[Ed: The following series of letters is no longer just about PARF refund but about something more important. It shows the kind of reception a bureaucratic department can give to a citizen with an idea to improve their implementation of a policy. I will not characterize this receptionin in any way. All the letters exchanged are here and the reader should come to his or her own conclusion.]
28 April 1998
The Forum Editor
The Straits Times
Dear Editor
PARF CASH REFUND WILL NOT AFFECT GOVERNMENT PROGRAMMES
I am confused by the Land Transport Authority's (LTA) explanation of its decision
not to refund the Preferential Additional Registration Fee (PARF) in cash. The LTA says
that funds must be set aside and would, 'therefore, become unavailable for other
government programmes'.
It helps to consider a simple model of the situation. In our model, the PARF is
standardised at $1.00 and 100 vehicles are scrapped each year. Since government policy is
to let the vehicle population grow, our model assumes that 105 new vehicles are registered
each year.
Under the current system, the LTA issues 100 PARF certificates which are then
used to pay the PARF of 100 of the 105 new vehicles. The amount of PARF collected is
thus only $5. This is the amount of money available for other government programmes.
If the LTA were to refund the PARF in cash, it would have to set aside $100. But
this does not mean that other government programmes would then be deprived of $100.
Since the LTA would no longer issue PARF certificates, all 105 owners of new vehicles
would have to pay the PARF, unlike the current system where 100 would have certificates.
In the new system, therefore, the amount of PARF collected would be $105. The nett
revenue gain would be $5, the same as the current system.
The real-world situation is, of course, much more complex than our simple model.
However, the model shows that government programmes would receive the same amount
of money regardless of the system of PARF refund the LTA operates. The LTA's mistake
was to look only at the expenditure side of the government budget without considering the
revenue increase.
Yours sincerely
___________________
Chong Fu Shin Francis
======================================
MAY 6 1998
Unwise to allow cash refunds for Parf
MR FRANCIS Chong suggested in his letter "Parf refund won't affect programmes"
(ST, April 30) that paying the Preferential Additional Registration Fee (Parf) in cash
would not tie up funds needed for other public programmes.
In the government budget, when a contingent liability is created, as in the proposal to
refund Parf in cash, revenue must be set aside to meet this liability even if it is from
revenue collected from new cars.
It cannot be used for other purposes.
In 1997, about 13,000 cars were de-registered.
If Parf were to be paid in cash, we would have to set aside about $160 million.
The number of de-registrations depends on various factors such as the number of
vehicles registered in the last 10 years, and the economic situation prevailing at the time.
For example, in the next few years, this number would increase quite substantially, as
many more vehicles were registered eight to 10 years ago.
To be able to meet such cash payment, much more than $160 million would have to be
set aside if cash refunds were to be implemented.
In the interests of prudent budgeting, we believe it is unwise to introduce a system
which locks up large sums of money that could be better used to benefit all
Singaporeans.
TOH SU FEN (Miss)
Deputy Director
Corporate Communications
Land Transport Authority
======================================
6 May 1998
The Forum Editor
The Straits Times
Dear Editor
PARF CASH REFUND: LTA SHOULD NOT CONFUSE TWO ISSUES
The LTA's fear that a cash refund system for Parf 'locks up large sums of money
that could be better used to benefit all Singaporeans' is unfounded.
According to the LTA, a cash refund system would have meant setting aside $160
million in 1997. Since the vehicle population grows each year, let us assume that the
amount of Parf payable on all vehicles registered in 1997 was $200 million.
When the government draws up its budget, it anticipates a certain amount of
revenue, and allocates funds accordingly. Under the current Parf system, the anticipated
revenue from Parf in 1997 would have been $40 million, because $160 million of the $200
million payable would be offset by Parf certificates. Therefore, $40 million would have
been the amount available to fund government programmes.
If a cash refund system had been in place, the government budget would have seen
an increase of $160 million in projected expenditure. However, it would have anticipated
revenue of $200 million dollars from Parf collected. The nett revenue gain from Parf would
have been $40 million, the same as in the current system.
