Budget 2023: Higher luxury car tax not expected to slow down car sales
- Buyers of cars with Open Market Value (OMV) between S$40,000 and S$80,000 to pay higher Additional Registration Fee (ARF) of 190 per cent to 250 per cent
- ARF rates raised to 320 per cent from 220 per cent for cars in the highest OMV tier of more than S$80,000
- Preferential ARF rebates capped at S$60,000 for cars and taxis
SINGAPORE’S move to raise taxes by hiking the additional registration fee (ARF), more so on luxury cars, is deemed a “cooling measure” of sorts but one that is unlikely to hurt demand, according to industry participants.
“This is something like a cooling measure ... a luxury tax,” said Neo Nam Heng, adviser to the Automobile Importer & Exporter Association. “Since ten years back, despite the tax increases, the number of luxury cars sold in Singapore has still been growing ... and has multiplied. So the latest measures will not change that (car sales in high-end segment).”
“The super rich who buy these cars will still be able to afford them,” he added. However, Neo said he expects a knee-jerk reaction in the next few rounds of the Certificate of Entitlement (COE) bidding exercise, which could see some “pricing adjustments”.
“Prices could cool down and the adjustments will be fairer to those who buy the cars priced in the mid range,” he added.
If last year is any guide, COE premiums in fact rose across the board in the first bidding exercise after higher new taxes for luxury cars kicked in, as announced under Budget 2022. The sharp rise in prices last year ran contrary to expectations that the higher ARF on high-end cars would hurt demand in that segment.
Victor Kwan, managing director of Wearnes Prestige Division, said in the short run, he expects potential buyers of luxury cars who were previously biding their time to “rush” to make their purchases as some of the older COEs would involve the old tax structure. Wearnes, a luxury automotive retailer in the city state, counts the Aston Martin DBX and Bentley Bentayga as its best sellers.
“So, we expect to see a rush of those (people) coming in to buy over the next couple of months,” he continued.
He added that based on last year’s experience when the taxes were raised on high-end cars, buyers of this segment are likely to eventually return as they will still be able to absorb the price increases.
“Most luxury car buyers have a high price inelasticity ... so they will not be deterred by the increase in taxes,” remarked one observer. Another observer said the latest measures could dissuade local buyers, if at all.
Other high-end car retailers including BMW Asia and Porsche Singapore declined comment for now as they were in the midst of assessing the impact of the new measures.
The revised ARF structure will apply to all new and imported used cars and goods-cum-passenger vehicles registered with COEs obtained from the second COE bidding exercise in February 2023 onwards. The second COE bidding exercise in February will take place from Feb 20 to 22.
