THE INSIDE MAN

Congestion Charging and further taxation

Congestion Charging and further taxation  image

Text: Tito F. Hermoso / Photos: AutoIndustriya.com, MMDA, Transport for London | posted October 18, 2016 14:49

More tax, less traffic?

Desperate measures

Despite all the ongoing programs to alleviate it, traffic decongestion is still a pipe dream. By now, the measures being considered are getting more drastic as the weeks pile on. You can infer the desperation of our authorities when you realize the extent the government are ready to curtail our motoring freedom of circulation. Besides the time torture and vehicle density, private motorists face more woes like lane restrictions, turn restrictions, wholesale access restrictions (like the EDSA bollard blockade preventing motorists coming from Ortigas to access Ortigas Center via EDSA Annapolis and Connecticut) and plate number restrictions (UVRRP - Unified Vehicle Volume Reduction Program a.k.a. coding) and so on. 

Some tired ideas re-tried

Some ideas, tired and old, have met an icy reception from the public and resulted in doubtful success. The mandatory opening of private roads of gated communities to public access is again being mulled, notwithstanding that the road layout of most, if not all well-planned communities, are limited access and built to service only the self-contained communities exclusively, hence through- or pass-through traffic is usually impractical.

Singapore's ERP

Looking for inspiration from various countries and cities, our authorities would be remiss if they didn't even study other vehicle reduction schemes. As always, the benchmark happens to be the most successful: Singapore. There, licenses to purchase motor vehicles are by quota and the price depends on competitive auction. Parking spaces are also limited and auctioned. Then there are the controlled access to the road itself; the ubiquitous ERP (Electronic Road Pricing) gantries. Mounted fore and aft of an over the road gantry, ERP vehicle ID readers record the front and rear license plate of a car driving into the ERP zone. Then the reader sends the plate number to HQ, which then determines how much congestion charge to deduct from the particular passing vehicle's pre-paid in-car electronic tag depending on the time of day.

ERP 2.0 is coming

It's one of the most sophisticated in the world as pricing is based on real time supply and demand road use. If point to point speeds fall below a certain benchmarked distance, like during peak hour, the ERP charge goes up. It's a theoretical economist's wet dream come true as the user is charged by his/her marginal utility; i.e. as per the current cost of using road space. Not content with this, Singapore is pushing the envelope and is already designing GPS monitored tags that can operate with other electronic road monitors and toll collections, doing away with the need for those giant gantries. But ERP is only one branch of a whole integrated transport network where the alternative to private motoring is one of the world's safest, most comfortable and extensive mass transit networks.

London Congestion Charging

London's calling

Another recent practitioner of pseudo-ERP is a newcomer to the game; London. Begun in 2003, it looks quaintly Edwardian or even Victorian compared to Singapore's home grown hi-tech solution, which, began in the mid-nineties. London currently charges a flat rate congestion charge of GBP 11.50 per entry into the 7.5 sq.km restricted zone of the City. Residents are given a discount which nets the charge to GBP 1.50. Monitoring is by Police CCTV cameras. Upon entering the “charge zone”, marked on the tarmac by a giant red circle with a white “C” in the middle, license plates are recorded and if the day's congestion charge has not been paid by midnight, a penalty charge will be mailed to the vehicle owner. 

The false promise of the MRT-3

Though already proposed during the Marcos years, vehicle reduction programs like odd-even were always successfully opposed by the PMA (Phil. Motor Assoc.), today's Automobile Association of the Philippines (AAP), on the grounds of unreasonable restrictions on the right to drive. But the construction of the MRT-3 in the mid-nineties made the Odd-Even ban a necessity. Instead of European practice where odd number plate numbers are banned, on odd number calendar days and even numbered plate numbers are banned on even numbered days, the MMDA chose regular days of the week; M-W-F for odd numbered plates, T-Th-S for even. HOV's (High occupancy vehicles) — distinguished by having 2 or more passengers, excluding driver — were exempted from the ban. Faster travel times were indeed recorded during rush hour when this was in place 20 years ago. At that time, the motoring public believed the government promise that once the MRT-3 was finished, regular travel on EDSA will be restored and buses will be banned because the MRT-3 was supposed to supplant them. But this turned out to be an empty politico's promise.

