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Recent Developments in Singapore's Motor

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London School of Economics and University of Bath

London School of Economics
Recent Developments in Singapore's Motor Vehicle Policies
Author(s): Sock-Yong Phang and Mukul G. Asher
Source: Journal of Transport Economics and Policy, Vol. 31, No. 2 (May, 1997), pp. 211-220
Published by: University of Bath and The London School of Economics and Political Science
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Developments in Transport Policy

Recent Developments in
Singapore's Motor Vehicle Policies
By Sock-Yong Phang and Mukul G. Asher*
1. Introduction
Singapore is a small, densely-populated island city-state with a population of 3.4 million
and a land area of 648 square kilometres. There were 642,000 motor vehicles registered
in 1995, of which 53 per cent were private and company cars. The island is well served
by public transport services and has an excellent road infrastructure. The latter (covering
12 per cent of the country's land area) includes 132 km of expressway and 567 km of main
arterial roads. The vehicle density of 210 motor vehicles per kilometre would have been
much higher but for the containment of motor vehicle ownership and traffic congestion
through the implementation of many innovative policies. Despite high income levels (per

capita GNP in 1995 was S$34,459, approximately US$24,600), only one person in ten
owns a car. Singapore provides an interesting example of the application of an overt policy

of trying to balance demand for private transport with the constrained supply of road
infrastructure and land availability, using market-related mechanisms to achieve this

objective.

2. The Land Transport Authority's White Paper 1996

In 1995, several government agencies involved in land transport were merged to form the

Land Transport Authority (LTA), a statutory board under the Ministry of Communica
tions, established to spearhead improvements to the land transport system. Agencies
currently subject to the LTA include: the Roads and Transportation Division (formerly of

the Public Works Department, Ministry of National Development); the Registry of

Vehicles; the Mass Rapid Transit Corporation; and the Land Transport Division (formerly
separate agencies under the Ministry of Communications). Soon after its formation, the
LTA was requested by the government to prepare a White Paper detailing how Singapore

could have a world-class land transport system. This was presented to Parliament in
January 1996.
The White Paper described four ways to realise a world-class transport system in ten
to fifteen years' time. These were:
* Department of Economics and Statistics, National University of Singapore.

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May 1997

Journal of Transport Economics and Policy

(a) Integrating land use, town and transport planning

Future land use plans should ensure maximum accessibility for commuters to key nodes
of employment, housing, leisure and other social activities. LTA will develop high-rise
sites above or adjacent to Mass Rapid Transit stations when constructing new rail lines.

(b)Expanding the road network and maximising its capacity

The present goal is for the construction of a further 225 lane-kilometres at a cost of S$ 1.1
billion over the next five years. An underground road system for the city centre, estimated

to cost S$4.8 billion to construct and S$80 million to operate, is under study. Technology
(such as green waves) will be extended to cover the whole island, and automatic traffic
monitoring systems will be adopted to maximise the capacity of the road network.

(c) Managing demand for road use

When electronic road pricing replaces the existing manual congestion-pricing schemes,
the road tax structure will be modified to help motorists adjust to the new system. The
implementation of more usage-based measures will allow greater scope for the increase
in existing quotas on motor vehicle ownership. Plans are for the car-to-population ratio
to change from the present 1:10 to 1:7 by the year 2010 through the vehicle quota system.

(d)Providing quality public transport choices

The public transport system is to be developed as the cornerstone of Singapore's land
transport strategy. The performance and quality of bus and taxi services will be improved.

The Mass Rapid Transit network will be expanded to 160 km to serve heavy traffic
corridors. Light Rail Systems will serve as feeders to the Mass Rapid Transit network.
While the White Paper also proposed a significant revision to the financing framework
for rail which existed in January 1996, the rest of this note will focus on motor vehicle

usage charges and vehicle ownership policies.

