COE, vehicle tax revenues expected to shrink further

Falling COE revenue would be on the back of a contracting supply of COEs. PHOTO: ST FILE

SINGAPORE - Vehicle-related taxes have shrunk in recent years, and are expected to shrink further, while petrol duty bucks the trend.

According to Budget 2020 statements, revenue from vehicle quota premiums (certificates of entitlement or COEs) received for financial year 2019 was $2.9 billion - down from an estimated $3.42 billion, and $3.62 billion collected in FY2018.

And for the current financial year, COE revenue is expected to fall to an estimated $2.64 billion.

This would be on the back of a contracting supply of COEs, which in turn follows a 10-year cyclical vehicle population trend - where each COE is valid for 10 years, with owners having the option to renew before expiry.

Excluding COE, the Government collected $2.46 billion in vehicular taxes in FY2019.

This is down from an estimate of $3.09 billion, and from $2.62 billion received in FY2018.

Again, FY2020 is expected to see a further fall, to an estimated $2.27 billion.

This follows the COE trend - fewer COEs translate into fewer vehicles registered, which in turn translates into less taxes - such as Additional Registration Fee and Registration Fee - collected.

The Government, however, expects to collect more excise duty.

For FY2019, it received $3.32 billion. While this is down from an estimated $3.5 billion, it is higher than FY2018's $3.08 billion. For FY2020, it expects to collect some $3.6 billion in duties.

Of these, revenue from motor vehicle excise duty is $486.3 million for FY2018, $386.3 million for FY2019, and an estimated $359.5 million for FY2020.

Petrol duty bucked the downtrend. It accounted for around $784 million in FY2018, $993.2 million in FY2019, and an estimated $1.003 billion for FY2020.

Observers attributed this to the growing number of private-hire vehicles, as well as the rising popularity of bigger and sportier cars.

KPMG Singapore tax partner Harvey Koenig said: "The Government's move to make Singapore a more 'car-lite' society is one that will have a double-whammy impact on Singapore's financial position - one that results not only in reduced revenue from vehicular taxes but will see an estimated increase in expenditure."

First, he said the move to have fewer cars will result in an expected drop in revenue from vehicular taxes and COEs.

Mr Koenig added that in encouraging more electric vehicles (EVs), Singapore is expected to see reduced revenue from fuel taxes, although it is introducing a special lump sum tax on EVs to counter this.

"To add to the drop in tax revenue, this shift will also lead to more investments in MRT lines and other forms of public transport infrastructure investments," the tax expert noted.

For sustainability, Mr Koenig said the Government could broaden its tax base "in terms of more environmental taxes and usage-based taxation".

"These are two possible ways that the Government can continue to move towards a more sustainable 'car-lite' future while managing its tax revenue and fiscal expenditure," he told The Straits Times on Tuesday.

"We do expect that the carbon tax rate would increase in the near future as a result of the push towards greater sustainability, and the Government will be introducing usage-based taxes under the next generation of electronic road pricing in the next few years.

"While we do not yet know how much additional revenue will be generated from these new initiatives, it's clear that the agenda for sustainability is one that is here to stay."

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