Tiered ARF: Most cars sold incur higher taxes

MORE than 85 per cent of car models sold in Singapore today will attract higher taxes with the newly introduced tiered Additional Registration Fee (ARF) scheme.

This could lead to some consumers favouring Japanese and Korean brands again, since these cars will become even more affordable in relation to the German brands.

According to data collated by the Land Transport Authority (LTA), only 27 - or 13.7 per cent - of a total of 197 car models will not see their ARF rising.

In the tiered scheme, a car with an Open Market Value (OMV or approximate cost price) of up to $20,000 will be taxed at the current rate of 100 per cent. The next $30,000 will be taxed at 140 per cent, and any OMV above $50,000 at 180 per cent.

The tiered scheme is effective for cars registered with COEs obtained from next month.

The LTA data shows about half - or 101 - of the models attracting the next-tier tax of 140 per cent, and 69 models subjected to the 180 per cent tax.

The list is based on cars registered last month. The car with the highest OMV registered last month - $422,791 - was a Lamborghini Aventador.

Car dealers note that the current model mix might change now that costlier cars incur higher - and often punitive - taxes.

Motor Traders Association vice-president Glenn Tan said the current model mix, with a large proportion of premium European brands, is a function of high COE prices.

The COE premium for cars up to 1,600cc is now hovering around $78,000 while that for bigger cars is around $92,000.

"If things change, we will see a flight back to more reasonably priced cars," he added.

This could mean the Japanese and Korean brands, which were traditionally top sellers before the German models started gaining ground four to five years ago.

The best-selling Japanese and Korean cars typically have OMVs below $20,000.

Will sellers attempt to suppress OMVs, say, by fitting components such as air-conditioners, hi-fi systems and sports rims locally?

Mr Michael Wong, general manager of Isuzu agent Triangle Auto, said: "That may happen but it boils down to the savings. But by doing that, you also incur labour cost."

The impact of the tiered ARF scheme is expected to be moderate for most cars. For instance, a Toyota Camry 2.0 with an OMV of $23,519 will incur $24,927 in ARF, or $1,408 more.

The popular BMW 520i, with an OMV of $41,316, will attract $49,842 in ARF, or $8,526 more.

But at the top end, the tiered system is punitive. A Rolls-Royce Phantom with an OMV of $632,000 will incur $1,088,000 in ARF - $456,000 more.

Mr Wong said: "The bulk of cars here will be within a so-called 'palatable' range. Bear in mind that ARF was 175 per cent not too long ago." The period he was referring to was 1983 to 1990 when all cars were subjected to a flat 175 per cent ARF.

In that regime, the Phantom, BMW 520i and Camry would have incurred $1,106,000, $72,303 and $41,158 in ARF respectively. Back then, luxury-car buyers complained that car taxes were unfair to them.