Taxi drivers could bear brunt of diesel tax hikes

Duties will be raised from $0.10 to $0.20 per litre.

Taxi drivers could reel from higher fuel costs after finance minister Heng Swee Keat announced that diesel taxes will be raised from $0.10 per litre to $0.20 per litre, according to DBS Equity Research analyst Andy Sim.

In order to offset the increase, the government will implement a permanent reduction of $850 a year on Special Tax on diesel taxis. This will bring the Special Tax down to $3,400 a year (or $1,700 per six months), from $4,250 a year currently.

“We expect ComfortDelGro (CDG) to fully pass on the cost savings to the taxi drivers,” said Sim.

However, the increase in diesel tax could continue to provide further reasons for management to eventually realign its fleet towards petrol-hybrid and/or full electric vehicles, the analyst noted. CDG already has 2,000 hybrid taxis — comprised of Toyota Prius and Hyundai Ioniq — out of its 12,600-strong fleet, which translates to 17%.

“We understand that management intends to replace its diesel fleet over time, subject to demand and market conditions,” Sim said.