Govt seeks 'more equitable' COE system

Among the ideas: Impose surcharge on multiple-car ownership
By Christopher Tan, The Straits Times, 17 May 2013

OWNING a second car could attract a surcharge, as the Government considers ways to make the vehicle quota system more socially equitable. Another option on the table is to re-categorise cars to better separate luxury vehicles from mass-market ones.

Transport Minister Lui Tuck Yew said yesterday that the proposals were among the various suggestions the Government had received from the public.

He has asked the Land Transport Authority to consult the public and stakeholders before deciding on changes.

The Straits Times understands that any change could be implemented as early as next February.

Mr Lui noted that last year, luxury brands like BMW and Audi took up more than one-third of Category A certificates of entitlement (COEs), which are for cars of up to 1,600cc. In 2010, the figure was less than 7 per cent.

"While this is a reflection of increasing affluence and consumer preferences, we also want to make sure Cat A, which is intended for buyers of smaller, budget cars, retains its original purpose."

Ways to do this could include re-categorising COEs by engine power, or to apply another criterion on top of engine capacity.

As for the proposal to impose extra levies on multiple-car owners, Mr Lui said it was "extremely difficult" for the Government to decide "who should be allowed to own cars and how many". That should best be left to the market.

But he added that there may also be merit in linking multiple- car ownership to "proportionately" higher levies - even though such a scheme could "fuel anti-wealth sentiments" and also be easily circumvented.

Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said: "If people want to get around such a rule, there are so many options, such as registering a car under another name."

He said care should be exercised in COE re-categorisation. If a car's power rating is used, strict enforcement is needed to prevent owners from tuning up the engine after registration, for instance.

Transport Government Parliamentary Committee member Lim Biow Chuan welcomed a review. "Ultimately, what we are looking for is social equity. Cat A is really intended for the man in the street who wants a basic car to transport him from point A to B. My sense is they are being crowded out... because of all the luxury vehicles that are in Cat A as well."

He said a balance will have to be struck between over-taxing the rich and meeting the interests of the man in the street.

About 7 per cent of motorists currently have more than one car. Retiree K.S. Ong, 57, who is one of them, believes car ownership is not an entitlement, and how COEs are distributed should be determined by market forces.

"People just have to accept that the world is competitive. Not everyone in London, New York and Hong Kong owns a car. Those who do pay through the nose."

But another retiree, Mr Lee Kok Meng, 56, said segregating luxury and everyday cars is "a good idea", but "the difficulty is in drawing the line" between the two.

He said a better way would be to have premiums pegged to a car's open-market value. That way, those who buy up-market cars will end up paying more.

Said Mr Lee: "Then you may not even need different categories or any other surcharge."

Comprehensive review of quota system needed
By Christopher Tan, The Straits Times, 17 May 2013

THE more things change, the more they stay the same.

That saying could well apply to Singapore's 45-year history of controlling its car population.

Before the vehicle quota system was introduced in 1990, the Government relied on hefty registration and import taxes to keep car numbers in check.

At their highest, fees and taxes amounted to 220 per cent of a car's open-market value (OMV), or its approximate cost price.

Buyers of bigger, more expensive cars complained they faced disproportionately high taxes. This has reversed in recent years, with complaints centring on how the vehicle quota system - which requires motorists to secure a certificate of entitlement (COE) through a fortnightly auction to own a vehicle - was starting to favour buyers of higher-end cars.

That is not entirely true, as luxury cars still attract higher levies than mainstream models. But the gap has shrunk significantly.

For instance, a Mercedes-Benz C180 would have attracted some 120 per cent more in tax than a Toyota Corolla in the early 1980s, and just 28 per cent more today.

This, along with other changes, has steered more than 35 per cent of Category A COEs (for cars up to 1,600cc) towards premium brands, from a negligible percentage just five years ago.

It is partly also why three out of the top five bestsellers this year are luxury marques, such as Mercedes and BMW, which are now comparatively less expensive.

In response to the clamour, the Government has re-introduced heftier registration taxes for costlier cars. The tiered Additional Registration Fee (ARF) scheme, announced in February, made car taxes more progressive.

Sounds familiar?

In addition, the Government is looking to make the vehicle quota system more socially equitable.

Possibilities include categorising COEs according to engine power instead of size, placing another parameter on top of engine size, and levying a surcharge on buyers of more than one car.

A review is welcome. But instead of making piecemeal changes, the Government should take this opportunity to have a deep and comprehensive examination of the 23-year-old system.

