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The road tax formula in Singapore should be made more transparent and simpler to make sense to car owners and drivers alike.

21 Jul 2021

I just renewed my road tax, and since it's a COE car (which means its COE has been renewed before), I realised how ridiculous our system can actually be.

For one, since it's zero growth, renewing your current car is the right thing to do. So why am I penalised for it? Secondly, if the road tax for a 1.0-litre petrol-powered car is $390 per annum, why do owners of a 2.0-litre petrol-powered car have to pay $1,194 a year? Mathematically, shouldn't an owner of a 2.0-litre petrol-powered car pay $780 a year?

This got me thinking - how does our road tax system even work? 

Road tax formula in Singapore

Engine Capacity (EC) Road Tax Formula (per annum)
EC<=600 cc S$400 x 0.782
600 cc < EC <= 1000 cc [S$400 + 0.25 x (EC - 600)] x 0.782
1000 cc < EC <= 1600 cc [S$500 + 0.75 x (EC - 1000)] x 0.782
1600 cc < EC <= 3000 cc [S$950 + 1.5 x (EC - 1600)] x 0.782
EC > 3000 cc [S$3050 + 2.0 x (EC - 3000)] x 0.782
This is the current road tax formula in Singapore, of which a lot of people do not know how the formula came about

Wait, what are you complaining about?

The current road tax formula is a complicated structure based around engine capacity
There are several things to complain about our system here. For starters, the road tax formula isn't a one-formula-use-all, which means based on the table shown above, the Engine Capacity (EC) is a variable that no busy Singaporean like you and me knows how it came about.

And, what exactly is the mathematical rationale of the current road tax structure?

Back in 2009, our then Finance Minister Tharman Shanmugaratnam said that the basic objective of our road and vehicle taxes is to control congestion on our roads. Through upfront ownership taxes, road tax and fuel tax, the Government seeks to manage road use.

Road tax serves a purpose of emissions control, as well as an ownership tax for people who want to drive
Today, I reckon road tax has a different objective. Our road tax is a progressive system that serves its purpose of emission control, whereby bigger displacement capacity cars are taxed more due to a higher level of pollution. Plus, road tax in Singapore is the tax you pay to the country's government for owning and driving a vehicle on Singapore’s roads. 

I do understand and agree that a road tax needs to be in place. After all, nothing can be said to be certain, except death and taxes. However, while the road tax structure is currently designed to solely take into account engine displacement, it does not take into account the differences in engine performance and emissions, which is a crucial factor if the Government wants to encourage electrified vehicles.

A Lexus LC (left) pays more road tax than a more expensive, more powerful and more pollutive Ferrari F8 (right)
Hence, a car with a higher displacement capacity would warrant a higher road tax charge even if it has lower CO2 emissions, costs cheaper and has lesser power output as compared to another car that has a lower engine capacity.

For instance, the Lexus LC 500 5.0 V8 Coupe has a chargeable road tax of $5,464 a year, while a juicier and more desirable 3.9-litre V8-powered Ferrari F8 Spider, which is almost twice as expensive, has over 240bhp more and has higher CO2 emissions, pays a lesser $3,796 a year. 

There's more...

More than just an ownership tax, road tax is also a wealth tax - the more expensive the car, the higher the tax
Then, there's the formula. A 600cc car pays a base of $400, while each increasing tier pays both a higher base value, as well as a larger multiplier. This means that a 1.0-litre car pays $392, a 2.0-litre car pays $1,214, while a 3.0-litre car pays $2,386. This does not scale proportionally.

The road tax on a 2.0-litre car is three times that of a 1.0-litre car, but is it three times as pollutive? Does it take up three times as much space on the road?

This exponentially increasing tax structure indicates one thing. More than just an ownership tax, road tax is also a wealth tax. Traditionally, the higher cc, the more expensive the car. The thinking here would be that the more expensive the car, the higher tax can be wrought.

Modern cars use downsized engines to reduce emissions, and the tax structure should account for that
It has a starting price of $400 for cars with less than 600cc and it doesn't increase systematically as you would on an additional mathematics test paper. In many countries, road tax is either a fixed value, calculated based on emissions, or against the price/value of the vehicle and in comparison, the objective of our road tax and the formula behind lacks clarity.

If it's a wealth tax, be upfront about it. If it's in place for the purpose of emissions control, then the formula needs to be tweaked. After all, road tax in Singapore was implemented a long time ago. As time passes and trends change, the need to tweak the road tax system in order for it to be relevant is inevitable.

With more brands downsizing, engine capacity is no longer directly correlated with a car's 'value'
Singapore should adapt the road tax structure to the changing automotive landscape. If the purpose of road tax is to limit dirty, high emissions vehicles, then the tax should be pegged against emissions figures.

If it is a wealth tax, peg it against the car's value. And if it strictly an ownership tax, then it should either be fixed, or proportionally tiered.

A clearer and a more transparent explanation is needed

Thus, to make things a tad clearer, the Government should make things more transparent. Beyond just being confusing, the current road tax structure also appears to be outdated. The problem with the current system is that while we know exactly how much we are required to pay, we don't exactly know what we are paying for.

Greater transparency and clarity is needed to the road tax system so that we can understand what we are paying for
Explain where the figures come from instead of having a scholar we don't know about, or a 'Mayor' who earns $800,000 a year explain to the everyday you and me about how they came up with the numbers when it's more confusing than convincing.

Don't get me wrong. We are willing to pay, although we do complain from time to time at the coffeeshop, but let's not forget that we are obedient citizens. And as a true blue Singaporean, I would really hate to be taken for granted.

Wouldn't you?

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