3. Motor Vehicle Usage Charges

Road congestion was a major problem in the early 1970s when there were minimal
motorisation restraint policies in place. Tackling the motorisation problem early, the
government implemented the well known Area Licensing Scheme (ALS) in 1975 (see, for
example, Wilson, 1988). The scheme, which started as a morning peak licensing scheme
(from 1975 to 1989), has since been extended to become a whole day scheme, with a two

tier pricing structure (see Table 1). The ALS operates from 7.30am to 7.00pm on
weekdays and 7.30am to 2.00pm on Saturdays and on the eve of five major public
holidays. It is not in operation on Sundays and public holidays. For entry into the
Restricted Zone, which at present covers an area of 725 hectares with 33 vehicular entry

points, a valid licence must be pre-purchased and displayed by all vehicles except
scheduled buses, police and emergency vehicles (see Table 1 for a schedule of rates). A
linear version of the ALS, known as the Road Pricing Scheme (RPS) was introduced on
the East Coast Parkway (an expressway) in June 1995. The RPS was further extended to

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Recent Developments in Singapore's Motor Vehicle Policies S-Y. Phang and M. G. Asher

Table 1
Scale of Fees/Taxes for Motor Vehicle Usage in Singapore (May 1997)
(S$l is approximately US$0.71)
Area Licensing Scheme (ALS):
For entry into the restricted zone (which includes the most congested parts of the CBD) at designated times

a valid licence must be purchased and displayed by all vehicles except scheuled buses, police vehicles and
emergency vehicles. There are two types of ALS licences: a Part-Day licence and a Whole-Day licence.

Day Part-Day Licence Whole-Day Licence

Weekdays 9.30am - 4.30pm 7.30am - 7.00pm
Saturdays + eve of 5 major public holidays 9.30am - 2.00pm 7.30am - 2.00pm

Sundays & public holidays not in operation not in operation

Fees

Motorcycle S$0.70/day, S$14/month S$l/day, S$20/month

Private car and other vehicles S$2/day, S$40/month S$3/day, S$60/month

Company car S$4/day, S$80/month S$6/day, S$ 120/month

Road Pricing Scheme (RPS) on Expressways:
Between 7.30am and 9.30am on weekdays, all vehicles except scheduled buses, police vehicles and
emergency vehicles entering the East Coast Parkway, the Central Expressway and the Pan-Island Expressway
at designated locations in the direction of city/Jurong are required to purchase and display an RPS licence.
The cost of the licence is S$0.70/day or S$ 14/month for motorcycle, and S$2/day or S$40/month for private
car or other vehicle. A valid ALS licence may be used as an RPS licence. An RPS licence may be used later

in the day as an ALS Part-Day licence.

Parking Fees:
Rates vary. The rates charged by the two main public sector operators of car parks are as follows:

Within the CBD: SS0.90 per half hour between 8.30am and 5.00pm
SS0.45 per half hour between 5.00pm and 10.00pm
Outside the CBD: SS0.45 per half hour between 8.30am and 10.00pm
Car owners residing in public housing estates pay S$50 per month for a residential parking permit and S$75
per month if the parking space is in a sheltered parking lot.

Fuel Taxes:
Petrol: S$0.60 per litre or 50% of pump prices, whichever is higher

Leaded petrol : additional S$0.15 per litre

Diesel: S$0.08 per litre (scheduled public buses need not pay the diesel tax)
Note: vehicles leaving the country must have a minimum three-quarter tank of fuel.

Off-Peak Cars:
No charge if driven on Sundays, public holidays and between 7.00pm and 7.00am on weekdays, and from
3.00pm on Saturdays. If an off-peak car is used at other times, a valid day licence must be displayed. Five free

day licences are given for each year and additional ones cost S$20 each.

Foreign Registered Vehicles (mainly from Malaysia):

Foreigners working or living in Singapore are not allowed to drive foreign registered vehicles in Singapore.
Foreign registered cars entering Singapore are subject to restraints similar to those for off-peak cars. They are

allowed free entry on Sundays and public holidays, between 7.00pm and 7.00am on weekdays, and from
3.00pm to midnight on Saturdays, as well as on five freely chosen days a year. There is a fee of S$20 for each
additional day in excess of the five days. Foreign registered vehicles may purchase monthly permits at S$340.

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May 1997

Journal of Transport Economics and Policy

the Pan-Island Expressway and the Central Expressway in May 1997. Vehicles can use
their ALS licence for entry to the expressways in the morning peak or purchase a separate
licence at a lower tariff (see Table 1).

