THE 179% PETROL DUTY

Mr David Marshall: Mr Speaker, in presenting his Budget speech, the Minister for Finance indicated that petroleum has proved a disappointment. "Once again, there is a short-fall, this time probably in the region of $1.3 million. There has been a switch from petroleum engines to diesel engines to power vehicles." Again, a little later on, Mr Speaker, he said, "The falling trend in the collection of Petroleum Duties is reflected in the decrease of $2 million shown in the 1962 estimate against the 1961 estimate of $38.5 million."

The extraordinary picture of a falling revenue arising from petroleum duties with increasing registration of motor vehicles prompted me to investigate, and I have, with considerable trouble and several days' research, obtained certain figures which I have taken the liberty of having cyclostyled and circulated. I must say, Sir, that I am delighted that my action in doing so has brought about, with commendable speed on the part of the Minister for Finance, what seem to be corrected figures, although my own figures are from official sources with certain additional material.

Sir, I think I can trust my original sources, but I do not wish to quibble, and I am prepared to correct my figures to follow those of the Minister for Finance; the differences are small, and particularly, Mr Speaker, certain differences arise from the fact that in respect of revenue for certain years, I could only obtain revenue in respect of petroleum and kerosene; 5 cents duty on kerosene per gallon, whereas I gather the Minister for Finance has been able to lay his hands on the exact figures.

So, Mr Speaker, let us look at the figures as they are: Consumption No of (Million Revneue Year Registered Gallons) (Million Increase of Vehicles (Petrol only) Dollars) Duty per Gallon 1955 61,000 26 18.3 1956 67,439 28.5 21.26 From 68 c. to 73 c. (Nov. 1955) 1957 73,614 31.5 25.59 From 73 c. to 80 c. (Nov 1956) 1958 81,810 32.02 32.4 From 80 c. to $1 (Dec 1957) 1959 89,117 32.26 34.24 1960 100,000 31 37.78 From $1 to $1.20 (Sep 1959) 1961 115,000 30.5 36.6 (Oct)

Mr Speaker, for 1962, we, of course, have no figures as to the increase in the number of registered motor vehicles, but you can see from the figures which I have given and which the Minister for Finance has given, that there have been successive increases year after year of registered vehicles without a break, from 61,000 in 1955 to 115,000 in 1961.

Mr Speaker, it is to be noted that despite the continually increasing number of registered motor vehicles, the consumption of petrol has dropped since 1959 and is continuing to drop. In 1959, 90,000 vehicles and in October 1961, 115,000 (in round numbers), an increase of about 23 per cent in the number of vehicles, and a fall in consumption of petrol of about 15 per cent.

Sir, what is the reason for this fall in the consumption of petrol? We are told, and accurately told, that there is a switch from the use of petroleum engines to the use of diesel engines. But why has this happened since 1959? You will notice that petrol tax was increased by 20 per cent in 1959. The petrol today costs per gallon 67 cents. The duty is $1.20, which is 179 per cent of the sale price, bringing the price of petrol to $1.87.

Sir, in presenting these facts in statistical form, I do so because I have learnt the Minister for Finance, is, in fact, a statistician and he understands statistics, and as the person responsible for the petrol tax, it is my desire particularly that he should understand what I am seeking to explain.

Here, the figures statistically prove that the moment his Government increased the petrol tax from $1 to $1.20, consumption immediately began to fall by a switch to diesel, and therefore, it can be reasonably inferred that a $1 tax on petrol is the point of diminishing returns in economic terms. Now that this is made clear, Sir, I would like to draw attention to the fact that at the time of imposing this additional 20 cents tax, the P.A.P. Government received from the Singapore Taxi Transport Association and the Singapore Hired Car Association a petition pleading that "the increased tax of petrol has adversely affected our livelihood", and the two Associations asked that their members should be exempted inter alia from the increased taxation.

Mr Speaker, I am in a position to table and I shall forward to your Clerk a copy of this letter*, signed by the Presidents of the two Associations. As can be expected, Mr Speaker, the letter had no effect. The taxi drivers did not understand that the Minister is not interested in other than facts; humanity has no place in his calculations.

• Letter tabled by Mr Marshall on 17-1-62 and copies circulated to Members for their information.