The point is this: while it is true that a large sum of money would have to be set
aside under a cash refund system, it is important not to overlook the fact that revenue from
Parf will increase by exactly the same amount. The nett contribution of Parf to government
revenue would be exactly the same regardless of the system of refund. The LTA is wrong
to believe that a cash refund system will reduce the funds for government programmes. It
is mistaken because it has confused the need to set aside money for a cash refund with a
reduction in total available funds.
There is, of course, one situation in which a cash refund system would lead to a
reduction of total government revenue. Such a situation would arise if the vehicle
population begins to decline, that is, more vehicles are scrapped than registered. In that
case, government expenditure on Parf refunds would exceed its revenue from Parf
collected, thereby reducing the funds available to other programmes. However, the current
Parf refund system would also be unworkable if the vehicle population begins to shrink.
The reason is that, with more sellers than buyers of certificates, some certificates cannot be
sold. In other words, the LTA would then be issuing pieces of paper, some of which will
be worthless. We can well imagine the reactions of those unfortunate enough to end up
with unsaleable Parf certificates.
Yours sincerely
__________________
Chong Fu Shin Francis
====================================
MAY 18 1998
More prudent not to refund cash for Parf
MR FRANCIS Chong (ST, May 8) contends that under a cash refund system for
Parf, the projected cash refund required can be roughly offset by a corresponding
increase in projected ARF revenue, and will thus not reduce funds for government
programmes
A cash refund system creates a contingent liability for the Government. Financial
prudence dictates that a sum in addition to the projected amount for the cash refund must
be set aside to provide for the contingent liability.
As explained in our earlier reply (ST, May 6), the number of deregistrations each year
depends on not only the age profile of the car population, but also the prevailing
economic conditions.
The sum to be set aside must therefore be large enough to cater for possible eventualities,
including Mr Chong's scenario, where the number of cars scrapped far exceeds the
number of new registrations.
In the extreme, the contingent liability could exceed $4.5 billion.
As explained before, this will mean significantly less money available for new public
programmes. The Government has therefore opted for the present system, which is more
prudent financially.
TOH SU FEN (MISS)
Dy Director
Corporate Communications
Land Transport Authority
=========================================
20 May 1998
Dear Editor
Wiser to refund Parf in cash
The LTA says that a Parf cash refund system would require the government
to set aside funds to cover the contingent liability that arises from the
possibility of more vehicles than anticipated being scrapped. It cites the
possibility of the contingent liability exceeding $4.5 billion. Based on
the Open Market Values published in the latest issue of Highway, that
impressive sum is equivalent to scrapping 85,000 new (less than 5 years
old) Mercedes Benz C200, 100,000 new BMW 318iS, or 500,000 new Proton Wira
1.3GLi. Given a total vehicle population of 552,003 (excluding motorcycles)
as of April 1998 and the fact that only 13,000 vehicles were scrapped in
1997 (figures from LTA), the LTA's multi-billion-dollar scenario is so
extreme that it borders on the preposterous. Would the LTA explain why its
scenario merits serious consideration in a rational discussion of public
policy?
In any case, the LTA's fear of a contingent liability is unfounded. As
another writer has pointed out, the contingent liability disappears if
vehicle owners are required to apply for Parf cash refunds a year in
advance. Those who scrap their vehicles without prior notice would get Parf
certificates instead of cash. In this way, the government would know
exactly, not roughly, how much it has to refund each year. There would be
no contingent liability. Why, then, is the LTA still so frightened of the
spectre of a contingent liability?
Finally, the LTA completely ignored my point that some Parf certificates
will find no buyer if the vehicle population decreases. I take its silence
to mean it agrees with me. That being the case, it is surely imprudent of
the LTA to operate a refund system that exposes the government to the
danger of issuing potentially unsaleable Parf certificates. Would the LTA
explain how it will deal with unsaleable Parf certificates if the vehicle
population falls?
Yours sincerely
Chong Fu Shin Francis
==================================
To the Feedback Unit 8
Dear Sir/Madam
I have been trying to understand why the Land Transport Authority is so
adamant about not refunding the PARF in cash. The LTA's last reply in the
May 18 issue of the Straits Times was unsatisfactory. Therefore, I would
appreciate it if you would let the LTA know that I am still waiting for a
convincing explanation of its decision. In particular, I would like the LTA
to address the points raised in the attached letter.