Electronic road pricing (ERP) is scheduled for implementation in early 1998. The ERP
system will cost taxpayers S$ 197 million to install and S$39 million to operate in the first

five years. The technology will involve a combination of radio frequency, optical
detection, imaging and smart cards. Each vehicle will be fitted with an In-Vehicle Unit
(I VU) on the bottom right of the windscreen (or the centre of a motorcycle handlebar) with

the unit connected by cables to the vehicle's battery. The I VU is an electronic smart card

reader, slightly larger than an audio cassette case. It debits charges from a stored-value
smart card each time the vehicle passes under a set of gantries. The IVU has a Liquid
Crystal Display screen which displays the card's stored value balance and confirms every
transaction with a beeping sound. The IVU will give a long beep when balances are low
or if the card is faulty .The cost of each IVU is estimated at S$100. The IVUs will include
removal-proof features to deter motorists from swapping them among different categories

of vehicles, which will be charged different rates. Foreign motorists may rent temporary

IVUs for their vehicles or install permanent units if they are regular users of Singapore
roads. A smart card currently in use in Singapore is a CashCard launched in November
1996 which can be used at over 500 retail outlets. The ultimate aim is for the CashCard
to be multifimctional so that it can eventually be used at all retail outlets, and for the

payment of telephone calls, bus, taxi and train fares, and ERP tolls. CashCards can be
purchased and topped up at post offices, selected bank branches and automated teller

machines.

ERP gantries will work in pairs. The first gantry has antennae which check the validity
of stored-value smart cards fixed on approaching vehicles. It conducts violation checks,
that is, no smart card or an insufficient balance of stored value. It then executes debiting

instructions to the IVU if everything is in order. The second gantry has a set of vehicle
presence detectors which pinpoints the location of the vehicle and identifies the type of
vehicle by optical means. A second set of antennae (on the second gantry) verifies whether
the correct deduction has been made and also whether the type of IVU corresponds to the

type of vehicle. An out-station controller, located at the side of the road, links the
information from the antennae and vehicle-presence detectors, to check for possible
violations (no IVU, wrong type of IVU, no smart card, insufficient balance in smart card).
If a violation occurs, enforcement cameras mounted on the first gantry record the image

of the rear licence plate of the violating vehicle, and the image and transaction record is
then forwarded to a central computer.
The ERP system to be implemented will have no provisions for alternative means of
payment. The charging points will have no toll booths or lane dividers, and vehicles are
not required to slow down when approaching them. This enables the system to handle
vehicles travelling up to 120 kph in a multi-lane environment. Two gantries are therefore

required at each charging point to allow sufficient time for the IVU to complete its
communication sequences with the smart card, before it communicates with the second
antenna in the transaction process. Given a maximum design speed of 120 kph and a time

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Recent Developments in Singapore's Motor Vehicle Policies

S-Y. Phang and M. G. Asher

of 400 msec to complete the I VU/smart card sequences, the two gantries have to be at least

15 metres apart (Lew et al., 1994).

Systems tests currently under way involve the testing of difficult traffic combinations

such as cluttered configuration, vehicles crossing paths or changing lanes under the
gantries, very close consecutive passings, motorcycles between large vehicles, and very

close parallel passings. Reliability standards have been set at one error in 100,000
passings. An error may involve either not capturing a violating vehicle, or detecting a non
violating vehicle as a violator. It is the latter category of error which is of greater concern
to the authorities, as errors of this nature would erode public confidence in the ERP system.

To avoid confusion to the motoring public when ERP is first implemented, the initial

system is expected to replicate the ALS and RPS, with initial charges comparable to
existing ALS and RPS charges. The Land Transport Authority (LTA) has promised to
cushion the impact of ERP on road users by making offsetting adjustments to other
charges, for example rebates on annual road taxes. ERP is expected to be progressively
extended to cover choke points along expressways, and congested arterial and ring roads

by the year 2000. Over time, ERP charges are expected to rise to "reflect a larger
proportion of the social costs of the congestion caused by road users" (LTA White Paper,

