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SINGAPORE – Most of the people who provided feedback for a review of the certificate of entitlement (COE) system supported merging categories A and B, with a preference for five-band fee rebate structure.
The five-band fee rebate structure will cover the range of rebates and surcharges, based on the open market value of cars, with the “aim of restoring a permanent price distinction in COE premiums between mass-market and luxury cars”, said Transport Minister Jeffrey Siow.
Speaking in Parliament on Nov 3, Siow gave an update on the Land Transport Authority’s public consultation exercise on COE categorisation, which closed on Nov 2.
“We are studying the submissions, and have not decided on the outcomes”, he added.
The COE review is expected to be completed by the first half of 2027. Apart from merging the two car categories, proposed changes will include a fee rebate system under which buyers of higher-value cars pay a higher premium than buyers of mass-market cars.
Currently, Category A COEs are used to register mass-market cars and electric vehicles (EVs) while Category B certificates are meant for larger and more powerful cars and EVs.
Two options were put up by the LTA for consideration – one with three bands and another with five bands.
Under the three-band option, cars with open market value (OMV) – the price before taxes – that fall in the lowest band would get a $15,000 rebate. Those in the middle band will pay the full price without rebate or surcharge, while those in the top tier will incur a $15,000 surcharge.
The five-band option adds two bands, with a rebate or surcharge of $7,500.
Siow said most respondents preferred the system with five-band structure because it reduces the “cliff effects”, when a vehicle will pay a disproportionately higher price when it crosses into the next less-favourable banding.
MP Edward Chia (Holland-Bukit Timah GRC), who first mooted the idea of merging car categories in March, asked if LTA looked at pegging the rebate or surcharge amounts as a percentage of the COE price instead of using a fixed amount.
Siow said using a percentage formula could further reduce the cliff effects, but it also means that buyers will not know the exact rebate or surcharge before the COE bidding exercise begins.
There are also competing demands for land and roads already occupy over 12% of Singapore’s land area, so there is a need to give priority to public transport over car ownership, he added.
Siow said over the past decade, COE revenues averaged about $5 billion annually. Every year, about $6 billion to $7 billion is spent on public transport, including subsidies to keep fares affordable, he added.
“Put another way, without COE revenues, we would have to find some other way to fund the public transport system that millions of Singaporeans use every day,” he said.
Public transport cannot meet every need, but Singapore’s taxi and private-hire car service are “more affordable options” for people to travel by car without incurring the expenses of owning one, he added.
Several MPs, including Choo Pei Ling (Chua Chu Kang GRC) and Tin Pei Ling (Marine Parade-Braddell Heights) raised concerns over the affordability of mass-market cars.
Siow said there are households who may prefer to own a car, but the principle is that the Government must support all families, including those who do not own and do not wish to own one.
He also said families receive broader support, like childcare subsidies, healthcare support and other assistance which defray household expenses.
Families, he added, can decide how to best manage the additional expenses of car ownership after factoring these subsidies.
Jessica Tan (East Coast GRC) asked if the Transport Ministry will look into the affordability of vehicles for self-employed and small businesses. Siow, in his reply, said it is something that will be looked into as the COE system is continually being reviewed.
Yip Hon Weng (Yio Chu Kang) asked if the Transport Ministry will look at putting in an income-linked benchmark, in addition to considering the vehicle’s OMV, to study if cars remain affordable to Singaporeans.
In response, Siow said the COE policies are designed to control the overall quantity of cars and that it will be difficult to try to control the price of cars.
He said: “What we want to do, knowing that we cannot enable everybody to own a car, we try to enable as many people to have access to a car ride and of course, beyond that, to focus our attention on public transport, which can meet the needs of most Singaporeans.”
In a Facebook update on Nov 3, LTA said it received more than 4,000 responses when the public consultation closed on Nov 2.