SCRAP VALUE OF CARS (Refund in cash)

The following Question stood in the name of Dr Wang Kai Yuen -

Dr Wang Kai Yuen: To ask the Minister for Communications whether the Government will consider refunding in cash the scrap value of a car being scrapped.

Dr S. Vasoo (Tanjong Pagar): Question No. 10, Sir.

The Minister for Communications (Mr Mah Bow Tan): Mr Speaker, Sir, the Preferential Additional Registration Fee (PARF) scheme was introduced in 1975 as a concession to encourage timely replacement of cars, so that our car population remains young and roadworthy. The concession is given in the form of a rebate that can be used to offset the Additional Registration Fee (ARF) of a new car.

The Government has considered refunding the PARF benefit in cash but decided against it. This is because it creates a potential cash liability in the Government's budget. A large amount would have to be set aside to ensure that there would be sufficient funds to meet the liability, in case many owners de-register their cars at the same time. This amount would have been better allocated for other worthwhile expenditure, instead of being locked up as a contingent liability.

The Government is aware that with the current economic situation, some car owners are not getting the full benefit of the PARF value. The Government has therefore decided to allow greater flexibility in the use of the PARF certificate. We will:

a) Allow the PARF certificate to be used to offset the various one-time upfront vehicle taxes and fees, namely, the ARF, the COE and Registration Fees (RF), at the point of registration of a new car.

b) Allow the use of more than one PARF certificate per car, and conversely allow the PARF benefits to offset the ARF, COE and RF of more than one new car.

c) Extend the validity period of PARF certificate from the current 6 months to 12 months.

The extension of the validity period of all unused existing PARF certificates will be with immediate effect. The other measures will be implemented from 1st November 1998 after the computerised vehicle registry system is amended.

LTA will announce details of these measures shortly.

Mr Low Thia Khiang: I would like to ask the Minister whether he thinks it is fair for the Government to budget for revenue from COEs and the import tax of cars but at the same time it cannot budget an amount to pay back the scrap value of cars in cash.

Mr Mah Bow Tan: I think the Member does not understand the concept of PARF. It is not a question of fairness. It is a policy measure to encourage car owners to scrap their cars before 10 years. It is a concession. It is not a deposit that people have to put with the Government and before 10 years, if they scrap their car, they are going to get this amount back. That is the first point.

The second point is that in terms of prudent financial budgeting, we must provide for a contingent liability because in the case of people wanting their money back, we must be prepared to give it to them, if we decide to give back in cash. You could argue that in the case where there is the same number of people registering new cars and the same number of people scrapping their cars, that the money from PARF can be offset by ARF. That may well be so now. What happens if we have a situation, one could argue that it is an extreme situation, where everybody wants to scrap his car but nobody wants to register new cars? You can say that is extreme. What happens if it is close to that situation? Do you know how much money the Government would have to set aside? Billions of dollars. Why don't we want to do that? Because every cent that is put into contingent liability is money that cannot be used for other worthwhile purposes. So we recognise the problem but we think this is a better and more practical and safer way to solve the problem. The measures that will be implemented will actually make the PARF certificate more valuable and even in these extreme economic conditions, people will be able to make full use of the PARF certificate.

Dr S. Vasoo (Tanjong Pagar): Would the Minister make an exception, particularly for those who are retiring or retirees above the age of 65? Would he consider alternative measures for them?

Mr Mah Bow Tan: What has he in mind? If we have a policy, we should have a policy that applies to all. Whether it is for retirees or not, that is a separate matter.

Dr Vasoo: But in keeping with the policy to take cars off the road, retirees do not want to drive any more. Would the Minister consider their case for cash payment?

Mr Mah Bow Tan: With the new measures, it is not too difficult for the retirees to be able to redeem their full cash value.