Petrol Duty Meant to Discourage Excessive Use of Vehicles and Encourage Fuel Conservation and Efficiency

Mr Shaun Mathew ("Cut excise tax on petrol to help S'poreans cope", ST Forum, 17 Jun 2008) felt that removing petrol duty would help consumers cope with rising oil prices and inflation, and allow the ERP to be the major driver in controlling congestion and vehicle use in Singapore.

2. The petrol duty is aimed at discouraging excessive use of private vehicles in general. It also encourages fuel conservation and energy efficiency, which now has added importance because of global warming and carbon dioxide emissions. The ERP on the other hand is a focused scheme and responds to specific traffic conditions. It seeks to discourage motorists from using roads which are particularly congested, by modifying the routes they choose or the times at which they travel or take an alternative mode. The use of the ERP does not remove the rationale for the petrol duty.

3. Petrol duty, which is fixed at up to $0.44 per litre, does not increase with the price of petrol It would be unwise for the Government to adjust the petrol duty to offset changes in the global price of oil. As many other countries have found, if Governments seek to offset these price increases, consumption does not adjust to the reality of higher global prices.

4. What the Government can and has done is to provide direct assistance to citizens in need through measures such as GST Credits, Growth Dividends and Comcare, to help them cope with the increase in cost of living. This approach benefits drivers as well as non-drivers.

5. However, we agree with Mr Mathew that in the long run, with the advent of clean diesel, it will be best to rationalise the structure of taxes of diesel and petrol. This is a more fundamental issue that the Government is studying.

CHIN SAU HO
DIRECTOR (CORPORATE COMMUNICATIONS AND SERVICES)
MINISTRY OF FINANCE