Thank you.
Yours sincerely
Francis Chong
---------------------
ATTACHMENT:
30 Bridport Avenue
Singapore 559320
Email: [email protected]
Tel: 280-5706
20 May 1998
The Forum Editor
The Straits Times
Dear Editor
Wiser to refund Parf in cash
The LTA says that a Parf cash refund system would require the government
to set aside funds to cover the contingent liability that arises from the
possibility of more vehicles than anticipated being scrapped. It cites the
possibility of the contingent liability exceeding $4.5 billion. Based on
the Open Market Values published in the latest issue of Highway, that
impressive sum is equivalent to scrapping 85,000 new (less than 5 years
old) Mercedes Benz C200, 100,000 new BMW 318iS, or 500,000 new Proton Wira
1.3GLi. Given a total vehicle population of 552,003 (excluding motorcycles)
as of April 1998 and the fact that only 13,000 vehicles were scrapped in
1997 (figures from LTA), the LTA's multi-billion-dollar scenario is so
extreme that it borders on the preposterous. Would the LTA explain why its
scenario merits serious consideration in a rational discussion of public
policy?
In any case, the LTA's fear of a contingent liability is unfounded. As
another writer has pointed out, the contingent liability disappears if
vehicle owners are required to apply for Parf cash refunds a year in
advance. Those who scrap their vehicles without prior notice would get Parf
certificates instead of cash. In this way, the government would know
exactly, not roughly, how much it has to refund each year. There would be
no contingent liability. Why, then, is the LTA still so frightened of the
spectre of a contingent liability?
Finally, the LTA completely ignored my point that some Parf certificates
will find no buyer if the vehicle population decreases. I take its silence
to mean it agrees with me. That being the case, it is surely imprudent of
the LTA to operate a refund system that exposes the government to the
danger of issuing potentially unsaleable Parf certificates. Would the LTA
explain how it will deal with unsaleable Parf certificates if the vehicle
population falls?
Yours sincerely
Chong Fu Shin Francis
====================================
From: [email protected]
To: [email protected]
Subject: FB 9806/120 - LTA and PARF refund
Date: Wednesday, June 10, 1998 9:54 AM
Dear Mr Chong
PARF REFUND
The reply we have so far from LTA is as follows :
2 According to LTA, the Preferential Additional Registration Fee (PARF) scheme
was introduced as an incentive to encourage timely replacement of old cars so
that our car population will remain relatively young and roadworthy.
3 Under the scheme, motorists who scrap their cars before they are 10 years
old can use the PARF to offset the cost of registering a new car. If the
motorist does not wish to register a new car, he can sell the PARF concession
to a third party who is buying a new car. To assist them in such transfers,
the transfer fee is kept at nominal sum of $10 and the motorist is given
up to six month to find a suitable buyer fo rhis PARF concession.
4 The Government does not allow the PARF concession to be redeemed in cash
because this would create major potential cash liability in its budget. The
Government would then have to set aside sufficient funds for this contingent
liability, in case many owners de-register their cash and redeem the PARF
for cash at the same time. These funds would be locked up and not be
available for other government programmes that benefit all Singaporeans.
5 We would be glad to hear from you regarding the above. Thank you.
Yours sincerely
LEONG CHEON WAI, IRENE (MS)
EXECUTIVE OFFICER (FEEDBACK UNIT)
for CHAIRMAN
FEEDBACK SUPERVISORY PANEL
=====================================
Dear Ms Leong
Thank you for conveying LTA's non-reply, which completely ignored the
points raised in my letter.
Since LTA has returned to the proverbial square one, I have attached a
copy of my prior exchange of letters with LTA in the Straits Times in order
to bring it up-to-date.
Here are a summary of the debate so far and my questions for LTA:
1. LTA says cash refund leads to contingent liability, or provision for
refunds beyond the anticipated amount. Yap Kim Sang and I have pointed out
that there is no contingent liability if the Government requires all
motorists to apply a year in advance for cash refunds. Motorists who fail
to meet the one-year cut-off would be issued PARF certificates when they
de-register their vehicles.In this way, the Government will know exactly
how much it must set aside for cash refunds when it draws up the budget
each year.
