NSP Statement on Increase in Petrol Duty in 2015 Budget

NSP Statement on Increase in Petrol Duty in 2015 Budget

1. It was announced in the Singapore Budget 2015 on 23 February 2015, that petrol duty rates would increase by S$0.20 to S$0.64 per litre for the premium grade and by S$0.15 to S$0.56 per litre for the intermediate grade. The increase was to take immediate effect.

2. Pump prices were immediately adjusted and on 27 February 2015, news reports appeared with the heading “Petrol firms profiteering, CASE charges” and reported [1]:

“As of Tuesday night, a litre of 98-octane-grade petrol at Shell cost S$2.28 - S$0.25 more than on Monday. Other brands also adjusted their prices, with Caltex, Esso and Singapore Petroleum Company (SPC) charging S$2.25, S$2.23 and S$2.20, respectively. The increment ranged between S$0.17 and S$0.21 for the three brands. For 95-octane-grade petrol, which is most popular with drivers, Shell raised the price byS$0.18 to S$2.04 per litre. The other three brands raised their prices to S$2.01 or S$2.02 — with the increases ranging between S$0.12 and S$0.16.”

3. On 4 March 2015, thanks to the Consumers’ Association of Singapore (“CASE”), it was highlighted in the local news that products like petrol, cigarettes and cars have duty added to them before the GST is calculated [2]. In other words, there is tax upon tax or “double taxation” on petrol. The extra tax on the increased duty is rather significant as highlighted in the following example given in one of the new reports [2].

“As an example of the current system, assuming a litre of non-premium petrol has a wholesale price of 55 cents a litre and the oil company has a gross profit margin of 80 cents on the litre, the GST of 7 per cent at this point would work out to be 9.45 cents.

But if the GST is calculated after the petrol duty of 56 cents is added, the tax comes up to 13.37 cents - more than 40 per cent higher.”

4. The National Solidarity Party (“NSP”) notes with great concern the overall impact of the increase in petrol duty on the working class and local businesses as a result of the twin effects of profiteering and double-taxation. This statement is issued to call upon the government to withdraw the increase in petrol duty and if it is unwilling to do so, to remove GST on petrol duty.

Avoid imposing unnecessary hardship on the working class and businesses – Withdraw the increase in petrol duty

5. Although Budget 2015 provides a one-off road tax rebate for a year to motorists to cushion the impact of the hike, it is hardly realistic to expect such a gesture to be an effective cushion as the rebate for a typical 1,600cc car using intermediate grade petrol is only $149 [4].

6. Oil prices started falling sharply in September last year. Until Budget 2015, motorists and businesses were beginning to enjoy lower transportation costs after many years of waiting for oil prices to decline. The resulting lower pump prices enabled the working class to have extra ready cash to spend on their other necessities. Businesses were also pleased to see a reduction in their transportation cost which has been a heavy component of their cost of doing business. However, this enjoyment was short-lived as it lasted only for a few months. It was completely eliminated, not by market forces, but by the government’s untimely imposition of additional duty on petrol.

7. As felt in these 2 weeks, the increase in petrol duty has caused great dissatisfaction. Itimposes unnecessary financial hardship on the working class and businesses and further undermines the standing of the government in the eyes of the people. It is perceived, rightly or wrongly, as being opportunistic and fuels the suspicion that the government is always giving away with one hand and taking back more with the other.

8. At a time when there is a need to lower the costs of living, NSP urges the government to exercise greater consideration for the working class and businesses by withdrawing the increase in petrol duty. It would bode well for the government to allow them the reprieve from even higher costs of transportation until such time when there is a more cogent reason for imposing additional petrol duty.