Democrats propose a fairer COE system

Singapore Democrats, 14 Dec 2010

The recent announcement that the Government intends to slow the growth of the car population in Singapore has resulted in a hefty jump in COE prices. The latest bid for cars in Category A (1600 cc and below) is $47,604 in December compared to $39,000 in November – a jump of 22%.

The existing system is highly unsatisfactory and in dire need of an overhaul for two fundamental reasons:

One, it pits those who are financially powerful against those who are not. The system does not take into consideration the fact that working folks may have as great a need for private transport as those who are in the high-income bracket.

For example, a couple who needs a car to run their small family business, ferry their children to and from school, and take care of their elderly parents would certainly have a greater need than another couple who already owns two cars but wants to buy a third for their teenage son. In such a set-up, a richer family would always out-bid a poorer family even though the poorer family may have a greater need for driving a car.

Two, it must be realised – and emphasised – that traffic congestion is not caused by people who own cars but rather by the amount of usage of the cars. Hence any system that limits the number of cars must nessarily consider the factor of ownership versus usage. The present quota system is inherently unfair because it penalises ownership of cars.

For instance, a family that lives in Woodlands and who seldom travels out of the northem part of the island pays the same amount for a COE as a family that lives on Orchard Road. While one hardly contributes to the congestion in the most crowded part of the country, the other does everyday.

The existing COE system does not take this factor into consideration, it makes all car owners pay the same hefty amount regardless of how and where the car is being used.

The SDP’s solutions

Based on the principles outlined above, the Singapore Democrats propose the following measures to make our car ownership and usage policy more efficient and equitable:

1. Introduce separate categories for COE bidding.

Category I: This category comprises 75 percent of available COEs to be issued via a balloting system. The ballot will be conducted in two phases where, in Phase 1, priority is given to applicants who have small businesses to run, families with young children and/or elderly parents, persons who depend on private transport for their work such as sales agents, and first-time car owners.

Phase 2 will be ballotted for all other applicants under Category I. Included in this category are also COEs for electric cars.

Successful bidders will pay a flat COE amount of $1,000. The COEs will not be transferable for two years to prevent speculation and their resale for profit.

Category II: This category will consist of the remaining 25% of available COEs where the open bidding system operates. This category will allow those who can afford it to compete with each other on the open market where the highest bids get the COEs, as how the present system functions. The minimum bid for this category is $1,000. Again the COEs are non-transferable for two years.

2. Reduce the road tax and abolish the ARF. Presently when one buys a car, the Government levies a series of taxes:

  • Road Tax (RT): $500 upwards, payable annually, depending on the engine capacity and age of the car
  • Registration Fee (RF): $1,000
  • Excise Duty (ED): 31% of the car’s import price
  • Additional Registration Fee (ARF): 140% of the car’s open market value (OMV)

The RT should be reduced by 80% and RF should remain. Revenue collected from these two taxes would be used for road works and road expansion/construction. (These takings would supplment revenue collected under the ERP system.)

The ED and ARF should be scrapped. The Government levies these taxes to control the number of new cars coming onto Singapore roads. By placing humongous taxes on cars, the Government hopes to discourage their purchase. Heavier taxes equals more expensive  cars equals fewer people who can afford them equals slower growth of the car population.

This rationale, however, doesn’t exist. Under the present COE system the number of new cars entering Singapore is capped. Whether the ARF is $1 or $1 million car population growth will not be affected. The vehicle quota system makes unnecessary taxes like the ED and ARF.

3. Set up an independent PTC to monitor the ERP system. In order that the Government does not abuse the ERP system, the current Public Transport Council should be revamped to include members of the public on a rotational basis. PTC meetings should be held regularly and opened to the public.

One of its task is to review the amount of revenue collected by the ERPs as well as monitor and approve ERP rates, their operation times, the number of gantries erected and their locations. Presently gantries are put up, for example, on the CTE towards Toa Payoh and Ang Mo Kio. They are in operation at night until 10:30 pm. Why should motorists going home to be with their families after a long day at work have to pay the ERP? (See also here)

The task of such a PTC is to ensure that the Government does not abuse the ERP system and use it to collect additional revenue to make up for the reduction of the RT and the scrapping of the ED and ARF.

Conclusion

The SDP’s alternative proposal to the present vehicle quota system has several advantages for motorists:

1. It is sensitive enough to take into consideration the differing needs of motorists and it separates the working population from the rich when it comes to bidding for cars. This ensures that ordinary folks who do not possess the financial muscle will have an equitable chance of buying a car.

2. Our alternative will save a car buyer an estimated $50,000 in taxes right off the bat. This will more than compensate for the amounts paid under the ERP system. All the COE and vehicle taxes like the ED and ARF have done are to enrich state coffers.

3. The public will effectively have oversight of the ERP system where the Government will not be able to erect gantries willy nilly and operate them at unreasonable times.

1 comment on Democrats propose a fairer COE system

  1. The part that I find confusing is that every car that is deregistered does not equal to 1 COE issued. With regards to today’s information speed, I cannot understand why there is a need to have an annual forecast of COE to be issued. I had the impression that 2 weeks or at the most 1 month should be enough.

    As for suggestion number 1 (Introduce separate categories for COE bidding) I am certain that almost all applicants would state to “have small businesses to run, have families with young children and/or elderly parents, have persons who depend on private transport for their work such as sales agents, and are first-time car owners”.

    That would be not helping in solving the real issue, ya?

    I dunno about anyone else but I have seen enough to conclude that it is very very very difficult to find an honest person on the road. When the human factor is involved, I don’t think it is possible to have an ideal solution.

    My suggestion is to pump in more money into research and develop a computer to replace the human driver. According to Discovery Channel the technology is already available. With car insurance seemingly growing uncontrollably I predict that one day it would be cheaper to install a super computer to be the driver.

    If a car owner needs it as a legit workhorse, install the computer and make it affordable. If the car owner wants it for vanity, pay premium for it.

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