Jump to content

Bring fairness back to the COE system

Bring fairness back to the COE system

Sign in to follow this  
ST_Opinion

7,221 views

monthly_09_2013/blogentry-133904-1379484138.jpg

blogentry-133904-1379484134_thumb.jpg

Most people will agree that vehicle population control is necessary for a small, land-scarce country like Singapore. Most will also agree that the vehicle quota system - which requires motorists to bid for and secure Certificates of Entitlement (COE) before they can own a vehicle - has worked fairly well in that respect since implementation in 1990.

 

At the same time, it has generated an estimated $50 billion in additional tax revenue over the years.

 

But the 23-year old system can certainly be improved.

 

This week, the Land Transport Authority (LTA) and Ministry of Transport (MOT) introduced engine power as an additional criterion to engine size, to group cars into their COE categories in a more equitable way. Alas, it won't be very effective.

 

A far better way to ensure equity is to categorise cars according to their values. But first of all, does social equity have a place in a system that essentially accords one access to a car based on one's ability to pay?

 

It does. The quota system was originally designed with an element of equity. There were four car categories in the past: Cat 1 (up to 1,000cc); Cat 2 (1,001 to 1,600cc); Cat 3 (1,601 to 2,000cc) and Cat 4 (above 2,000cc).

 

Engine sizes were a proxy for car values. In 1999, they were distilled into two: Cat A (cars up to 1,600cc); and Cat B (cars above 1,600cc). The move was made to "improve liquidity" and minimise "price distortions".

 

But as a result, a measure of equity went out the window, as budget car buyers had to compete with buyers of costlier cars. Buyers of family carriers (such as MPVs) had to compete with buyers of Porsches and Ferraris.

 

The situation worsened five years ago when Mercedes launched a 1.6-litre C-class, followed by sub-1,600cc models from Audi, BMW and Volvo.

 

These pricier cars began to nudge mass market cars such as Toyotas, Nissans, Hondas and Hyundais out as buyers of the latter could not keep up with bids from those who could afford the pricier brands. Today, premium and luxury brands account for 70 percent of Cat A cars sold - up from less than 1 percent five years ago.

 

After four months of deliberation and consultation, the LTA and MOT decided to apply an engine power cap to inject some equity back into Cat A. Cars in this COE category must not only meet the 1,600cc cap, but also not produce more than 130bhp of power.

 

On the surface, this makes sense, as premium and luxury cars tend to have more powerful (largely turbocharged) engines. And with the change, some 90 percent of cars remaining in Cat A will have an open-market value (OMV, or approximate cost price) of less than $20,000.

 

But just as engine capacity has become irrelevant as a proxy for a car's value, the power cap will soon lose its bite.

 

Mercedes and BMW (and most other European makes) already have engines that produce less than 130bhp. These are mostly manual transmission models, which are not popular here. But it won't be long before manufacturers make automatic versions. Industry watchers expect the first to arrive within nine months.

 

What will the authorities do then? Lower the power limit? If so, budget cars will be affected as well. Already, the 130bhp cap - which kicks in in February - will move some mass market Cat A models to Cat B. They include cars from Proton, Suzuki, Citroen, Ford, Hyundai, Opel, Peugeot, Skoda and Volkswagen.

 

Using a power criterion is thus simplistic and ineffectual.

 

If the idea is to categorise cars according to their values, why not use values to begin with? Why use proxies?

 

Cars already have an OMV assessed by Singapore Customs. It is calculated based on a vehicle's cost price, freight, insurance and all other charges incidental to the sale and delivery of the car from country of manufacture to Singapore. The LTA and MOT argue that OMVs are prone to fluctuations, and thus are not a suitable measure.

 

It is a difficult argument to follow. First, OMV for a particular model does not fluctuate wildly unless there is a regional or global financial crisis. Second, averages can be used to pare down whatever little variations there are. We can use three, six, nine, 12 or even 24-month averages of OMV.

 

Or the authorities could remove the foreign exchange element in OMV for this COE categorisation exercise. This would be similar to international accounting standards which allow companies to restate their financials before and after taking into account forex gains or losses.

 

Or perhaps OMV should be redefined, for instance by streamlining elements that have little to do with a car's intrinsic value. Car dealers and manufacturers have been coming up with inventive ways to minimise their OMV for decades now - despite stiff penalties for under-declaration. The trend has taken a new turn with manufacturers setting up offices here to do their own importation, and the lifting of a ban on imported used cars.

 

Fixing the COE conundrum thus begins with fixing OMV.

 

Admittedly, it is far more difficult than drawing an arbitrary line across engine sizes or outputs. And it requires inter-ministerial cooperation, which often slows things down considerably. But it will be a worthwhile exercise, given that the entire vehicular taxation system hinges on OMV.

 

Fixing it will pave the way for equity - not only for buyers, but sellers too. In fact, with a robust value-based system, we could have one COE category, with premiums pegged to the OMV of each car.

 

Picture credit : ST Illustration by Miel

Sign in to follow this  


4 Comments


Recommended Comments

Not this shit again!

The previous article was much better. This is probably comes from a guy who can't afford to get a car.

Share this comment


Link to comment

Well, it is undeniable that no matter what changes are made to COE system, there will never be equity in car purchase in this country. There are bound to loopholes that consumers with deeper pockets and dealers of luxury cars can exploit and ultimately still average households who wish to own a mass-market car lose out. Everyone has their own opinion in what the change means to them. You guys may be able to afford a car but not everyone does.