As Transport Minister Lui Tuck Yew suggests, the Land Transport Authority (LTA) should engage the public, industry and other stakeholders. This will not only enrich the recalibration process, but will also lead to better public buy-in.

Ideally, the LTA should have embarked on this review earlier. The tiered ARF already makes buyers of costlier cars pay more. In some cases, substantially more.

So a similar move on COEs may come across as overkill. Or even anti-wealth.

Whatever changes are considered, parties deliberating should not lose sight of the primary objective of the quota system, which is to manage the vehicle population - something most people agree is necessary. Having a price mechanism to allocate COEs is efficient.

To ensure an efficient system is also fair, the LTA could of course tweak it here and there. But to have a holistic vehicle taxation regime that is elegant and easy to understand, and which is not easily skewed by external changes (such as luxury brands making smaller cars), a proper overhaul is probably necessary.

Satellite ERP still years away: Lui
By Christopher Tan, The Straits Times, 17 May 2013

AFTER about two years of tests and trials, the Government has concluded that a satellite-based electronic road pricing (ERP) system, which can charge according to distance travelled, is likely to be feasible in Singapore.

The system will also be able to facilitate paperless street-side parking as well as dynamic charges for off-peak car use.

However, Transport Minister Lui Tuck Yew said that "it will be several more years" before the new-generation ERP system can be implemented.

Speaking during a visit to the upcoming Marina Coastal Expressway yesterday, Mr Lui took pains to reassure motorists that they are unlikely to have to pay more with the new system.

He said the system will start off on roads which are already priced. And any expansion will be solely congestion-driven.

"Some motorists are worried they will be charged the moment they leave home or start their engines," he said. "Let me assure you that we have no intention of doing so."

The minister said the new system does away with bulky gantries, which are costly and take time to erect. Hence, it will be more responsive, capable of applying and altering charges fairly quickly.

The system will come with a new and sophisticated on-board monitor, which replaces the current in-vehicle unit.

Besides ERP, the new device will have various other functions, including couponless street parking and dynamic charging for off-peak cars. Currently, it costs a flat $20 fee each day to use an off-peak car outside the designated 7pm to 7am period.

The Land Transport Authority (LTA) will work with the industry to develop other value-added services.

Possibilities include tracking of stolen vehicles, live traffic information, and even enforcement of illegal parking.

Mr Lui also reassured the public that the privacy of motorists will be safeguarded. One way, he said, would be "anonymising any data collected". The telecommunications industry already does this.

The LTA has been studying the feasibility of a gantryless ERP system since 1999. Trials in 2006-2007 found that the technology was not precise enough then.

But rigorous trials conducted from 2011, which cost about $12 million and involved various consortiums, found that the technologies involved have matured enough.

National University of Singapore transport researcher Lee Der Horng believes the Government should try to use the full capabilities of the new system.

There was little point in replicating the current system, which charges motorists for using specific roads which are deemed to be congested, and travelling through certain areas, such as the city centre.

Dr Lee said: "ERP is not a toll system. If we want to maintain this principle, we should pursue a distance-based system... so we can achieve dynamic pricing."

Marina expressway ready by year-end
Structural works done, including undersea tunnel
By Royston Sim, The Straits Times, 17 May 2013

FINISHING touches are being applied on the Marina Coastal Expressway (MCE), which is on track to open by the end of this year.

All structural works have been completed on the 5km, $4.3 billion highway, including a 420m undersea tunnel.

The bulk of electrical and mechanical systems has been installed and contractors have begun testing and commissioning those systems, a process that will take about five months.

This update on Singapore's 10th expressway was given by Transport Minister Lui Tuck Yew after he visited the MCE control centre yesterday. It will be a key link connecting expressways in the east and west, he said.

"The MCE will offer commuters a direct and high-capacity link to the new downtown at Marina Bay, and is therefore a critical development that supports Singapore's growth as a financial hub."

It will connect East Coast Parkway (ECP) and the Kallang-Paya Lebar Expressway (KPE) with the Ayer Rajah Expressway (AYE).

With five lanes each way, it can carry 10,000 vehicles an hour in each direction and replace the ECP as the main route for motorists travelling across the various expressways. Designed with a top speed of 80kmh, the MCE will link to the KPE, which has a maximum speed of 70kmh.

The Land Transport Authority (LTA) said it is assessing whether to raise the KPE speed limit to match that of the MCE.

