Transport minister’s point about car ownership may have social implications
Ssamue Lee 22 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 heights.
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 COEs.
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 isn’t 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’s 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 can’t 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’s 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%” 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 of Singaporeans can accept that some are multi-millionaires 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 doesn’t live in the north. Also, his five cars are never on the road at the same time and he’s 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 why cars should not be made even pricier and why 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 coupé 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 because that will make the cars on our roads really boring to look at.
2 comments:
Whither the COE system?
Transport minister’s point about car ownership may have social implications
Ssamue Lee
22 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 heights.
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 COEs.
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 isn’t 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’s 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 can’t 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’s 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%” 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 of Singaporeans can accept that some are multi-millionaires 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 doesn’t live in the north. Also, his five cars are never on the road at the same time and he’s 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 why cars should not be made even pricier and why 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 coupé 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 because that will make the cars on our roads really boring to look at.
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