Cutting fuel duties would 'effectively amount to subsidy on private transport': Lawrence Wong

CUTTING or suspending fuel duties or giving out road tax rebates would effectively amount to a subsidy on private transport, and this will have counter-productive effects, said Finance Minister Lawrence Wong on Monday (Apr 4).

This is because such subsidies would benefit a relatively small but generally better-off group, since fewer than 4 in 10 households in Singapore own cars, with only about 1 in 10 among the lowest quintile.

"Cutting fuel duties also means that some of the subsidies will flow back in part to producers and suppliers themselves, not just to consumers, as the pump price may not fall as much as the reduction in duty," he said in a ministerial statement in Parliament.

"More importantly, such subsidies will reduce the incentive to switch to more energy-efficient modes of transport, which is a critical element in our plans for sustainable living."

Wong's comments come amid calls from some MPs to reduce or suspend fuel duties or to provide road tax rebates in the wake of rising pump prices.

Oil prices spiked above US$100 per barrel after Russia invaded Ukraine, worsening the already tight energy supply.

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Wong said he recognises there are several groups, such as taxi and private-hire car drivers and delivery riders, who are affected by higher petrol and diesel prices.

He noted that various taxi and private-hire car operators have implemented temporary increases in fares, and they also have tie-ups with petrol companies to offer fuel at discounted prices for their drivers.

Over the last 5 years, the government collected an average of S$920 million a year per year of fuel duties. Fuel duties and road taxes are collected for revenue and to price the negative externalities of vehicle transport, such as the impact on public health and the environment, said Wong.

This revenue adds to the pool of resources available for programmes and subsidies that benefit Singaporeans, which includes spending on public transport, for which the government provides significant capital investments, as well as operating subsidies to keep the system effective and affordable.

The better way to help Singaporeans cope with the rise in petrol prices and inflation in general, said Wong, is to provide them with the support measures catered for in the Budget.

"Through these measures, we are extending concrete help directly to Singaporeans to cope with their different areas of needs, including their utility bills, children's education, and daily essentials, and we are providing more targeted help for the lower-income groups," he said.

READ MORE:

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