Budget 2020: Lump-sum tax built into road tax for electric vehicles

A lump-sum tax will be built into the road tax schedule for electric vehicles (EV) to partly account for the loss in fuel excise duties since owners of such cars do not pay them, Deputy Prime Minister and Finance Minister Heng Swee Keat said in his Budget speech on Tuesday.

The lump-sum tax will be phased in over three years starting from January 2021, with the full quantum implemented by January 2023.

Fuel excise duties today yield around S$1 billion per year and are significant contributors to government revenues, Mr Heng said.

They are also a form of mileage tax which discourages excessive driving, especially in private cars and thus helps to reduce road congestion, he added.

"But EVs do not pay fuel excise duties. Therefore, we will need to update our vehicular tax structure to preserve these two considerations," Mr Heng said.

He said the government would ideally like to implement a usage-based tax on EVs, but the technology to do this is still several years away, through the Next Generation ERP System.

While total road tax will be higher for some EV models, Mr Heng noted that EV buyers can still enjoy substantial cost savings because of the significant EV Early Adoption Incentive.

For more Budget 2020 stories, visit bt.sg/budget20.