SINGAPORE: The proposal by the Progress Singapore Party (PSP) to set up a certificate of entitlement (COE) credit system may be well-intentioned, but is “unlikely to be effective in practice”, said Senior Minister of State for Transport Amy Khor.
She was responding to suggestions by PSP on how to create a more equitable COE system for private vehicles which were raised by Non-Constituency Member of Parliament Hazel Poa at an adjournment motion in parliament on Tuesday (Jan 7).
The proposed COE system would use “COE credits” instead of cash for bidding, said Ms Poa.
These credits were proposed to be distributed by the government to adult Singapore citizens and permanent residents each month, and the number of credits received by each individual would depend on various factors such as their nationality, their age, the number of children they have and whether or not they have any disabilities, among other considerations.
For illustration purposes, Ms Poa suggested that 100 credits be distributed to each adult Singapore citizen and 70 to each adult PR. Those with children aged 12 and under could get an additional 200 credits per child who is a citizen, and 140 per child who is a PR.
Senior citizens above the retirement age could get an additional 100 credits, and those who have mobility impairments, such as those who qualify for Class 1 or Class 2 car park labels for the disabled, could get an additional 200 credits.
“These examples given are not exhaustive, but serve to illustrate how we can use this system to take into account needs and social contributions, and make it less costly for those with greater need to own a vehicle,” she said.
She added that the proposed credits would also be transferable. For instance, families could pool their COE credits together to bid for a vehicle.
Credits could also be traded – those who want to own a vehicle could buy the COE credits from those who do not, in order to submit higher bids.
“Under this system, unavoidably, those who are financially better off would still be better able to acquire a COE, although it is ameliorated to some extent by distributing COE credits based on needs factors,” said Ms Poa.
Ms Poa also proposed that to reduce the impact of the proposed new COE system on government revenue, a base fee be collected per COE. This could be either a flat rate depending on the COE category, or a percentage of the car’s open market value.
Even with the base fee, Ms Poa noted that there would still be some loss of revenue for the government.
In response, Dr Khor noted that under the proposal, those who want to own a car can buy COE credits from those who do not.
The net effect would be that the people who would be able to acquire COEs would still be those who were willing and able to pay for them, she said.
“Their proposal may potentially drive the price of credits underground, where the prices of the credits become opaque and unknowing consumers get fleeced – akin, for instance, to the price gouging of Taylor Swift concert tickets last year,” said Dr Khor.
She added that a COE under such circumstances may “well cost even more than today”, and that to guard against black markets for credits, a whole new trading and enforcement regime may need to be set up, which would “ultimately cost taxpayers even more”.
Ms Poa also said that the trading of COE credits would also come with the “redistribution of wealth from vehicle owners to non-car owners, and from foreigners to Singaporeans and PRs”.
Thus, the proposed system could reward those who choose not to own cars and help them better cope with the rising cost of public transportation, she added.
Dr Khor said that this “system of transfer” is something that the current system already achieves “at the macro level”.
“COEs that are paid by private owners form part of the government’s revenue, which is used to fund the government’s subsidies for public transport and other public goods such as housing, healthcare and education,” she said.
Dr Khor also said it was “concerning” that PSP was suggesting that the government dictate who gets more credits.
“It may sound attractive in the first instance that different people with different needs should get different (amounts) of credits, but needs are very subjective,” said Dr Khor.
“How do we pass such judgment on who needs a car more?”
She questioned, for instance, if there is a strong justification that a family with a child under 12 should be allocated twice the credits of an adult.
“Families with children are given baby bonuses and other assistance,” said Dr Khor.
“For these groups, we provide additional support upfront in a transparent and direct way, instead of through a convoluted credit system.”
Ms Poa also suggested that an additional levy be imposed on any additional car purchases by a household, much like how additional buyer’s stamp duty (ABSD) is imposed on those purchasing second and subsequent properties.
This is in line with what PSP had suggested in 2023, but at that time, then Transport Minister S Iswaran said that high COE prices were not explained by multiple-car-owning households.
“However, PSP believes that there is a need to send a signal against the accumulation of multiple cars by ultra-wealthy households for pleasure when these scarce COEs could be more useful in the hands of another household that does not currently own a car,” said Ms Poa.
She said that in order to be fairer to multi-generational families residing together or larger families, exceptions can be made where the household size is such that the ratio of household members to each car is five or more before an additional purchase.
Responding to this, Dr Khor said that the key intent of ABSD is to curb speculative behaviour in the property market, but that cars are less regarded as speculative assets, “in part because the COE system limits the validity of use”.
“The same parallel therefore cannot be drawn,” she said.
She reiterated that multiple-car-owning households are not the main drivers for COE quotas, and that fewer than 5 per cent of all households own more than one car, and the percentage has been gradually coming down.
Record-high COE prices in recent years have put the 35-year-old system in the spotlight.
Dr Khor said that while demand for COEs cannot be controlled, the government has “made significant moves” to increase the COE supply.
In 2023, a “cut-and-fill” move was announced to bring forward COE quotas from peak years to fill the supply troughs.
In 2024, the Category A and B quota was increased by more than 9,000 via this move.
“The quota released was more than 30 per cent higher than what it would have been without ‘cut-and-fill’,” said Dr Khor.
In October last year, it was announced that up to 20,000 additional COEs will be progressively injected across all vehicle categories from February.
“This increase in supply is the most direct way to give more households the choice of owning a car, without causing traffic congestion,” said Dr Khor.