1996, p.35).
The optimal ERP tariff structure will be one which allows for each toll to equal the
congestion externality?the difference between the cost the traveller imposes on society
and the cost he necessarily bears (Morrison, 1986). ERP represents a move towards this

theoretical ideal as compared to the ALS and the RPS. However, the gains from
implementing the optimal tariff structure will ultimately have to be weighed against the
costs of complexity and dissemination of information to the motoring public. The frill
implementation of the ERP will hopefully reduce controls on car ownership significantly
in the long term. However, because the level of car usage is dependent amongst other
things on the level of car ownership, and because of the need to ensure that excessive ERP

charges do not result, ownership controls (whether by way of price or quota) are
inevitable. There is also the need to ensure that there are some uncongested roads that
remain unpriced, lest the whole island be cluttered with unsightly ERP gantries. The
relatively small size of Singapore makes these various problems particularly acute.
Other usage charges include parking fees and fuel taxes (see Table 1). The fuel tax is
sufficiently high to warrant legislation that makes it an offence to leave the country (via
the causeway to Malaysia) in a vehicle which does not have a minimum three-quarter tank

of fuel.

4. Motor Vehicle Ownership Policies

Usage charges are complemented by numerous policies to regulate motor vehicle
ownership. From May 1990, the owner of a new vehicle must have first acquired a
Certificate of Entitlement (COE) before the vehicle can be registered (see Smith, 1992,
for details of the initial form of the vehicle quota scheme). The motor vehicle quota system
allows for growth of the motor vehicle population at a predetermined annual rate. The

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May 1997

Journal of Transport Economics and Policy

Table 2
Scale of Fees/Taxes for Motor Vehicle Ownership in Singapore (1997)
(S$l is approximately US$0.71)

Customs Duty:
41% of Open Market Value (Cost Insurance Freight, handling and other incidental charges paid)

Goods and Services Tax:

3% of CIF plus customs duty payable

Registration Fee:
S$ 1,000 for private registration; S$5,000 for company registration

Additional Registration Fee:

150% of Open Market Value (OMV) for private registered car
300% of Open Market Value (OMV) for company registered car
Certificate of Entitlement Available only to Successful Bidders at Monthly Tender (prices vary monthly):

Type of vehicle March 1997 Prices

For registration
of new vehicles

Prevailing

Highest

quota premium*

COEprices

27,220
Small cars (l,000cc or less)
Mid-size cars (1,001 to l,600cc)45,008
53,000
Big cars (1,601 to 2,000cc)

21,446
44,855
49,442

3,350
60,810

2,808

31,246 (Nov 94)

58,600 (Nov 94)
95,100 (Nov 94)
110,500 (Dec 94)
39,000 (Dec 94)
4,202 (Dec 95)
105,000 (Nov 94)

S$

Luxury cars (2,00 lcc or more)

Goods vehicles and buses

Motorcycles

Open category t

60,888
30,610

S$

51,031
29,602

n/a

S$

* The prevailing quota premium is the average of quota premiums over the past twelve months. The owner
of a 10-year-old vehicle who wants it to remain on the road for another 10 years has to pay the prevailing quota

premium. The fee is halved for five-year extensions.

t An open category COE can be used to purchase any kind of vehicle. It can be converted to a motorcycle
licence for one third of the quota premium. Company-registered cars and heavy vehicles pay double the quota

premiums.
Annual Road Tax ($ per cc):

l,000cc and below

1,001 to l,600cc

1,601 to 2,000cc

2,001 to 3,000cc
above 3,000cc

SS0.70
SS0.90
SS1.05
SS1.25
SS1.75

The road tax for a company registered car is twice the above rates, which are for private registered cars. For

a diesel-powered car, a diesel tax which is 6 times the road tax of a similar petrol-driven vehicle is payable.
Off-peak cars enjoy a flat S$800 discount subject to a minimum road tax payment of S$50. B etween May 1997
and April 1998, the government will give road tax rebates of S$20 for motorcyles, S$10 for weekend and off
peak cars, and S$60 for cars and other types of vehicle, to cushion the impact of introducing the RPS on two

expressways.

