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LTA’s new role fuels talk of emission-based tax

The Land Transport Authority (LTA) will take over the fuel efficiency labelling of cars from the National Environment Agency (NEA) next year – a move that industry players say could pave the way for an emission-based vehicle tax system in the longer term.

Such a taxation system uses the amount of tailpipe emissions to determine how much a motorist pays in road tax or even excise duty, and has been adopted by several countries in recent years.

Asked if this was the eventual plan, an LTA spokesman would say only: ‘As announced by the Minister for Finance at Budget 2011, the Government is undertaking a comprehensive review on measures to promote the adoption of green vehicles, as part of our efforts to promote sustainable development.’

The fuel economy labelling scheme was launched two years ago by the NEA to raise awareness among consumers, who hopefully will opt for cars which are more efficient.

Such cars will use up relatively less fuel, and consequently produce less emissions than others which are less efficient.

The NEA made it mandatory for all new cars in showrooms to display this label – which declares the amount of fuel the vehicle uses for every 100km – but sources said some parallel importers still flout the rule.

The LTA said taking over the fuel economy labelling of cars will streamline the vehicle type approval process for motor traders.

‘Type approval’ refers to a process where the LTA inspects a new model before deciding whether to allow it to go on sale here.

‘LTA will become a one-stop centre for all vehicle type approval-related processes,’ the spokesman said.

Several quarters in the motor industry have lobbied for a shift from the current system that determines road tax and certificate of entitlement (COE) category by engine size, and the granting of the Green Vehicle Rebate (GVR) based on engine technology.

Last year, German car manufacturers, through the German Chamber of Industry and Commerce, submitted a ‘green paper’ to the Singapore Government proposing a carbon-based tax system.

Two months ago, Associate Professor Lee Der Horng of the National University of Singapore followed suit.

In a paper commissioned by the Motor Traders Association, Prof Lee proposed a separate COE category for green vehicles.

He also said that the current ‘special tax’ slapped on diesel cars should be replaced with a carbon-based tax that is consistent ‘across vehicles of different fuel types’.

Mr Wolfgang Huppenbauer, president and chief executive of Daimler South East Asia, told The Straits Times yesterday that the Government has had several consultative meetings with the German companies since the ‘green paper’, and that he was hopeful that some recommendations would be taken into consideration at the next Budget.

‘All the talks have triggered a thinking process,’ he said. ‘I’m confident that something positive will happen, but I don’t know exactly what at this stage.’

This year, Britain adopted an emission-based vehicle tax regime that has been in place in most of Europe for several years now.

Last year, South Africa introduced a vehicle emissions tax in its aim to slash greenhouse gases by 42 per cent by 2025.

Singapore has in its own way tried to incentivise green technologies. Its GVR, for instance, grants tax cuts to electric, petrol-electric hybrid and compressed natural gas cars.

Critics, however, say this scheme is technology-biased. For instance, it gives petrol-electric cars a 40 per cent cut in the Additional Registration Fee, which is the main tax levied on a car when it is registered, but none for diesel-electric hybrids.

Mr Gilbert von der Aue, who heads engineering firm C. Melchers’ oil and gas department, said the bulk of tax breaks from the GVR is now garnered by luxury models such as the Lexus and Porsche hybrids.

He said the criterion for granting the green rebate should be the amount of tailpipe gases a car emits, not the technology it uses.

‘A large hybrid vehicle may have more CO2 emission than a 2-litre compressed natural gas vehicle or even a compact petrol car,’ he said. ‘There should be a level playing field for all.’

Observers said the move for LTA to take on the new role could lead to tighter enforcement of fuel economy labelling, as well as economy figures declared by manufacturers being audited by independent parties.

These audited labels may then form the basis for determining car taxes or even tax rebates, they said.

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