The Straits Times has reported of the government’s plans to implement a new scheme to benefit fuel efficient cars.
Emissions-based car taxes in the works
Fuel-efficient vehicles will get bigger rebates under new system, say sources
The Government will soon announce a new emissions-based vehicle tax system.
It is expected to replace the decade-old green vehicle rebate scheme, which expires at the end of the year.
But more than just handing out tax rebates to buyers of environmentally friendlier cars, the new scheme will take a carrot-and-stick approach.
Buyers of fuel-efficient new cars stand to enjoy rebates of up to $15,000, which they can use to offset their vehicles’ Additional Registration Fee (ARF), the main car tax here. Those who go for more pollutive models may have to pay up to $15,000 in extra taxes.
The scheme follows closely the practice in the European Union, where cars are categorised by the amount of carbon dioxide (CO2) they produce, and taxed accordingly.
According to sources, a new car that produces less than 150g of CO2 per km will be eligible for a tax break of up to $15,000, while a model that produces more than 200g will be penalised by up to the same amount.
The majority of cars sold here today fall within the so-called neutral range of 150g-200g/km, which attracts neither incentive nor penalty.
Big luxury cars or sports cars – such as the BMW 760Li, Mercedes-Benz S600L, Porsche 911, Ferrari 458 and Lamborghini Gallardo – are expected to attract higher penalties under the new scheme.
And cars such as the Toyota Prius (a petrol-electric hatchback) and the Volkswagen Polo BlueMotion 1.2 (a turbodiesel hatchback) are likely to get the biggest incentives.
Buyers of other diesel models which produce less than 150g/km could also enjoy the tax break, as long as their cars meet the stringent Euro V emissions standard.
This is to ensure that these cars produce relatively low levels of nitrous oxides and hydrocarbons – two pollutants which are hazardous to health, and which diesel cars tend to emit more than petrol cars.
Diesel cars which enjoy the rebate will still be liable for the annual special diesel tax, which is $1.25 per cubic cm of engine displacement for cars that meet Euro IV standards or higher.
While the Land Transport Authority (LTA) – which will launch and enforce the new taxation scheme – is still in consultation with various stakeholders such as motor traders regarding finer details, The Straits Times understands that the general form of the proposed system has already been decided.
An announcement is expected within the next few weeks, and the scheme could kick in as soon as the green vehicle rebate runs out in December.
The green vehicle rebate was first introduced in 2001 to encourage the use of greener vehicles. But it has been criticised for its technology-dependent criteria. For instance, as long as a new car is electric, a petrol-electric hybrid or runs on compressed natural gas, it qualifies for a rebate equivalent to 40 per cent off its ARF. It does not matter how much C02 it releases from its tailpipe.
And because the rebate is a percentage of a car’s ARF, buyers of costlier models such as the Porsche Panamera Hybrid and Lexus LS600h – both limousines – save the most in absolute terms.
The emissions-based format is seen to be a more equitable solution, and has been lobbied for by various quarters.
In 2010, German car manufacturers, through the German Chamber of Industry and Commerce, submitted a ‘green paper’ to the Singapore Government proposing a carbon-based tax system.
A possible switch to an emissions-based system was first reported by The Straits Times in December.
Motor industry players said the new regime will make consumers more aware of the fuel efficiency of cars – and consequently the CO2 they emit – but is unlikely to fuel a big change in buying habits.
‘The neutral range is too wide,’ said one motor trader. ‘So, buyers of most cars today are not affected.’
Nor would the scheme make diesel cars significantly more attractive than now, as the punitive special annual tax is unlikely to be fully offset by the one-off rebate at the point of purchase.
Mr Raymond Tang, secretary of the Singapore Vehicle Traders Association, said: ‘A road tax reduction on top of an upfront rebate will be more meaningful, as the one-time rebate benefits only the first owner.’
Mr Tang said the association may also propose other practices in place in several European cities, such as restricting or banning the use of more pollutive vehicles in the city centre at certain times of the day.
The LTA would only say that a review of measures to encourage green vehicle usage has been in the works since last year. ‘Details will be released in due course,’ a spokesman said.
Image taken from acagamic