Share this comment


Link to comment

Not this s--t again!

The previous article was much better. This is probably comes from a guy who can't afford to get a car.

Why is his suggestion make him a guy who can't afford to get a car?

 

Wouldn't it be a more sound choice to use OMV instead? Unless you are one that is looking at getting a Audi A1, A3 or VW Golf etc, I don't see why one wouldn't prefer OMV over the current 130bhp ruling.

Share this comment


Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Featured Stories

    Not all heroes wear capes, some ride PMDs

    Your faith in humanity will be restored by a recent post on Roads.sg about an elderly taxi uncle who received help to change a flat tire by a kind soul – A GrabFood PMD rider. Image taken from Roads.sg No one bothered to help the uncle The taxi uncle experienced a flat tire on his SMRT Toyota Prius at 1 am on the 13th of November 2019. He tried asking people to help him, but no one came to his aid. Enter the hero, a GrabFood Rider, the only person to offer assistance True to his word, this kind soul comes back awhile later to help change the tire Image taken from Roads.sg But the ban? It’s been about a week since the ban of Personal Mobility Devices (PMDs), and there’s been a lot of attention on errant PMD riders. Image taken from Straits Times Prior to the ban, numerous videos and posts had been exploding all over social media that showcased irresponsible behaviour from some PMD riders. These “incidents” are what motivated the government to implement the ban as they want to return safety to pedestrians on footpaths. However, the ban also implicates law-abiding and good citizens who need PMDs to carry on their food delivery jobs. So hypothetically, if there are more examples of good and kind PMD riders in Singapore, will the ban then be lifted?

    jameskarlchan

    jameskarlchan

    VEP delayed till 2020 or maybe when your grandchildren have children

    If you've been one of the "kan cheong" people waiting to get your Vehicle Entry Permit (VEP) approved before driving into Malaysia, here's some good news for you - The implementation of the VEP scheme will only commence next year. According to The Straits Times, Malaysian Transport Minister Anthony Loke claimed that the delay is due to the system's inability to cope with the exponential number of vehicles that needed to install the RFID tag. It seems that many Singaporeans are not surprised by this delay. It’s not the first time that there has been a delay with the implementation of the VEP and you can be sure people were quick to call that out.  And some people make pretty sound arguments. Wait, does this mean that Singaporean car owners with the RFID tags did the application and probably wasted a weekend queueing up in Malaysia for nothing? Sounds about right.  Malaysia Boleh? Case closed. ----------------------------------------------- Still wondering how to get your VEP? We went through the entire process so you can have this handy guide here! -----------------------------------------------  

    jameskarlchan

    jameskarlchan

    A woman being a PUBIC nuisance on Middle Road. No, that's not a typo

    You probably have seen a video that went viral recently about a woman removing her clothes in anger on Middle Road. She even went as far as pulling down her panties! If you haven’t, here’s the video courtesy of Roads.sg In the video, you can see a woman taking off her clothes in response to a man (a cab driver) walking away from her. She is believed to have done this to play the victim card and make false accusations that the cab driver was the one who did it to her. Crucial eye witness account An eye witness of the incident posted the video on Roads.sg According to the witness, he saw the lady kicking the cab. She then began chasing the cab driver, scratching, punching and going all bat shit crazy. The driver did not retaliate to her provocation. So what triggered this? There have been no reports (as of yet) as to what led to this behaviour, but theories are being thrown around on social media. Even I would be offended. At least give me $10 What happened in the end In a recent STOMP article posted earlier today, it’s been confirmed that the lady, a 31-year old woman was arrested for PUBLIC nuisance. Yeap, I spelt that one right. You can read the full article here

      Header image by STOMP

    jameskarlchan

    jameskarlchan

    Eh LTA! Don’t touch my car leh!

    An image of an LTA officer checking the undercarriage of a Mazda RX8 with a flashlight is circulating on WhatsApp group chats and social media. In the image (see full image below), we can tell that this incident happened sometime at night and it's at a HDB estate.  Image taken from Roads.sg Just so you know, LTA officers are obligated to come down and visit you whenever they receive a complaint about your vehicle. It could be illegal parking matters or of course illegal modifications, which is exactly what the LTA officer is checking for in the image. The best part about these visits is that you won’t even know about them! Upon inspection and if found guilty of modification violations, you’ll only hear about their visit through a letter from LTA accompanied with a fine/summon that will probably tear a hole through your *censored*. Why people want to “sabo” you If you’ve done modifications to your car and someone made a complaint against you, it could be a couple of reasons 1.       They have nothing better to do and damn cb 2.       They cannot tolerate the disturbance your car causes to the neighbourhood Generally when people complain, it’s because of No.2. What should you do if you don’t want people to call the polis? LTA has very clear guidelines as to what modifications need or don’t need LTA’s approval. They’ve also included modifications that are specifically not allowed. Everything else not mentioned, is fair game. Taken from LTA.gov.sg Keep within the guidelines and LTA won’t touch your car. As you can see, not everyone appreciates how loud your vehicles are. Especially in residential areas. Like, why? Louder isn’t always better. Facebook comments and feature image taken from Roads.sg Also, we aren't in America where we can own the car for a lifetime. It's just a 10-year lease! Don't need mod lah! Call 1800 2255 582 for the LTA customer service hotline if a car is disrupting your peace. 

    jameskarlchan

    jameskarlchan

×