MP Jamus Lim explains why imposing environment tax on SIA can be more “economically efficient” at this time

MP Jamus Lim explains why imposing environment tax on SIA can be more “economically efficient” at this time

Earlier on Tuesday (6 Oct), Transport Minister Ong Ye Kung said in Parliament that he will not contemplate imposing an environment tax on Singapore Airlines (SIA) at this time, as indicated by the Workers’ Party (WP) Member of Parliament (MP) for Sengkang GRC Jamus Lim.

The Minister revealed that both Changi Airport Group (CAG) and SIA are in “deep crisis” due to the global travel restrictions amid the coronavirus pandemic.

Mr Ong said that with SIA having recorded its largest-ever quarterly loss on record in the first quarter of its 2020 financial year, the company is “trying its best to reduce cash burn, preserve core capabilities, and explore all ways to generate revenue”.

Assoc Prof Lim asked him to clarify on why he would not consider imposing an environment tax as it is “entirely possible” that the tax will not have an immediate concern on the economic viability if SIA is able to pass on the cost to consumers.

“I wonder whether it is possible to consider mechanisms where the environmental needs – of both the country and the world – need not be a casualty through business considerations,” he continued.

In response, Mr Ong noted that SIA is in the state of a crisis and is likely to have gone under if not for its recent recapitalization exercise.

“SIA, as I mentioned, is ferrying 1.5 per cent of its passenger volume so it’s not about passing the cost to passengers – there are no passengers to pass [the tax] to now.”

“This is really not the time now to talk about an environmental tax on SIA. If I were to do that, I think there’s Chinese saying… I would’ve made the situation much worse for SIA. It means, someone fell into the well, and you throw a stone to make the situation worse,” he remarked.

Assoc Prof Lim took to his Facebook on the same day to further explain why he believes imposing an environmental tax on SIA could help support the airline at this time.

According to him, an environmental tax would constitute “an indirect transfer” from passengers, who are willing to take a flight to nowhere, to SIA workers.

“The alternative would have been a direct bailout (as is currently the case), which also involves a tax (the expenditure of taxpayer monies).

“Alternatively, such a tax could be funded from certain cost savings, perhaps from berthing rights in foreign airports (since the planes won’t need to land there), leaving total ticket costs the same. This still involves some redistribution, but from foreign airport revenues to SIA,” the WP’s member asserted.

Assoc Prof Lim said imposing tax may be more economically efficient at this time because flights to nowhere offer one important benefit that usually accrues to travel, which is, “the welfare gains of the hundreds of passengers who get to enjoy the experience of being in a new country”.

“Given these forgone benefits, the environmental costs loom much larger.”

He continued, “More generally, I was hoping to spur some creative thinking about how we can help ensure the future viability of our national airline, without compromising the need to pay attention to the environment, too. I think such creative thinking is necessary to ensure that we don’t spend our hard-earned reserves in an unwise fashion.”

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