Taxes and traffic

In the years leading to 1990, Singapore experienced a surge in its vehicle population, something which is happening today in the Philippines.

Singapore, being a city state with limited land space, wading through (or sitting still in) traffic became a big issue. This is also the same with the Philippines.

Because road taxes were no longer effective in preventing new vehicles from using the city roads, the government came up with complementary schemes called Certificate of Entitlement to limit the number of new vehicles and the Electronic Road Pricing (or congestion tax) to discourage vehicles from using the congested roads.

The latter scheme was more controversial, Singapore being the first country/city to implement such a traffic containment management system. During those days, technology wasn’t as nifty as it is now, thus there were a lot of issues that both motorists and authorities had to contend with.

Today, more than 25 years since the congestion tax was first conceived and implemented, many other big cities that have adopted the principle are enjoying the benefits of such a system. Countries like London and Stockholm have combined it with green measures that discourage fuel emission in confined areas.

The collected congestion taxes have been put to good use in most instances, not just for regulating traffic entering designated zones, but also in improving road safety and environment standards.

Augmenting tax collections

This is one idea the current government may think of doing, not just for the meritorious goals as mentioned above, but also to defray some road and other infrastructure building costs, as well as to shore up the sagging state revenue collections especially with the planned decrease in corporate and personal income taxes.

Another revenue generating measure that should seriously be considered is hiking the road users tax or the Motor Vehicle User’s Charge (MVUC), which was passed into law in 2000.

Finance Secretary Sonny Dominguez had recently hinted at increasing taxes on imported luxury vehicles, and while this would generate some money to alleviate the lost revenues from reducing corporate and personal income taxes, this would not help at all in reducing vehicles on the roads.

We all know the battle on the streets is about those SUVs, MPVs, sedans and compact cars that are attractively priced, so much so that even a call center executive would be enticed to get one through any of the attractive car financing schemes now available.

Updating and strengthening the road users tax

Looking at how the road users tax is structured, the rates can easily be amended without going through the whole rigmarole of legislative procedures, at the same time avoiding the president from being accused of going against a campaign promise (no new taxes).

The road users tax is a schedule of fees for vehicles when they are registered every year. This law also states that the president may increase the tax rates just once every five years, something I think has never been done since it was implemented.

The schedule of taxes could be hiked in favor of the more expensive vehicles that the more affluent buy. In a sense, there would be a form of equitable taxation where those who can only afford small cars or small businesses needing multi-purpose vans are not as heavily taxed.

Of course, for the national government to be able re-channel the taxes collected from the MVUC, the law will have to be amended — even strengthened — so that the national treasury can set aside future collections for other purposes.

Currently, the law specifically states the monies collected will go to road maintenance and the improvement of road drainage, the installation of traffic lights and road safety devices, and air pollution control.

In fact, the law specifically entrusts the collected money to four special trust accounts under the national treasury, namely a Special Road Support Fund (80 percent of collections), a Special Local Road Fund (five percent), a Special Road Safety Fund (7.5 percent), and a Special Vehicle Pollution Control Fund (7.5 percent).

Of course, any amendment of the law should include provisions that would prevent the use of the funds for political purposes. Remember, the emergency employment program when thousands, including “ghosts” were hired to supposedly clean roads funded through the road users tax?

Controlling new vehicles

Another way of earning additional funds for the state coffers would be instituting a Certificate of Entitlement system similar to what Singapore has. But more than the tax collections, COEs are the best way to control the ballooning of vehicles numbers on our roads.

A COE system would likely be even more controversial than President Duterte’s statement about leaving the United Nations or his dissing about the US’s meddling of our state affairs; oh yes, Filipinos might not be too happy about having to save tens of thousands of pesos as a requisite to buying a new car.

The Singaporean COE system is quite mature and transparent, and it does get to control the number of vehicles that can use the country’s road system. The best part of the COE is its penalties for vehicles that continue to be used or more than 10 years. After 15 years of use, vehicles need to be de-registered for scrapping or selling abroad.

The COE system was instituted when Singapore’s road user taxation system was not effective in curbing traffic congestion in many of its centers during the late 1980s.

Of course, it helps that Singapore has one of the best and most reliable mass transport systems in the world, so that residents who find the cost of a COE plus a new car way beyond their means are somehow mollified.

Ideas on tax and traffic relief

Looming new taxes are about the hottest new issues that the current administration would have to plough through, and this definitely deserves more than a few more columns in the coming days.

On the other hand, traffic problems are a sore point for all Filipino motorists, and could only be resolved if there would be a cap on new cars or the opening up of new roads. Of the two, the first option would seem to be more surmountable, especially if we cannot find better engineering technologies to build skyways on top of skyways.

But who knows. Filipinos have always been ingenious about finding new solutions and thinking out of the box. Perhaps we have a better answer out there that could make the threat of new taxes and the headache of traffic woes disappear.

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