WITH inflation and crude oil prices experiencing major upward swings this year, it will be timely for the Government to consider removing the excise tax of 44 cents per litre imposed on petrol.

While other Asian nations are grappling with reducing fuel subsidies, Singaporean consumers continue to pay some of Asia's highest pump prices.

Motorists are having to cope with an economic slowdown, an uncertain global marketplace, rising inflation and more Electronic Road Pricing (ERP) gantries all at once. Surely demand for petrol in Singapore should be dictated by market forces without government subsidies or taxes.

The relatively young age of the private passenger car fleet in Singapore, coupled with a robust inspection system, ensures that pollution will not be excessively exacerbated by the lower prices which would be in line with the Land Transport Authority's drive to make ERP the major driver in controlling congestion and vehicle use in Singapore.

It is highly unlikely that drivers will drive more after a reduction or abolition of the tax as petrol prices would still be higher than they were in recent history.

Removal of taxes on petrol would also mean the tax structure for diesel vehicles could be refined and brought in line with the formula for computation of taxes for petrol vehicles. In the long run, diesel (especially with the Euro V standard in place) will become extremely popular and such adjustments to motoring tax structures are steps in the right direction.

Shaun Mathew

This article was first published in The Straits Times on Jun 17, 2008