GST Levied on Taxi Rentals

Mr Ang Hin Kee asked the Deputy Prime Minister and Minister for Finance whether the Ministry will consider a review or removal of the Goods and Services Tax (GST) that is levied on the daily rental of taxis which taxi drivers have to bear.

Mdm Speaker, Mr Ang has asked whether the GST chargeable on the rental of taxis can be reviewed or waived. Taxi rental is part and parcel of the costs incurred in a taxi trade which attracts GST. We had designed our GST system to be broad-based, with few exemptions, to keep our GST rate low.

Traders, generally, meet their GST costs from their earnings. Alternatively, they could register for GST which would allow them to charge customers for GST and claim GST costs.

It is understandable that taxi drivers may not find it worthwhile to be GST-registered, especially as fares are set by the taxi operators. The Government is prepared to work with the National Taxi Association and taxi operators to explore if there are other options which could improve the taxi drivers' recovery of their GST costs.

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Madam, I thank the Senior Minister of State for taking into consideration our suggestion. Let me first declare that I am also the Executive Advisor for the National Taxi Association.

Today, the costs incurred by taxi drivers not only include the GST that is levied on them for the daily rental of the vehicle but also the $5,100 a year diesel tax levy that is levied on taxis that are using diesel.

Over the years, our taxi vehicles have moved towards Euro IV, Euro V standard which is less polluting and also more efficient in terms of the type of pollutants that are released to the environment.

The $5,100 levy that was levied on older diesel vehicles, such as older models of taxis, should therefore be reviewed today because we have better models on the road. And that is also another option that we hope that the Ministry can consider in order to lower the costs that are incurred by taxi drivers on a daily basis other than just the vehicle rental but also this element of GST, in addition to the diesel levy of $5,100.

Mdm Speaker, I thank Mr Ang for his suggestion. I fully appreciate the cost pressures that taxi drivers face in carrying out their trade. He has asked specifically on the special tax on taxis. Rightfully, this is not part of the original question. I am going to invite him to file a separate question and I can give him a fuller response.

But Madam, briefly, and also for the benefit of Members of the House, the annual special tax on taxis is levied on diesel taxis given that we do not impose a unit tax on diesel fuel. So, I just like to point out that if we were to charge taxis the equivalent volumetric tax that we do for a petrol-driven car, it would actually incur a higher tax than the annual special tax that taxi drivers now pay, or that is actually levied on taxis now. In other words, it is already a concession.

The second point is that the special tax on taxis, in fact, has remained unchanged since 1998 and it was temporarily reduced in 2001 and 2003 as part of recessionary measures. But otherwise, it has not changed for the last 15 years. So, these are just some points, Mdm Speaker, for Mr Ang's consideration.

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