Budget 2019: Diesel tax doubled to 20 cents a litre, Government to cushion impact

SINGAPORE — In the second round of diesel tax restructure to discourage diesel consumption, excise duty for diesel here will be doubled with immediate effect from 10 cents to 20 cents a litre, Finance Minister Heng Swee Keat said on Monday (Feb 18).

At the same time, to cushion the impact of the new diesel duty, the Government will permanently reduce — with immediate effect — the annual special tax on diesel-run cars and taxis by S$100 and S$850 respectively.

A lump sum special tax is imposed on diesel-run cars and taxis yearly regardless of the amount of diesel used. The last time the 10-cents-a-litre diesel duty was levied was in 2017, and the special tax was also reduced by the same amounts that year.

In his Budget statement on Monday, Mr Heng said: “I strongly urge taxi companies to pass on the savings to their drivers like they did in 2017. This will, on average, reduce the impact of the duty increase by more than three-quarters for taxis.”

For diesel-run cars, he said that the reduction of the special tax will offset the duty increase by more than half.

An owner of a diesel-run taxi pays S$4,250 in special tax a year, whereas for a Euro 4 or 5 type of diesel car, its owner can pay between S$270 and S$950 a year, depending on the model.

Pointing out that diesel exhaust is highly pollutive and adversely affects people’s health and quality of life, Mr Heng said that many cities in Europe have imposed restrictions on the usage of diesel-run vehicles.

“We have also taken steps to discourage diesel consumption. Over the years, we have implemented schemes to encourage early renewal of diesel commercial goods vehicles, and also to account for the impact of vehicular emissions,” he added.

“We have seen positive results. More owners are shifting towards more environmentally-friendly engines such as electric hybrids. We are glad to see a drop in the number of new diesel cars and taxis registered.”

To help businesses adjust, the Government will also provide a 100 per cent road tax rebate for one year and partial road tax rebate for another two years for commercial diesel vehicles.

Besides these, there will be an extra cash rebate of up to S$3,200 over three years for buses using diesel, such as school buses and eligible private-hire or excursion buses used to ferry school children.

NOTICE TO VEHICLE OWNERS 

In a separate statement, the Land Transport Authority (LTA) said that because of the time needed to put in place the necessary system changes for the special tax reduction, vehicle owners will continue to receive their road-tax payment notice based on the existing rates until end-June this year.

For vehicle owners paying the special tax based on existing rates until the end of June, as well as those who have made payment for the period beyond Feb 18, the excess tax paid will be automatically used to offset the amount payable at the next renewal of road tax, the LTA said.

Responding to TODAY’s queries, Ms Jasmine Tan, general manager of taxi operator Trans-Cab, said that the company will pass on the cost savings to its drivers starting from Feb 18. About 2,750 of its 3,200 taxis run on diesel.

Similarly, Ms Tammy Tan, group chief corporate communications officer of taxi operator ComfortDelGro, said that the company will be passing on all savings resulting from the special tax reduction to its drivers. ComfortDelGro has the largest taxi fleet here and 82 per cent of its taxis run on diesel.

INCREASE IN DIESEL DUTY ‘SIGNIFICANT’

Calling the 100 per cent increase in diesel tax “significant”, Mr Wong Meng Yew, auditing firm Deloitte’s tax partner and global advisory leader, said that this will drive business operators and car owners’ decisions on whether to switch to petrol-run vehicles.

If a car owner’s vehicle has a full-tank capacity of 45 to 65 litres, a 10-cent increase will mean he pays S$4.50 to S$6.50 more for a full tank. If the tank is refilled weekly, this works out to between S$18 and S$26 a month or S$216 to S$312 a year, Mr Wong estimated.

“While this may not immediately push a private-vehicle owner to give up his diesel-run vehicle, the increase will certainly become a factor to consider during the next vehicle purchase,” he said.

For taxi companies, the financial impact of the increase will be compounded due to the number of vehicles they own and their refuelling frequency.

The reduction in annual special tax that the Government is providing to cushion the impact will not help defray costs significantly, Mr Wong added.

The diesel duty will further accelerate the preference among vehicle owners to stop using diesel-run cars, which is a trend that has already started, he said.