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She was responding to suggestions by PSP on how to create a more equitable COE system for private vehicles which were raised by Non-Constituency Member of Parliament Hazel Poa at an adjournment motion in parliament on Tuesday (Jan 7).
The proposed COE system would use “COE credits” instead of cash for bidding, said Ms Poa.
These credits were proposed to be distributed by the government to adult Singapore citizens and permanent residents each month, and the number of credits received by each individual would depend on various factors such as their nationality, their age, the number of children they have and whether or not they have any disabilities, among other considerations.
For illustration purposes, Ms Poa suggested that 100 credits be distributed to each adult Singapore citizen and 70 to each adult PR. Those with children aged 12 and under could get an additional 200 credits per child who is a citizen, and 140 per child who is a PR.
Senior citizens above the retirement age could get an additional 100 credits, and those who have mobility impairments, such as those who qualify for Class 1 or Class 2 car park labels for the disabled, could get an additional 200 credits.
“These examples given are not exhaustive, but serve to illustrate how we can use this system to take into account needs and social contributions, and make it less costly for those with greater need to own a vehicle,” she said.
She added that the proposed credits would also be transferable. For instance, families could pool their COE credits together to bid for a vehicle.
Credits could also be traded – those who want to own a vehicle could buy the COE credits from those who do not, in order to submit higher bids.
“Under this system, unavoidably, those who are financially better off would still be better able to acquire a COE, although it is ameliorated to some extent by distributing COE credits based on needs factors,” said Ms Poa.
Ms Poa also proposed that to reduce the impact of the proposed new COE system on government revenue, a base fee be collected per COE. This could be either a flat rate depending on the COE category, or a percentage of the car’s open market value.
Even with the base fee, Ms Poa noted that there would still be some loss of revenue for the government.
In response, Dr Khor noted that under the proposal, those who want to own a car can buy COE credits from those who do not.
The net effect would be that the people who would be able to acquire COEs would still be those who were willing and able to pay for them, she said.
“Their proposal may potentially drive the price of credits underground, where the prices of the credits become opaque and unknowing consumers get fleeced – akin, for instance, to the price gouging of Taylor Swift concert tickets last year,” said Dr Khor.
She added that a COE under such circumstances may “well cost even more than today”, and that to guard against black markets for credits, a whole new trading and enforcement regime may need to be set up, which would “ultimately cost taxpayers even more”.
Related:
GOVERNMENT DISTRIBUTES WEALTH AT “MACRO LEVEL”: AMY KHOR
Ms Poa also said that the trading of COE credits would also come with the “redistribution of wealth from vehicle owners to non-car owners, and from foreigners to Singaporeans and PRs”.
Thus, the proposed system could reward those who choose not to own cars and help them better cope with the rising cost of public transportation, she added.
Dr Khor said that this “system of transfer” is something that the current system already achieves “at the macro level”.
“COEs that are paid by private owners form part of the government’s revenue, which is used to fund the government’s subsidies for public transport and other public goods such as housing, healthcare and education,” she said.
Dr Khor also said it was “concerning” that PSP was suggesting that the government dictate who gets more credits.
“It may sound attractive in the first instance that different people with different needs should get different (amounts) of credits, but needs are very subjective,” said Dr Khor.
“How do we pass such judgment on who needs a car more?”
She questioned, for instance, if there is a strong justification that a family with a child under 12 should be allocated twice the credits of an adult.
“Families with children are given baby bonuses and other assistance,” said Dr Khor.
“For these groups, we provide additional support upfront in a transparent and direct way, instead of through a convoluted credit system.”
ADDITIONAL LEVY FOR ADDITIONAL CAR PURCHASES: PSP
Ms Poa also suggested that an additional levy be imposed on any additional car purchases by a household, much like how additional buyer’s stamp duty (ABSD) is imposed on those purchasing second and subsequent properties.
This is in line with what PSP had suggested in 2023, but at that time, then Transport Minister S Iswaran said that high COE prices were not explained by multiple-car-owning households.
“However, PSP believes that there is a need to send a signal against the accumulation of multiple cars by ultra-wealthy households for pleasure when these scarce COEs could be more useful in the hands of another household that does not currently own a car,” said Ms Poa.
She said that in order to be fairer to multi-generational families residing together or larger families, exceptions can be made where the household size is such that the ratio of household members to each car is five or more before an additional purchase.
Responding to this, Dr Khor said that the key intent of ABSD is to curb speculative behaviour in the property market, but that cars are less regarded as speculative assets, “in part because the COE system limits the validity of use”.
“The same parallel therefore cannot be drawn,” she said.
She reiterated that multiple-car-owning households are not the main drivers for COE quotas, and that fewer than 5 per cent of all households own more than one car, and the percentage has been gradually coming down.
Related:
ADDRESSING HIGH COE PRICES
Record-high COE prices in recent years have put the 35-year-old system in the spotlight.
Dr Khor said that while demand for COEs cannot be controlled, the government has “made significant moves” to increase the COE supply.
In 2023, a “cut-and-fill” move was announced to bring forward COE quotas from peak years to fill the supply troughs.
In 2024, the Category A and B quota was increased by more than 9,000 via this move.
“The quota released was more than 30 per cent higher than what it would have been without ‘cut-and-fill’,” said Dr Khor.
In October last year, it was announced that up to 20,000 additional COEs will be progressively injected across all vehicle categories from February.
“This increase in supply is the most direct way to give more households the choice of owning a car, without causing traffic congestion,” said Dr Khor.
Continue reading...