Coding makes the sales go up

Still, the odd-even ban made life difficult for single vehicle families and so the variant called “coding” or the UVRRP was instituted. Instead of a theoretical 50% ban, it was modified to a 20% ban essentially prohibiting plate numbers 1 & 2 on Monday, 3 & 4 on Tuesday and so on. The motoring public reacted by buying more cars and specifying plate numbers on new car purchases so that they don't lose mobility for the whole week. A rather expensive solution but it did create an unrelenting sales boom for car dealers because the discordant mass transit system left the motoring public with no choice.

Quota and charge

Today, the current legislators and technocrats are studying further options which are generally derivatives of the two-pronged approach of Singapore; 1. limiting vehicle ownership by quotas for purchases and parking space, 2. Congestion or CBD access charge, where prices depend on the flow of traffic.

Knee-jerks make silly laws

In the meantime, there are pending bills in Congress that are proposing a “no-garage-no-car-purchase” law or even a “no-income tax return – no car purchase” law. But these hare-brained measures damage the economy by restricting trade of the automotive industry, a pillar of the economy, a huge tax payer, a giant employer and an industry that the government wants to promote and grow. A variant of these laws is the proposal to tax the 2nd or 3rd vehicle that a family buys. The problem lies in that these proposed laws assume that the rest of the country is as congested as Metro Manila or that income earners like pensioners, contractors, professionals other than those regularly employed do not have a right to purchase a car which is downright discriminatory and ridiculous.

On street parking

The 2nd vehicle tax

Let us tackle the 2nd vehicle tax first. The proposal assumes that by taxing the extra vehicles bought to get around coding or odd-even will reduce congestion. We believe that while vehicle reduction by this tax will not be significant, the law will be prone to discretion and loopholes. This will then need extra effort to police which, in turn, goes against efficient tax administration. Moreover, as a one size fits all broad-brush solution, it will do more harm than good; i.e. hurt the auto industry by punishing vehicle purchases in other cities where congestion is not as severe as Metro Manila.

Why another tax?

On the other hand, we are aware that the DoF needs compensatory revenue after it reduces income taxes. BIR is looking at taxing luxury cars, ad valorem, i.e. a tax as percentage of sale price. We think taxing cars and congestion reduction is not a correlated relationship particularly for countries as area-large as ours. Proof of this is another example country, same size and population as Singapore, same excellent mass transit, same predictable traffic flow but without Singapore's interventionist restrictions on car ownership, taxes and congestion discrimination: Hong Kong. There, auto taxes are high for fiscal and environmental reasons and not for congestion reduction purposes. So assuming that increasing revenue is the purpose of the 2nd vehicle tax, we propose a flat tax per category per price segment.

50k tax per 1M price from 2M up

For example, cars selling for SRP PhP2.0M should be exempt from the tax because this is the price point of Multi Passenger transport for the regular Filipino starter family. The next price segment – PhP2M to 3M will now be charged a flat tax of PhP 50,000 as this is the price range of fancier SUVs and D-segment cars. The next price segment, 3M-4M will entail a flat tax of another PhP50,000. Hence a PhP22.0M Aston Martin DBS will be taxed at PhP1.0M and a PhP35.0M Rolls Royce Phantom will pay PhP1.65M tax. This is on top of all the regular taxes imported cars pay. Not a bad deal for the tycoons, right? In order to promote alternative energy, hybrids like the Prius and some Porsche and Lexus models, should be exempt.

Cancellation due to exchange rate depreciation

This PhP50k tax should be suspended once the exchange rate shoots up beyond PhP50 to 1.00 US Dollar. Imagine if a Mirage, that today costs PhP600k, suddenly costs PhP4.0M because of an exchange rate depreciation, the PhP100k tax, in this case, would kill auto industry sales. Of course, the auto industry and other affected stakeholders should join in with their reservations or support, since our auto industry already pays a lot of taxes making our car pricing the most uncompetitive among the car exporting countries in ASEAN.

The Hong Kong alternative

As for congestion charging, forgive us if we have lost faith in the odd-even, coding, no-garage-no-purchase and quota to purchase combined as Hong Kong, with its mass transit facilities, proves that it can do without it. Congestion reduction/discrimination was tried at one of the many cross harbor tunnels some time ago but it met with widespread public opprobrium. In our case, the restraint on personal freedoms is too much for us, Asia's oldest democratic car culture.

