BID FOR YOUR COE AS A PERCENTAGE OF THE PURCHASE PRICE
The chorus of voices calling for reform to the COE system is rising again. This is largely brought about by despair about the sustained sky-high prices recently.
Actually, the main objection to the COE system in its present form should not be about high prices. High COE prices are largely due to the free market forces of supply and demand.
What has not been realized is that the COE is actually not the price of the right to buy a car. Such a right to buy any legal product, including cars, has never been relinquished by Singaporeans, so there is no need to buy it back.
The COE is actually an additional tax levied on the purchase of a vehicle. What's wrong with it is that it is an absolute amount in dollar terms and is the same for the purchase of all vehicles in their own category irrespective of the actual vehicle price.
This has obviously led to an inequitable situation whereby poorer buyers of cheaper cars are paying a much higher COE tax than richer buyers of expensive cars. For example, a buyer of a Porsche 911 Carrera 3.4 PDK(A) who pays Stuttgard Auto $467,098 OTR including $96,210 for his Cat B COE actually pays a COE Tax of 25.9%. A buyer of a Toyota Corolla Altis 1.6 Classic (A) who purchases his car from Borneo Motors for $146,988 OTR including $92,100 for his Cat A COE will not realize that he is paying more than 6.5 times higher COE Tax of 167.8%!
No wonder most COEs nowadays are used to buy expensive luxury or sports cars. Even so-called cheap economy cars are now priced out of the pockets of the ordinary wage earner.
A system that favors the richer people and penalizes the poorer people is inherently unfair and must be rectified. If the COE is a tax, it cannot be an absolute quantum irrespective of the value of the car.
We should bid for COEs as a percentage of the purchase price of the car. That way, buyers are fully aware of the extra tax they are paying for the privilege of buying a car. It will be much fairer and, unlike now, COE prices will be unlikely to stay at unearthly levels.
(NB. An edited version of this article was published in The Straits Times Forum Section today.)
