Parliamentary Replies

Date: 14 September 2009

Question No. 147 (by Mr Hri Kumar Nair, MP for Bishan - Toa Payoh GRC):

To ask the Minister for Finance whether it is the Ministry's policy that the road tax structure should promote and encourage the purchase and use of more fuel efficient and environmentally friendly vehicles and, if so, whether the road tax to be imposed on Euro V compliant diesel engines should be based on comparisons of fuel efficiency and particulate discharge with petrol engines, and not with Euro IV compliant diesel engines.

Reply by Finance Minister Tharman Shanmugaratnam:

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. This is complemented by the ERP, which manages peak congestion.

Naturally, however, measures to reduce or manage road congestion are also environmentally-friendly. Further, the structure of our taxes does in fact encourage people to use vehicles that are fuel-efficient and produce less emissions.

First, we provide a Green Vehicle Rebate (GVR), which is calibrated so that a typical hybrid car does not attract higher upfront ownership taxes than the equivalent conventional car - despite the higher Open Market Value (OMV) of a hybrid car.

Second, road taxes – which are based on engine capacity - are higher for, bigger cars, which tend to consume more fuel and produce more emissions than small cars.

Third, we have also taken environmental considerations into account when setting fuel taxes. In Budget 2008, the special tax rate for Euro-IV diesel cars was reduced significantly, in recognition of their improved emission standards compared to pre-Euro IV diesel cars.

In determining the special tax to be imposed on Euro-V compliant diesel engines, the Government will consider the fuel-efficiency and emissions standards of Euro-V cars relative to both Euro-IV and petrol cars.