Every drop matters - Water Conservation Tax: How it works

I refer to the letters, "In murky waters: Water Conservation Tax system can be improved" (Feb 8) by Mr Siew Ngung Chia and "Reward big families using less water" (Feb 10) by Mr Ng Eng Huat.

Mr Siew proposed setting a minimum level of consumption below which water conservation tax (WCT) would not be levied.

Currently, WCT is levied from the very first cubic metre of water to reinforce the message that every drop of water is precious. It will not be appropriate to exempt a certain amount of consumption from tax.

Mr Siew and Mr Ng also suggested that the 40 cubic metres of water per month threshold beyond which a higher rate of WCT is levied should take into account household sizes, as larger households would need to consume more water.

We recognise that water consumption is determined by several factors, including the number of occupants in a household.

However, pricing water to take into account these factors is not practical, as it requires the Public Utilities Board (PUB) to track how many people live in each household.

Instead, the threshold has been selected such that it will affect very few households. Only 6 per cent of households are paying the higher rate. A typical four-member household's water consumption is about 19 cubic metres per month, well below the 40 cubic metre threshold.

Lastly, Mr Siew asked why WCT is subject to the Goods and Services Tax (GST). GST is a tax on the final value of any good or service consumed in Singapore. This includes any duties imposed in the course of supplying those goods and services. WCT is a part of the price payable for the consumption of water.

In the same way, GST is payable on duties levied on tobacco, liquor and petrol.

GST is not applied to direct taxes such as personal income tax, corporate income tax and property tax as these taxes are not levied in the course of supplying goods or services consumed in Singapore.

This is also the practice in GST/Value Added Tax systems in other countries.

HAN KOK JUAN
DIRECTOR (SOCIAL & SECURITY PROGRAMMES)
MINISTRY OF FINANCE