Questions for LTA: If motorists are required to apply a year in advance for
cash refunds, will there still be a contingent liability? If yes, please
explain why that is so. If no, please explain why LTA persists in a policy
that has no basis?
2. LTA gave a refund figure of $4.5 billion.
Question for LTA: Does that figure, which corresponds to the PARF value of
85,000 Mercedes, 100,000 BMWs or 500,000 Proton Wiras, merit serious
consideration in a rational debate on public policy?
3. If the vehicle population declines, there will be more PARF certificates
issued than there would be buyers.
Question for LTA: Does LTA agree that, when the vehicle population
declines, it will be issuing certificates, some of which will find no buyer?
If so, how does it propose to act when recipients of PARF certificates issued by
LTA cannot find buyers?
Please let the LTA know that I would appreciate it if it would stop being
evasive and answer the four questions I have posed. In particular, there is
no need to pad the reply with irrelevant descriptions of the purposes of
the PARF, of which we are all familiar.
Thank you.
Yours sincerely
Francis Chong
================================
[Ed: this is a letter by another Singaporean, but is related to Francis' letters
so it is being appended here.]
GOVT should rectify under-declared OMV
I refer to reports on the suspected cheating by several car distributors
several months back.
Two months ago, I wrote to the Land Transport Authority (LTA) to enquire
about this matter.
There was no reply.
Recently, I heard from some Borneo Motors sales staff that it had already
paid the fine for discrepancies in the open market values (OMV) declared on
its vehicles.
They thus suggested that I should approach the LTA to revise and update the
OMV in my vehicle registration card since the difference had been 'topped
up'.
My vehicle, a Toyota Corolla 1.6A, was registered in September 1997 with an
OMV of $10,680.
A similar vehicle registered after the investigations started has an OMV of
approximately $25,00, or so I was informed.
On May 24 this year, I wrote again to the Land Transport Authority to seek
clarification on this matter.
If the Government has found the car company guilty of declaring a wrong
OMV, then shouldn't the customer who has been wronged have his car's OMV
rectified too?
TAN THIAM HEE
================================
I REFER to Mr Tan Thiam Hee's letter "Govt should rectify under-declared
OMV" (ST, June 15).
The Customs & Excise Department uncovered a total of 11 cases of
under-declaration of car imports, involving around 5,000 cars.
In all these cases, action is being taken against the errant car traders to
recover the shortfall in taxes and the Additional Registration Fee from
them. The Land Transport Authority is making preparations currently to
adjust the open market value record of each vehicle.
We assure Mr Tan that when all these issues are resolved, all affected
vehicles will have their OMV records adjusted accordingly.
TOH SU FEN (MISS)
Deputy Director
CorporateCommunications
Land Transport Authority
SUSAN TAN (MRS)
Public Relations Officer
for Director General
Customs & Excise
================================
To: Feedback Unit
Subject: PARF
Dear Sir/Madam
Please refer to your email of 10 June 1998, which conveyed the LTA's
reply to my questions about the PARF policy.
As I pointed out then, the LTA completely ignored my questions in its
reply.
It is now more than a month since our correspondence. May I know when I
can expect a serious reply from the LTA?
Thank you.
Yours sincerely
Francis Chong
================================
6 April 1999
The Forum Editor
The Straits Times
Dear Editor
LTA's new formula for COE quota allows cash refund of PARF
Last year, the LTA rejected calls for the Preferential Additional
Registration Fee (PARF) to be refunded in cash instead of PARF
certificates. The LTA claimed a cash refund system would impose a
"contingent liability" on the Government and stated that prudence
required the sum to be "large enough to cater for possible
eventualities" ("More prudent not to refund cash for Parf", ST, 18 May
1998).
The LTA's objection to a cash refund system depended critically on its
implied claim to have no advance knowledge of the annual number of
vehicle de-registrations. The LTA underlined its ignorance by claiming
the contingent liability could exceed $4.5 billion in the extreme,
although the total value of PARF refund certificates in 1997 was only
$160 million for some 13,000 vehicles.