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Recent Developments in Singapore's Motor Vehicle Policies S-Y. Phang and M. G. Asher

Table 2 Continued
Surcharge on Imported Used Cars:
S$ 10,000 (Note: imported used cars must be under three years old)

Registration Fee Rebate for Off-Peak Car:

S$17,000

Preferential Additional Registration Fee (PARF) Benefit for Deregistering (scrapping or exporting) a

Car of Under 10 years:

Age of Vehicle at Deregistration PARF Benefit

Below 5 years 130% OMV

Between 5 and 6 years 120% OMV
Between 6 and 7 years 110% OMV
Between 7 and 8 years 100% OMV
Between 8 and 9 years 90% OMV
Between 9 and 10 years 80% OMV

The PARF benefit can be used to offset the additional registration fee of any new car. Imported
and company registered cars are ineligible for PARF benefits.

quota for each quota year (May to April) is pre-announced and determined

makers' expectations of the number of cars which will be scrapped during the ye

as considerations such as the extension of the Road Pricing Scheme and the im
introduction of ERP.

The COE is valid for a ten-year period and can be obtained through electronic

at a monthly tender held by the Land Transport Authority. An interested bidder can

his bid at over 850 ubiquitous automated teller machines. The deposit, equal to
bid, is deducted from his bank account. Successful bidders pay the lowest succ

price in each category (see Table 2). The system delivers the bidding results an
the deposits of unsuccessful bidders within two working days. Successful bidd

then use their COEs to register their vehicles in the same month of bidding. T

1997priceof aCOE for a medium-sized car (1,001 to l,600cc) was S$45,008. In

to the COE, the owner of a new motor vehicle is required to pay an import tax

per cent of the market value of the vehicle, a 3 per cent goods and servic

registration fee of S$ 1,000, an additional registration fee which is 150 per cen

market value of the vehicle, as well as annual road taxes that vary with the engin

of the vehicle (see Table 2). When the Road Pricing Scheme is extended to

expressways in May 1997, motor vehicle owners will receive rebates on the ann

tax of S$20 for motorcycles, S$10 for weekend and off-peak cars, and S$60 fo
other types of vehicles. An "off-peak" car, which is identified by a red number

be registered at considerable tax savings (see Table 2), but it can only be us
permitted off-peak hours (see Table 1).

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May 1997

Journal of Transport Economics and Policy

The quota system, when first implemented in 1990, resulted in uncertain COE prices
and COEs became a target for speculators, requiring the introduction of various curbs on

the resale of COEs as well as newly-registered motor vehicles. Measures to curb

speculation have included disallowing motor vehicle distributors from bidding, and
making certain categories of COEs non-transferable (in 1991). In 1995, the government
imposed a total ban on transfers within the three months following the registration of a car;

and a levy (equal to the positive difference between the COE price at the time of transfer

and the car's original COE price) for car owners who disposed of their vehicles between
the fourth and sixth month after registration (Phang, Wong and Chia, 1996).

As a result of taxes and levies on ownership, a new Toyota Corolla 1.6 (a typical
medium-sized car) with an import value of S$20,000, costs approximately S$ 110,000 (or

US$80,000). Another popular model, the Mercedes Benz E200, with an import value of
S$50,000, costs approximately S$250,000 (US$ 180,000) after taxes and quota premiums.
The Toyota and Mercedes Benz are the two top selling brands in Singapore. The ratio of
the price of a typical medium-sized car to per capita GDP has increased from 3.2 in 1991

to4.5 in 1994 (LandTransport Authority, 1996, p.32). In most high-income countries, the
corresponding ratio is less than one.
The above discussion and information contained in Table 2 illustrate the complexity
of taxes on motor vehicle ownership in Singapore. An argument could be made for taxes
on ownership to be simplified and still achieve the same objective of regulating vehicle
ownership. In fact, since the introduction of the quota system in 1990, the additional
registration fee has been adjusted downwards on two occasions from 175 per cent of Open
Market Value to the present 150 per cent. However, the substitution of other taxes by the
COE bid affects the final prices of newly-registered cars and hence all used car prices. As

the car is a significant asset for most car-owning households, policy-makers have had to
take into account the effect of such tax substitution on used car prices.

5. Implications for Government Revenue and the Environment

Motor vehicle-related taxes and levies are an important source of revenue. In the fiscal
year 1993, the last year for which complete data are available1 (see Table 3), these taxes
and levies accounted for 5.0 per cent of GDP, 29.1 per cent of total tax revenue and 22.9

per cent of total operating revenue of the government. Among the most important
contributors were: Vehicle Quota Premium or revenue from the sale of Certificates of
Entitlement (COEs); Additional Registration Fee (which essentially acts as an additional

import duty on motor vehicles); and annual road tax and excise duties on petroleum
products. Revenue from Vehicle Quota Premium is substantial but fluctuates with COE
prices. This has implications for fiscal marksmanship.
1 With the establishment of the Land Transport Authority in September 1995, New Registration Fees,
Transfer Fees and Area Licences (see Table 3) have become off-budget items. Comparable data from the LTA
are not available to form a complete picture.