After the MCE opens, a portion of the ECP after Benjamin Sheares Bridge will be downgraded to an arterial road, with traffic lights and crossings, that connects to the Central Business District (CBD).

Currently, the Marina area is split in half by the ECP. The downgraded portion of the ECP will be named Sheares Avenue.

The LTA will re-adjust several Electronic Road Pricing (ERP) gantries to cover the new road connections created by the MCE.

Gantries currently on the to-be-downgraded part of ECP, like the one in Ophir Road, will be removed and replacements installed on the MCE.

Motorists will continue to pay the existing ERP charges when they use the MCE or ECP to enter the CBD. For instance, it costs between 50 cents and $5 now to pass through the gantry on the ECP after Fort Road from 7.30am to 9.30am on weekdays.

Mr Lui noted the challenging engineering obstacles posed by the MCE. "Since much of the MCE is built on reclaimed land, engineers had to contend with soil condition that, I am told, is almost like peanut butter."

Some 13.1ha of land was reclaimed for the project and the largely soft clay ground had to be improved to stabilise it.

Deep and wide excavations posed another challenge.

The average excavation width was 60m, wide enough for more than 15 traffic lanes, while tunnels went as deep as 25m - the equivalent of an eight-storey building.

In all, 4.3 million cubic m of soil was excavated, about half a kilometre of earth stacked on a football field.

The MCE will have a total of nine entry and exit points to the ECP, Marina Boulevard, Central Boulevard and Maxwell Road. There are provisions for another five access points in Marina East.

COE system - steer clear of the populism pothole
By Samuel Ee, The Straits Times, 23 May 2013

IT IS interesting that even as the Transport Minister emphasises that the COE system should remain market-based, he is essentially considering the redistribution of car ownership. Could it be that the Government is pandering to a vocal minority? Or are these the signs of a budding socialist movement?

The COE, or certificate of entitlement, was introduced in 1990 to control the car population and congestion. It complemented the existing high registration taxes by requiring a motorist to bid for the privilege of owning a car. This piece of paper with a validity of 10 years could cost anything from $1 to more than $100,000, depending on the state of the economy and the size of the COE quota. In recent years, the latter, as well as an increasing population and growing affluence, conspired to push COE premiums to new highs.

The result of grossly overpriced cars becoming even more expensive led many in Singapore to lament that vehicle ownership was out of their reach. Astronomical car prices also contributed to headline inflation.

So on Feb 25, the Government introduced progressive registration taxes and vehicle financing restrictions.

Now, it is setting its sights on what is likely to be a revamp of the COE system and - even if it is not saying it out loud - basically ensuring that the masses would be able to afford a car, come tax or high COE premiums.

But how do you do that without taking apart the free market system that is the COE bidding exercise? How do you do that in a society that has been told from Day One that this is a meritocracy, one where hard work is rewarded, and that those rewards can be used to acquire and enjoy such material comforts as are deemed appropriate?

Cars in Singapore may be obscenely priced but most understand why they have to be on this tiny island. But the minister's comments may open a Pandora's box.

On the surface, his first point makes sense - to retain the original purpose of COE Category A (for cars below 1,600cc). It is not right that luxury cars should encroach into the so-called bread-and-butter segment and turn Cat A into a mini-Cat B (for cars above 1,600cc). After all, that is what categories are for in the first place.

But the problem is the market does not remain static. If a Cat A COE is reserved only for cheaper cars, it is safe to assume the COE premium would be low. But for how long? Because its affordability will surely attract more buyers to that category, especially if the alternatives - Cat B or the open category - cost more. The market will find its own equilibrium. The problem is supply and demand - there are just too few COEs available for too many buyers.

No system is perfect, not the current COE system nor the one that will replace it. But at least, it is based on principles that Singaporeans were taught to accept. More importantly, if you cannot afford a new car, there remains an alternative - a second-hand one.

But it is the minister's second point about car ownership that could have social implications. With 7 per cent of car owners owning more than one car and their cars making up 14 per cent of all cars, some people are unhappy about multiple-car ownership.

What's next? No multiple ownership of property? Lynch the guy with more than one good class bungalow? It is a slippery slope. So far, ordinary folks have not had much opportunity to denounce the rich but this could highlight the divide more clearly and formalise "We are the 99 per cent" sentiments.

Maybe income tax could be raised or more wealth taxes introduced, but there are economic downsides to punishing the rich. We may not like them simply because they are rich but hey, that's life; who said it was fair? If the majority can accept that some are multimillionaires but most will never be, then we should let the well-heeled buy that Ferrari and/or Aston Martin in addition to an S-Class.

