantry to really discourage people from driving to work if that's what the government wants

'Red-plates' timing for weekdays should be changed from 7am-10am and 5pm-7pm. Remove the inbetween timing because I don't see how you can create jams when everyone is already at work
Scoobydoo Mar 05 2010 10:29 AM
I'm all for usage-based taxations, because I hardly use my car... haha. But objectively, yeah, it should be that way instead of a blanket system.
Pweelee Mar 05 2010 10:35 AM
Isn't it big CC private vehicles are for the well-to-do or rich people??
Joseph22 Mar 05 2010 12:44 PM
Nissan, you never been on the road during those time right? Its still very heavy during those time you mention.
TandemAssassin Mar 05 2010 05:30 PM
@ Pweelee: with our current road tax system, it certainly ensures that only the better off folks can afford a big cc car. But there is no reason for road tax to be based purely on the engine capacity because that in itself does not create the negative externalities that a road tax is trying to address. A benefit of that is, it will be ok to buy big capacity cars, if you buy an efficient version or drive infrequently. More consumer choice for everyone.

If you think that road tax should be redistributive; i.e. tax the richer more, using big cc also does not work well. Furthermore, our PARF import tax already fulfills that function (sort of).
Ikeehc Mar 06 2010 11:08 AM
In my opinion, road tax should be based on OMV/PARF. Imagine one with a big family of 5 or 6. Other than taking a train, bus or using leg power, one is likely to buy a MPV which typically has a higher displacement compared to cars.

A C-Class though more expensive can have a lower CC compared to a Hyundai Trajet and hence being taxed less.

Doesn't seem very equitable for a poor man to be taxed more.
Relagsingh Mar 06 2010 06:00 PM
So how? Road tax based on annual income?
Xefera Mar 07 2010 12:05 PM
or taxed based on odometer? that would be a better option than taxing using GPS tracking IU :(
TandemAssassin Mar 17 2010 09:00 PM
@lkeehc: PARF is already an import tax based on the OMV of the vehicle. So those who buy more expensive cars are already taxed more. Anyway, the purpose of road tax is not to redistribute wealth - we have income tax for that. It should be to price in the negative externalities caused by driving namely congestion, pollution and consumption of scarce resources. Congestion tax is ERP, leaving pollution and fuel consumption to be tackled by road tax.
  • 1
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