Here's how tiered vehicle taxes will impact Singapore inflation

"Net impact is easing in inflation," analyst said.

According to DBS, a tiered structure for vehicle taxes (i.e. Additional Registration Fee, ARF), where more expensive cars pay higher tax rates, have been introduced in the recent budget.

This will essentially raise the underlying cost of a motor vehicle. These higher tax rates, which will eventually be passed on to consumers, may offset the downside impact of the LTV tightening on CPI inflation.

Here's more from DBS:

That is, the effects on the headline CPI inflation from both policy changes will be opposing in nature. The hikes in taxes will drive private transportation cost higher whereas the fall in COE premiums will bring it down.

Our assessment is that the effect from the falling COE premiums will likely dominate. The net impact is an easing in inflation and there is the risk of a deeper drop.

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