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Recent Developments in Singapore's Motor Vehicle Policies

S-Y. Phang and M G. Asher

Table 3
Motor Vehicle Related Taxes and Levies in Singapore
(Figures in parentheses refer to proportion of GDP)

FiscalYear 1992/93

Category

Amount

Total
Tax

Fiscal Year 1993/94

Total

Operating
Revenue Revenue
S$ million
Total Tax Revenue

All taxes and levies

on motor vehicles3

14,237.1

100.0

17,772.4

124.8

3,449.7

24.2

Import duties on motor vehicles

Vehicle quota premium

Additional registration fee

309.7
887.5
821.2
630.8
87.5
52.1

2.2
6.2

Road tax

Special tax on heavy oil engine

New registration fees
Transfer fees

Area licences
Excise and import duties
on petroleum products

Othersb

80.1

16,223.7

100.0

78.5

20,655.5

127.3

100.0

4,721.8

29.1

22.9

418.1

2.6
9.7

2.0
7.6

(17.2)

100.0

(21.9)

(4.3)

Revenue Revenue

S$ million

(17.6)

Total Operating Revenue

Amount Total Total

Tax Operating

(21.9)

19.4

(5.0)

1,144.0
693.4
95.0

4.3
0.6

47.4
38.7

4.4
0.6
0.4
0.3
0.3

1.7
5.0
4.6
3.5
0.5
0.3
0.3
0.2

557.2

3.9

17.6

0.1

5.8

1,574.1

7.1

5.5

0.4

46.8

0.4
0.3

3.4
0.5
0.3
0.3
0.2

3.1

598.6

3.7

2.9

0.1

22.5

0.1

0.1

70.2
59.1

Source: Calculated from Republic of Singapore's Budget Documents for various years.
a The data exclude parking fees which incorporate a high regulatory tax component.
b This category includes revenue from traffic offences, sale of registration numbers, passenger vehicle seating fees etc.

When the ERP is implemented in 1998, the government is expected to make offsetting
adjustments to the motor vehicle quota as well as other taxes and charges, such as road
taxes. However, neither the ERP charges nor the offsets have so far been announced. The
introduction of the ERP is thus expected to change the composition of motor vehicle taxes
and charges, but not to lead to a reduction in their revenue importance. If anything, their
importance is likely to increase.

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May 1997

Journal of Transport Economics and Policy

Motor vehicle taxes and charges are not earmarked for either road or transport
development. They form a part of the general revenue of the government. This permits
greater flexibility in allocating budgetary resources to areas of priority.
As businesses also pay motor vehicle taxes and charges, though their share is difficult

to determine, the cost of conducting business in Singapore is also affected. This needs to
be borne in mind in setting taxes and charges. It also has implications for the economic
incidence of motor vehicle taxes.
While urban transport policies in Singapore are not targeted specifically to address
environmental concerns, they have a direct impact on the environment. Levels of carbon
monoxide, sulphur dioxide, nitrogen oxide, smoke levels and th? average lead concentra
tion in Singapore are all within US Environmental Protection Agency standards. The level

of pollutants from mobile sources is a function of the level of traffic congestion.

Restrictions on motor vehicle ownership and usage have thus helped to reduce peak hour
pollution concentration levels in Singapore. In addition to demand management policies,
regulatory policies on vehicular emission standards, statutory periodic vehicle inspection
and differential taxes on leaded and unleaded fuel also play their part in reducing air

pollution from motor vehicles (Chia and Phang, 1994).

References
Chia, N. C. and S. Y. Phang (1994): Motor Vehicle Taxes: Their Role in the Singapore Revenue System and
Implications for the Environment. Special Paper. Singapore: Economy and Environment Program for

Southeast Asia.

Land Transport Authority, Singapore (1996): A World Class Land Transport System. White Paper presented
to Parliament, 2 January.

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Date of receipt of final manuscript: March 1997

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