PETROL TAX (Reduction)

Dr S. Vasoo asked the Minister for Finance whether he intends to reduce petrol tax in view of the steep increase in petrol pump price.

The Minister of State for Finance (BG George Yong-Boon Yeo) (for the Minister for Finance): Mr Speaker, Sir, I am replying on behalf of my Minister.

The recent sharp increases in petrol prices are a reflection of the loss of Iraqi and Kuwaiti oil production and fears that the Gulf conflict would spread to the other Arab nations. As we import all the oil we consume, Singapore cannot hope to isolate itself from the price consequences of world-wide oil shortages. Our response to the price increases must be to adapt to market conditions and cut back on fuel consumption.

The duty on petrol (premium grade) is 50% of the pump price or 60 cents per litre, whichever is the higher. The duty is imposed not only to raise revenue but to achieve two other basic objectives, namely, to discourage vehicle usage as a means to curb traffic congestion, and to encourage conservation of energy.

These objectives are best achieved by the present ad valorem formula for petrol tax. As petrol prices rise, the duty collected per litre increases in step.

This way, the incentive to conserve energy is maintained. The Government, therefore, does not intend to reduce the petrol tax, or to cap the tax rate at the present level.

Dr S. Vasoo (Tiong Bahru GRC): Sir, may I ask the Minister of State whether there are any other intended actions that the Government will take.

BG George Yong-Boon Yeo: Sir, the number of cars going to Johor Bahru as a result of the widening differential in petrol prices between Singapore and Johor Bahru has increased from an average of about 7,100 cars each day to 9,100 cars each day. The price difference has now widened to something like 64-65 cents. If this continues, I think the Government will have to take action to rectify the situation. But I am not prepared at this stage to speculate on what kind of measures are being considered.