Now, he has the figures, Mr Speaker, and the figures prove irresistibly that the 20 cents increase in the petrol tax introduced by the Government has, in fact, been responsible for diminishing our revenue from that source. Mr Speaker, the Minister in supplying the figures indicates that there is an offset in respect of the increase in revenue from diesel engines. That is perfectly correct. The position with reference to diesel engines, as I understand it. Mr Speaker, is not a tax on the diesel oil that they use, but a somewhat heavy tax on the existence of the engine itself. Sir, if a diesel engine has to pay a substantial tax, nevertheless that tax may well be worth while because diesel oil is cheap if a considerable distance is travelled in the period of a year. But what would be the revenue to this State if, instead of using diesel oil, that considerable distance were, in fact, to be travelled on petrol? There, Mr Speaker, in fairness, I must say that I am not in possession of actual figures nor am I adequately an expert to indicate with certainty that there would be a greater increase in revenue than that shown by the offset in diesel engines. But I do ask you to notice certain very interesting particulars, Mr Speaker. In 1956, the total number of vehicles was 67,000 and the petrol consumption was28� million gallons. Sir, today we have 115,000 vehicles, but the petrol consumption is only 30� million gallons. When I say "today" I am talking of "the end of 1961". Mr Speaker, the comparative figures are startling - really startling, and I would urge that if the consumption were to be maintained in proportion to the rate it was at in 1956, our revenue would be considerably greater from petrol than the small offset, specious and really misleading, which we find from diesel engines. I say this with some diffidence, Mr Speaker, but I do generally have the impression that the increase of 20 cents in petrol tax by this Government has, in effect, resulted in decreased revenue to the State by encouragement of the increased utilisation of diesel engines instead of petrol engines. It is in these circumstances that I would ask the Minister whether he is considering the position with a view to easing the tax both for the benefit of our revenue and for the benefit - if I might urge this on him though it may have no meaning - of our taxi-drivers and lorry-drivers and the motoring public at large who, it is true, are not in the category of poverty of the first two classes. But I do want to emphasise this - and I speak as one who introduced the luxury tax of ten per cent on cars - that today motor transport is an essential aspect of our life. To travel by bus and taxi is no longer a question of luxury. It is a question of necessity. We would seek to avoid imposing what may amount to a prohibitive tax on the consumption of petrol, which is taking advantage, perhaps unintentionally, of the need of the people. If you will notice, at the time I increased it, I think it was from 68 to 73 cents, and even in November 1956 when I was associated with the Labour Front, we increased it to no more than 80 cents, although in the Federation at that time I think it was a dollar.

It might interest you to know the figures in other territories. I would like to take first of all - as I have said, I have circulated them for the convenience of Members; figures are difficult things to retain in one's mind unless one is a statistician - Brunei, for example, Sir, which is a happy country. I am taking first those territories which are not only close to us but which we hope will be our partners and brothers. In Brunei, there is no tax at all on petrol. In the neighbouring territory of British North Borneo, it is 25 cents. It is not that they do not need money. British North Borneo is not rich. Brunei is, but not British North Borneo. In Sarawak where money is very tight - the Government has to make strenuous effort to get it - the petrol tax is no more than 50 cents. But let us go further afield, Mr Speaker, Sir,In Australia, it is 32 cents. In South Africa, I think it is 50 cents. In Tanganyika, it is 32 cents. In Uganda, it is 43 cents. In Kenya, it is 53 cents. Now, Sir, I do not know whether I have given one other figure which, in fairness, I should give hut which I seem to have omitted from my own lists: in India, it is $1.17 cents and in Hongkong, it is 79 cents. Now, Sir, India comes closest to us. I do not know why it was omitted from the list, hut I do remember it accurately, and I ask you to notice, Mr Speaker, that according to these figures, Singapore and the Federation have the highest duty compared to all of these countries. Now the Federation has different financial problems to ours - and very difficult problems they are, which fortunately do not apply here, and the circumstances are different here.

I do urge, Mr Speaker, Sir, that in the light of these statistics, which have highlighted the issue that our tax in going beyond the dollar has reached the point of diminishing returns, the Minister would give consideration both for the sake of our revenue and for the sake of our people. It is very rarely that one can both please the revenue and the people hut in this instance I think that miracle can be achieved.

Dr Goh Keng Swee: Mr Speaker, Sir, I must congratulate the Member for Anson for the pains he has taken in this piece of research and the lucid manner in which he has presented his case.

Yes. I think I have no quarrel with most of his arguments. I think by and large they are valid. I think he has not attempted to conceal from the House any facts which would prejudice his case.

I think we are agreed on the main fact that there may be differences between the figures he put up and the figures I gave, but that may be due to differences in definition. I suspect it may be that his figures of revenue included the one on kerosene, whereas mine did not. Where the figures of registered vehicles differ, the reason may be that I took the figures as on 31st December of that year, except for 1961 when it was towards sometime in October. There could be differences in dates. But generally I think we are agreed on the facts. Now what conclusion do we draw from the facts?

