Emission-based vehicle taxation system

The Land Transport Authority (LTA) has already rolled out plans to implement the emission-based vehicle taxation system, once the current green vehicle rebate scheme runs out at the end of this year (2012). This switch is primarily due to the lack of success of the current system to encourage a wider adoption of greener vehicles. This is because the current system is based solely on the “technology platform” which means that rebates is given as long as the vehicle is either a hybrid, CNG or battery-powered. This results in other type of cars that could be equally efficient to be ignored. In contrast, the new system will be based on the carbon emissions of the cars.

Euro V standard

(Source: The Straits Times, February 18, 2012)

Singapore will also adopt the Euro V standard for diesel vehicles by 2014. Government will slash the Special Diesel Tax of diesel vehicles that meet the Euro V standard. This is to encourage the adoption of cleaner types of diesel cars.

Importance and relevance of these systems

Cars in Singapore are generally expensive due to the Certificate of Entitlement (COE). Tax rebate will come as a respite for most Singapore car owners. Such governmental implementation has huge bearing on the purchasing decisions of new car owners. Some car buyers who are low on budget may take advantage of the new system and purchase more environmental friendly cars that have less carbon emission.

Current adoption of green cars is still very slow, even though green car drivers can save substantially on petrol money in the long run. This invariantly demonstrates people’s temporal discounting tendency. The government’s tax rebate scheme can help entice more Singaporeans because it translates the long term savings into something more short-term and tangible, in the form of tax rebate.

Singaporeans’ adoption of greener cars will lead to a huge environmental impact. This is because such technology choice (like buying a car) only requires one decision to make a continuing impact on the environment.

It is also commendable that the Singapore government is willing to implement this money losing scheme for the good of the environment. As mentioned by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, the government is expected to lose S$34 million implementing this scheme (Tan, 2012). This further displays the government’s commitment to reduce our carbon footprint.

Challenges

The new system could lead to two possible problems. One – The tax rebate may encourage more Singaporeans to drive rather than taking public transport. Two – Due to affordability, more Singaporeans may purchase tax rebated cars for frivolous reasons rather than for pragmatic purposes.

Suggestion

To prevent frivolous purchase of “green” cars, government could impose restrictions on the number of vehicles eligible for the tax rebate for each household.