Reduction In Road Tax

As announced by the second Minister for Finance in his FY2007 Budget Statement, the Government will reduce the road tax for cars and motorcycles by 8%. The reduction is in line with the Government's on-going approach of gradually reducing ownership costs so as to strike a better balance between the ownership and usage costs of a car. The road tax is part of the cost of owning a car, since it is payable regardless whether or not the car is actually used. The road tax reduction is extended to motorcycles for the same reason.
Reduction in Annual Road Tax

The annual road tax for cars and motorcycles will be lowered by 8% with effect from 1 September 2007. The road tax for cars and motorcycles currently comprises two components, viz. the Passenger Car Unit (PCU) component for the use of road space and the progressivity element for social equity considerations. The changes are made such that, in principle, the PCU component of the annual road tax for cars and motorcycles remains unchanged.

Cars
The annual road tax of cars will be reduced by 8% from 1 September 2007 as shown in Table 1 below:

Engine Capacity (EC) in cc	Current Road Tax Formulae for Cars	New Road Tax Formulae (from 1st Sep 2007)
EC < 600	$400 (flat)	$400 x 0.92
600 < EC < 1,000	$400 + $0.25(EC – 600)	[$400 + $0.25(EC – 600)] x 0.92
1,000 < EC < 1,600	$500 + $0.75(EC – 1000)	[$500 + $0.75(EC – 1000)] x 0.92
1,600 < EC < 3,000	$950 + $1.5(EC – 1,600)	[$950 + $1.5(EC – 1,600)] x 0.92
EC > 3,000	$3,050 + $2(EC – 3,000)	[$3,050 +$2(EC – 3,000)] x 0.92

Motorcycles
The annual road tax of motorcycles will also be reduced by 8%. Their annual road tax rates from 1 September 2007 are shown in Table 2 below:

Engine Capacity (EC) in cc	Current Road Tax Formula for Motorcycles	New Road Tax Formula (from 1st Sep 2007)
EC < 200	$80 (flat)	$80 x 0.92
200 < EC < 1,000	$80 + $0.3(EC – 20000)	[$80 + $0.3(EC – 200)] x 0.92
EC > 1,000	$320 + $0.6(EC – 1,000)	[$320+$0.6(EC – 1,000)]x 0.92

Implementation
With the road tax reduction, there may be cases of overpayment by owners who have paid their road tax based on the old road tax rates. The excess road tax paid would automatically be used to offset the road tax payable at the next renewal.