Moreover, a tycoon with five cars is unlikely to have any real impact on the roads. He is not the cause of congestion on the CTE because unlike the heartlander, he does not live in the north. Also, his five cars are never on the road at the same time and he is always out of town. Which merely reinforces the point that usage and parking charges could ultimately be the only real solution to easing congestion.

Finally, one very important reason cars should not be made even pricier and multiple-car ownership should not be prevented - diversity. If everyone were allowed only one car, then that car would probably be a seven-seat minivan because it has to be as practical as possible. Because no one will buy a coupe or a convertible or a two-seater, mid-engined sports car or anything that is remotely exotic.

So if nothing else, say no to a COE system that veers towards populism and wealth taxes as that will make the cars on our roads really boring to look at.

A more equitable COE system promotes stability

MR SAMUEL Ee argued that the free market certificate of entitlement (COE) allocation system is in keeping with Singapore's meritocratic system ("COE system - steer clear of the populism pothole"; Thursday).

The system allows the rich who earn more to own multiple cars at the same COE prices as those who own just one car.

He further argued that life is unfair, and distortion to this form of market-based allocation punishes the rich with economic downsides.

However, it must be remembered that the rich can do well only in a stable society, where fairness and justice are as important as the rich acquiring and enjoying material comfort.

Singapore chose to have public housing allocation based not only on pure market forces, but also on citizenship status, income level, and marital status.

The debate on car ownership allocation should also be viewed through the lens of justice and fairness rather than just market forces.

Those with more starting resources are more likely to succeed in a meritocratic system, which is why we support efforts to ensure equality of opportunities.

Therefore, is it fair and just if someone who earns more because of greater starting resources and inherent ability to succeed in our knowledge-based economy pays the same amount of COE premiums to own multiple cars as another individual who may work just as hard but aspires to own just one family car?

Many may agree that it is fairer if a wealthy individual pays more for the privilege of owning more than one car, given that he will deprive another middle-class Singaporean of owning a family car by doing so.

Furthermore, it is a slippery slope if we start to view greater financial contributions by the rich as a "wealth or populist tax".

Without a cohesive and stable society where the benefits of progress are widely spread to all through more contributions by those who benefited more, the rich will suffer too.

Soon Sze Meng
ST Forum, 25 May 2013

Target usage, not ownership

MR SAMUEL Ee's commentary ("COE system - steer clear of the populism pothole"; last Thursday) and Mr Soon Sze Meng's letter ("A more equitable COE system promotes stability"; last Saturday) offer divergent views on the certificate of entitlement issue, but the crux of the matter is the affordability of cars versus the need to keep our roads relatively congestion-free.

Only 7 per cent of car owners own more than one car and their vehicles make up 14 per cent of the car population. So moves to curb multiple car ownership may not resolve the congestion issue as they do not target the majority of the car population.

Also, the average car in Singapore clocks about 20,000km each year, so owners will look to maximise the usage of their cars in order to amortise the high costs of ownership.

The Transport Ministry seems to be shifting towards targeting car ownership by the wealthy. But how does this address the underlying issues of road usage and congestion? Yes, one could argue that fewer cars mean less usage but, as Mr Ee pointed out, a tycoon with five cars is unlikely to have any real impact on the roads. And proposals to restrict ownership to one car per household can be easily circumvented by the wealthy.

If promotion of social equality is driving this shift in stance, the Government should focus instead on disallowing concurrent ownership of HDB and private properties or re-introducing estate duty.

I urge the Transport Ministry to continue its multi-pronged efforts to target car usage. We need look no farther than Hong Kong to see a city where many own cars but few drive them on a daily basis. This is because of:

- Its superior public transport system. The multiple entry and exit points in MTR stations, the frequency of MTR and bus services, the manyminibuses plying popular routes and the easy-to-understand taxi rates (no confusing surcharges except for call bookings) are things our Transport Ministry should study and implement.

- The high cost and inconvenience of parking. Parking charges are high in Hong Kong and it is difficult to find parking spaces in popular areas like Causeway Bay. Our Transport Ministry should look into levying a surcharge on parking in popular areas in Singapore while potentially allocating less land to carparks.

Lastly, the ministry should implement satellite Electronic Road Pricing as quickly as possible and charge high rates based on mileage, with even higher rates incurred during certain hours or in certain zones.

Adrian Tan
ST Forum, 28 May 2013

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