Budget 2019 debate

Diesel tax hike to nudge users towards cleaner choices

Finance Minister Heng Swee Keat, in addressing concerns over potentially higher business costs with the increase in diesel tax, stressed that the long-term impact of excessive diesel use on people's health is significant. The diesel excise duty is on
Finance Minister Heng Swee Keat, in addressing concerns over potentially higher business costs with the increase in diesel tax, stressed that the long-term impact of excessive diesel use on people's health is significant. The diesel excise duty is only one part of a larger road map to discourage diesel consumption.ST PHOTO: KUA CHEE SIONG

While the recent diesel tax increase makes the environment cleaner, it may be at the expense of potentially higher business costs, Non-Constituency MP Dennis Tan said on Tuesday during the debate on the Budget statement.

Responding yesterday, Finance Minister Heng Swee Keat said the framing of the issue needs to go beyond that of a simple trade-off to a broader understanding of the longer-term approach Singapore is taking to address the increasingly urgent issue of vehicular emissions.

"Diesel exhaust contains substantial amounts of particulate matter and nitrogen oxides, which are associated with an increased risk of lung cancer and respiratory infection," Mr Heng said in his wrap-up speech on the Budget debate.

"The long-term impact of excessive diesel use on the health of our family and children is significant," he added.

Several MPs had earlier flagged the impact of the diesel tax hike on businesses and taxi drivers. The tax has been increased from 10 cents a litre to 20 cents, from Feb 18.

Mr Heng said it is necessary to use a price signal to nudge diesel users towards cleaner and more sustainable alternatives.

The diesel excise duty is only one part of a larger road map to discourage diesel consumption, he noted.

 
 
 

Other measures include the Early Turnover Scheme introduced in 2013. It helps owners of commercial goods vehicles to switch to cleaner and more fuel-efficient diesel models.

Last year, the Vehicular Emissions Scheme was also introduced.

Mr Gan Thiam Poh (Ang Mo Kio GRC) suggested exempting vehicles and machinery with no non-diesel alternatives from the tax hike, but Mr Heng said this works against what the Government is trying to do.

Mr Heng said the tax hike will help nudge businesses that are heavy diesel users towards greater efficiency - for example, by adopting consolidated logistics.

He noted that the Government has given an offset package to cushion the cost impact until 2022, adding that it recognises the impact of the new tax on cost for cabbies.

Reiterating what Senior Parliamentary Secretary for Transport Baey Yam Keng said a day earlier, Mr Heng told the House yesterday that taxi operators have pledged to pass on the entire savings, from an $850 reduction in annual special tax for taxis, to their drivers.

 
A version of this article appeared in the print edition of The Straits Times on March 01, 2019, with the headline 'Diesel tax hike to nudge users towards cleaner choices'. Print Edition | Subscribe