COE and car prices : the Singapore experience.

In Singapore, consumers are required to purchase a Certificate of Entitlement (COE), before they can own a car. COE is a first-of-its-kind vehicle ownership tax, comprising five categories: Category A-E. This paper considers only three categories: Category A for passenger cars that are 1600cc and below (including taxis); B for those above 1600cc; and E, for the purchase of any vehicles from Category A-D. The Land Transport Authority (LTA) determines the COE quota while consumers and car dealers determine the price of COE when they bid for COEs via the open-bidding system. Car dealers often bid on behalf of consumers, as part of their service provided. Interactions between the dynamic demand and supply forces result in COE price fluctuations which subsequently lead to car price fluctuations. It was observed that car price fluctuations do not reflect the full magnitude of the COE price fluctuations. This observation motivates the motif of this paper, to uncover the relationship between COE and car prices, particularly in terms of the distribution of tax incidence.Bachelor of Art