The LTA's new COE quota formula voids its objection to a PARF cash
refund system ("New COE quota formula is accurate" ST, 18 Mar). Its
new ability to estimate the annual number of de-registrations to within
ten per cent implies it now has a good idea how much it would have to
refund for PARF each year. The accuracy of the LTA's formula means any
contingent liability will be small. The LTA should therefore introduce a
PARF cash refund system without delay.
Yours sincerely
___________________
Chong Fu Shin Francis
================================
Dear Editor
Objection to PARF cash refund groundless
The LTA's ability to predict the annual number of de-registrations gives
it a good estimate of the total sum of money it would have to return to
motorists in a cash refund system. This being undeniable, the LTA had to
plea that, "in extremis, the actual number of de-registrations could far
exceed the projected number" ("PARF is not a refundable deposit", ST, 15
Apr). Put simply, the refund total could be very big.
The LTA then argued that "such a large sum of money could be better
allocated to other public programmes". In other words, a cash refund
system would be funded at the expense of other programmes.
Paradoxically, the LTA also assured motorists they will "realise the
cash value of their PARF certificates". Logically, the LTA,s argument
against cash refunds and its assurance to motorists cannot both be true.
Either the assurance is valid, and the argument specious, or the
argument is true, in which case the assurance is unfounded. As the
following analysis shows, the LTA cannot have it both ways.
Currently, vehicle buyers pay certificate-holders cash for their
certificates. The buyers then use the certificates to offset various
governmental vehicle-related fees. If the LTA's assurance to motorists
were valid, every certificate will be bought and used as offset, so the
total value of all certificates is equal to the total offset.
If the LTA gave cash refunds, the total refund would equal the total
value of all certificates. However, buyers would no longer be able to
buy certificates to offset governmental fees. They would have to pay the
Government a cash amount equal to the sum they had previously offset.
Therefore, the Government would enjoy a revenue gain equal to the total
offset. In short:
Refund total
= Total value of certificates
= Total offset
= Government revenue gain
Since (Refund total) = (Government revenue gain), any sum set aside for
cash refunds, regardless of its size, will be fully funded by an equal
increase in Government revenue.
Hence, the LTA's assurance that motorists will realise the cash value of
their PARF certificates contradicts its argument that a cash refund
system would be funded at the expense of other public programmes. There
is no reason to doubt the LTA's assurance. Therefore, its argument must
be invalid, which means the LTA has no reason to refuse to refund the
PARF in cash.
================================
MAY 4 1999
Parf is a concession to car owners
MR FRANCIS Chong ("LTA's objection groundless", ST, April 29)
was of the view that under a cash refund system for Preferential
Additional Registration Fee (Parf), the projected cash refund required
would be equal to the gain in government revenue, and would thus not
reduce funds for government programmes.
This is true only in a situation when the number of cars de-registered is
equal to the number of cars registered during the year. As explained in
our earlier reply ("Parf is not a refundable deposit" ST, April 15), it is
possible that due to adverse economic or social conditions, the number
of cars de-registered could far exceed the number of cars registered.
If Parf is a refundable deposit, that is, payable on demand in cash, the
Government would have to set aside a sum of money to meet this
contingent liability. For financial prudence, the amount to be set aside
cannot be based on the estimated number of de-registrations, but would
have to be large enough to meet the Government's obligations under all
possible eventualities, including the situation described.
Setting aside such a big sum of money to cater for Parf refund would
mean significantly less money available for new public programmes.
Parf is a concession to encourage car owners to replace their vehicles
before they reach 10 years old. It is not a refundable deposit guaranteed
by the Government. Owners will realise the full value of the Parf
benefits if they use it to register new vehicles.
However, we do recognise that not all Parf holders will do so. Hence,
the recent liberalisation on the use of Parf certificates has provided
owners with greater flexibility to maximise the use of the Parf benefits.
Extending the validity of the Parf certificates from six to 12 months also
gives owners more time to find a suitable buyer if they decide to
transfer their Parf benefits.
This should help to address the concern of Mr Mohamad Azni Abdul
Ghani (ST, April 30) that holders of Parf certificates had to sell them at
a discount to third parties.
TOH SU FEN
Senior Manager
Corporate Communications
Land Transport Authority