The Member for An son drew particular attention to the revenue position between 1959 - that was the time when the additional tax was imposed - and 1960. That may be a valid period for the comparison of tax changes in response to changes in the rates of tax. But I would rather take a longer period. The first conclusion I would say is that if you take the year 1956 and aggregate both the tax on petrol and the special tax on diesel engines, you would get a total of $22.7 million. By 1961, the total of both the petrol and the diesel engine tax went up to $41 million. The increase in the revenue earned with regard to these taxes is a shade more than the total increase in the number of vehicles between 1956 and 1961. Between 1956 and 1961, there was a 70 per cent increase in the total number of registered vehicles. The increase in the petrol tax itself was of the order of 72 per cent. And if you include the tax on diesel engines, that might bring it up well over 75 per cent. So by and large, the yield of duty has kept pace with the number of registered vehicles. But as the Member for Anson rightly pointed out, the consumption of petrol has not. The actual quantity of petrol consumed, in spite of the tremendous increase in the number of registered vehicles, has increased only from $28.5 million in 1956 to $30.5 million in 1961. He said that if only the consumption of petrol could have kept pace with the increase in the number of registered vehicles, then of course the Treasury would have been overflowing with money. And that is quite true. But what has happened is this. If you will look at the third set of figures I gave - the number of registered vehicles classified by types - you will find that the largest percentage increase has been in respect of motor cycles. The number of motor cycles registered between 1956 and 1961 has nearly trebled. Of course, the term "motor cycles" includes scooters and light two-wheeled machines which consume very little petrol. Therefore, whether we increase the tax on petrol or not, it is hardly possible for the quantity of petrol consumed to increase pari passu with the number of registered vehicles for three reasons. First, the number of motor cycles has increased much faster than the others. Second, even in the case of motor cars, there has been a switch from cars that consume a lot of petrol to lighter models like - I should not mention names - small cars that are very economical in price. Then, of course, there is a general technological progress whereby even for the same make of cars, engines of improved compression ratios are made, and generally petrol consumption is lowered. Therefore, although one cannot be certain about this - just as the Member for Anson said that he was not sure that if the duty on petrol is retained at its present level the duty might well increase - it could have increased or it could not have increased. One does not know. My guess is that it is very likely that if we had maintained the same rate of petrol duty all these years, one might have induced an increase in the consumption of petrol. Motorists would have driven more often. Possibly, more people might have bought more cars and motor cycles. But as against that, there has been a switch from the larger types of cars to the smaller types of cars and there has been a tremendous increase in the popularity of scooters and motor cycles. So it could well be - and in fact I am almost certain - that if we had for instance retained the duty on petrol tax at the rate existing, say in 1956, the effect would have been that the consumption of petrol would certainly have increased - by what proportion one does not know. But it is doubtful whether it would have increased fast enough to yield the revenue that we are now receiving from petrol tax. For the petroleum revenue to remain at the 1961 figure, the consumption of petrol would practically have had to double from 1956. I think that would have been a most unlikely event.

The petroleum duty in Singapore and in the Federation is high - one of the highest in Asia. The rate of petroleum duty in India is practically the same as ours. My calculations show that the percentage of petroleum duty is 179.2. but we will say that it is the same. In Ceylon it is about 167. But other than these two countries, the other countries in Asia have much lower petroleum duties than ours. Japan has just over 107. Hongkong has a duty rate of 97 on the retail price. On the other hand, there are other countries which pay much higher duties than we do. Of course, Australia pays much less than that. It is a developed country. I can of course quote the case of France where the rate of duty is 287 per cent of the retail price. South Africa pays less duty than we do. On the other hand, Italy, for instance, pays more than we do. So, by and large, some countries pay more and others pay less.

It is a moot point whether we have reached the point of diminishing returns. It is certainly a point that is worth investigating. Of course, the way to get a full and complete investigation of the effects of tax on yield of revenue requires quite advanced techniques of practical analyses. Bearing in mind that the physical consumption of petrol has not increased in the last seven or eight years in spite of the increase in the number of cars, I think the Member for Anson has a point that both the Singapore and the Federation Governments might well look into this matter.

The Question having been proposed at Eight o'clock p.m., and the time appointed for the termination of the sitting (half-past Eight o'clock p.m.) having arrived, Mr Speaker adjourned the Assembly without question put, pursuant to the Standing Order.

Adjourned accordingly at half-past Eight o'clock p.m. DEVELOPMENT ESTIMATES OF THE STATE OF SINGAPORE FOR 1963(Cols 0325-0326)