On 4 February, the UK government announced that it is looking to terminate the sales of petrol (gasoline) and diesel by 2035 – in effort to tackle climate change and reduce emissions. In a previous announcement, the timeline was set by 2040 by the UK authorities.
In practice, consumers will be left to choose between hydrogen and electric vehicles (EVs) once the sale of petrol, diesel, or hybrid cars or vans is ended.
Taking up the similar environmental stance, the Singapore government will be introducing new measures to encourage the switch to EVs. This move also aligns with its vision to phase out vehicles with internal combustion engines (ICEs) by 2040.
Speaking regarding the move in his Budget speech earlier today (18 Feb), Deputy Prime Minister Heng Swee Keat announced a series of initiatives to be introduced by the Government as to encourage the adoption of cleaner and more environmentally-friendly vehicles in Singapore.
First off, a new rebates scheme called ‘EV Early Adoption Incentive’ will be implemented. Under the scheme, those who purchase fully electric cars and taxis will receive a rebate of up to 45% on their Additional Registration Fee.
Besides that, Mr Heng noted that the Government will be working with the private sectors to expand the public charging infrastructure for EVs at public carparks.
The goal is to deploy up to 28,000 chargers islandwide by 2030 – a substantial improvement from the 1,600 chargers present as of today.
Mr Heng went on to announce that the Government will be taking the lead in progressively obtaining and utilising cleaner vehicles.
“We are placing a significant bet on EVs, and leaning policy in that direction because it is the most promising technology,” he remarked.
“Our vision is to phase out internal combustion engine vehicles and have all vehicles run on cleaner energy by 2040,” he added.
Government to revise vehicular tax structure to impose a lump-sum tax for EVs to partly account for loss in fuel excise duties
Interestingly, while the Government is working to phase out ICEs and encourage more EVs on the streets, Mr Heng noted that the current road tax methodology for cars will be revised to accommodate the transition, adding that the transition will have “major impact on tax revenues”.
The revision to the vehicular tax structure will begin from January 2021.
According to Mr Heng, the fuel excise duties today yield S$1 billion a year, which bring a significant contribution to the Government revenues.
“They are also a form of mileage tax, which discourage excessive driving, especially in private cars, and thus helps to reduce road congestion.”
However, he highlighted that EVs do not pay fuel excise duties.
“Ideally, we would like to implement a usage-based tax on EVs as an alternative to fuel excise duties,” hinted Mr Heng. “But the technology to do this properly on EVs is the Next Generation ERP (electronic road pricing) System, and distance-based charging using ERP is still several years away.”
Hence, he pointed out that the Government will be imposing a lump-sum tax that will be built into the road tax structure for EVs to relatively make amends for the loss in fuel excise duties.
This will be phased in over three years, starting from January 2021. The full quantum will be implemented by January 2023.
