10 Facts About Petrol Tax & Its Sudden Increase During Budget 2021

You’ve always heard uncles and aunties complaining about rising fuel prices, but have you ever heard someone making a fuss about petrol taxes?

Well, you will soon.

That’s because Deputy Prime Minister Heng Swee Keat announced a hike in petrol duties in his Budget speech on Tuesday (16 Feb).

This has left some residents scratching their heads, but we all know one thing: a price hike in anything can’t be good news. 

So, what exactly is a petrol tax, and why have the authorities suddenly raised it?

It’s An Excise Tax Imposed on the Sale of Petrol

While it sounds like an option to pay the government your annual taxes in fuel form, petrol taxes are actually an excise tax imposed on the sale of petrol.

An excise tax is an internal tax that is levied on the sale of specific goods and services, such as alcohol, petrol, and tobacco.

Just like the beloved GST, consumers end up paying more than the cost of the petrol itself, as they’re paying for both the petrol and the petrol tax.

So, for instance, if a litre of petrol costs $2.00, and there’s a petrol tax of 50 cents per litre, that means you’ll have to pay $2.50 for each litre of petrol.

Why do Countries Have it?

Countries all over the globe have imposed fuel taxes on its motorists, and for various reasons.

In some countries, petrol taxes are simply seen as a user fee, while in others, it’s a source of general revenue.

In recent years, countries have introduced petrol taxes as an ecotax of sorts, to reduce carbon emissions and promote ecological sustainability.

In Singapore, It May Encourage the Use of Public Transport

In a tiny country like Singapore, where jams are as common as bubble tea shops, the government has to do whatever it can to encourage the use of public transport.

The very popular Certificate of Entitlement and other expenses that come with owning a vehicle here go a long way to discouraging residents from purchasing one.

In addition, this petrol tax may help limit congestion on our roads and encourage more motorists to take public transport instead.

Singapore’s Petrol Tax Was Raised By Up to 15 Cents Recently

The whole reason everyone’s suddenly talking about petrol tax is because Mr Heng mentioned it in his Budget speech.

With immediate effect, motorists will have to pay more for fuel when they head to the petrol station.

The duty for premium grade (98-octane and above) petrol will be raised 15 cents per litre to 79 cents a litre.

Similarly, the fuel for intermediate grade (92-octane and 95-octane) petrol will be raised 10 cents a litre to 66 cents a litre.

The Main Aim of the Tax Hike is to Combat Climate Change

In recent years, it’s become apparent that urgent action is needed to combat climate change.

As previously mentioned, fuel taxes are sometimes imposed as an ecotax; if fuel is more expensive, fewer vehicles will be on the road, and if fewer vehicles are on the road, there will be fewer viral videos of lorries banging into cyclists.

Also, you know, it’ll reduce our carbon footprint.

As Mr Heng said in his speech, “Climate change is real and urgent. We must act now. Behavioural changes take time.”

This will help the authorities achieve their goal of switching to electric vehicles in less than a decade, as part of their Green Plan 2030.

There Will Be Tax Rebates to Ease the Transition

The sudden hike in petrol duties will undoubtedly impact those on the road, especially those who rely on their vehicles for their livelihood.

To ease the transition, Mr Heng also announced a host of road tax rebates:

• taxi and private-hire drivers will be given a 15% road tax rebate for a year, and $360 of additional petrol duty rebate over four months
• goods vehicles and buses will be given a 100% tax rebate for a year
• cars using petrol will be given a one-year tax rebate of 15%
• motorcyclists will be given a 60% road tax rebate for a year, and up to $80 of additional petrol duty rebate, depending on the engine capacity

The Tax Rebates Will Offset One Year of Petrol Duty Increases For Taxis & Motorcycles

All road tax rebates will take effect from 1 August 2021 and will be applicable for one-year until 31 July 2022.

There’s no need to apply, as they will be disbursed automatically to those eligible.

As Mr Heng said, these tax rebates were introduced to cushion the blow of the petrol tax hike.

And it will do just that.

The new road tax rebates will offset about one year of petrol duty increases for taxis and motorcycles, and about two-thirds for commercial vehicles and cars.

So, motorists will only feel the pinch in 2022, once the road tax rebate scheme ends.

Mr Heng said that most of the expected revenue from the fuel duty increase will be given out through the offsets, estimated to cost S$113 million.

Petrol Duties Were last Raised in 2015

The last time petrol duties were raised in Singapore was in 2015, to discourage car usage and reduce carbon emissions.

Then, the petrol tax was raised by 20 cents per litre for premium grade petrol, and 15 cents per litre for intermediate grade petrol.

A one-year road tax rebate to ease the transition was also implemented then; 20% for cars, 60% for motorcycles and 100% for commercial vehicles.

The Global Mean Petrol Tax Has Decreased Over the Years

According to a Nature study, petrol taxes have increased in more countries than they have decreased in during the period 2003–2015.

However, it was found that the global mean fuel tax has decreased due to greater consumption in the low tax countries.

India Has the Highest Petrol & Diesel Tax in the World

If you listen closely, you can hear a chorus of wah laus echoing throughout Singapore.

Sure, we’ll have to pay more for fuel, but the tax hike is nothing compared to that of some countries.

In India, for instance, a whopping 69% of the total fuel and diesel price comprises taxes, which is the highest figure in the world.

Given that a litre of the 95-octane petrol is now retailing at $2.19 at all stations here except SPC, which charges $2.15, the average price of fuel per litre in Singapore, including duties, is $2.85 a litre.

This means that just 23% of our total fuel cost goes to the petrol tax. And given that our planet is in danger, it isn’t the worst thing in the world.

Featured Image: Shutterstock.com / bunyarit