Time for Congestion Charging

We have proposed this before and it won't need expensive technology like Singapore's. We can keep it simple and attractive. We can have as many bids, or BOT-PPP or unsolicited proposals for as long as Congestion Charging for Metro Manila prioritizes ease of application/enforcement, speed of construction, minimal traffic inconvenience, simple maintenance and income for the government. The participants can fulfill Pres. Duterte's wish that we get the best and not the lowest bidder.

Katipunan ave

Off day, double the rate

We propose a one-time passage fee of PhP100.00 per day, valid from 0800hrs to 2200hrs, while passage outside those hours is free of charge. We can combine it with an odd-even twist. PhP100.00 for even numbered plate numbers on even numbered calendar days, while the even numbered plate number can travel on odd number calendar days but must pay PhP200.00. If one wants to stick to coding, then cars, jeeps, taxis, buses etc. pay PhP50.00 a day 4 days of the week, but PhP200.00 on the coding day if they need to travel, but this vehicle reduction would hardly change from today's pattern.

The “C” network, E-PASS redux

All cars traveling on the prime “C” (covered by congestion charging) network of roads — like London, marked with large red circles with a white “C” on signs and pavement markings at entry point — must have a DSRC (Dedicated Short Range Communication) tag which is like the defunct E-PASS Premid tag and today's Kapsch EasyTrip electronic tag. These tags must be pre-loaded with a minimum balance amount for, let's say PhP1,000.00 per week, to be considered valid. These tags must be readily and widely available at gas stations, convenience stores, supermarkets and the like. They must also be easy to load via electronic banking or over the counter at point-of-sale like gas stations, convenience stores, etc. The tags must also be linkable with debit cards or auto-pay credit cards and loadable via ATM accounts too.

Tags at reasonable cost

The tags can be sold with a security deposit to reduce the cost of acquisition, which the owner can refund when he/she wants to terminate. This way, updates in tag technology will oblige the issuer to supply the customer with the latest tag while he/she continues his subscription without incurring any upgrade expenses. The tags can be rented as a percentage of the minimum weekly load so as to allow widespread use. The tags, if possible, can be made compatible to pay for parking, tolls and even P2P buses and LRT networks that use the AF payments Beep Card. That way, a tag holder has other journey options.

Transferability

As these tags are transferable, the gantry mounted electronic tag readers should be able to identify and record the front and the rear plate number and deduct the correct amount accordingly. Each gantry reader will transmit an order to deduct the full amount once a vehicle passes through. Once charged for the day, any pass through under any other gantry will recognize, validate and confirm that the car's plate number is paid for passage for the rest of the day, whether it entered at 0800hrs or 2159hrs. This means that if the tag is transferred to a different vehicle plate number within the 0800hrs-2200hrs congestion charge period, the gantry reader will charge the tag for the different vehicle's congestion fee.

Locating gantries

The prime “C” congestion charging network that will have the gantries will be the major roads of the Metro. These are all the R-roads; R-1, R-2, R-3, R-4, and the circumferential roads; C-2, C-3 Araneta Ave., C-4 EDSA. C-5, etc. Gantries must not be located on stretches of prime roads that allow crossing traffic to use a short stretch to get to the other side. For example, with the U-turn system on EDSA, traffic from Bansalangin crossing EDSA must take two EDSA U-turn slots. These motorists must not be charged a congestion charge since Bansalangin is not covered as one of the congestion charge prime roads. Same goes for traffic that crosses EDSA bound for the Ortigas Center coming from Annapolis and Connecticut. Gantries must be located away from these zones so as not charge vehicles that are only crossing EDSA to get to Ortigas Center. Cross Metro expressways like MMSS3 – Metro Manila Skyway Stage 3 and NLEx metro-link connector should be free from congestion charging gantries as it assumes traffic transiting through Metro Manila via these two tollways will not add to Metro congestion.

MMDA may huli ba

Penalizing the cheats

Penalties for not having a tag should be punitive so as to discourage cheating. MMDA's “mayhuliba” website should publicize the cheats, and fines should rise for every week's delay in payment. For example, failure to bring the tag is fined the congestion charge of the day, plus PhP500.00 if paid within the first two weeks of mayhuliba posting. If not paid by the 3rd week after the spotted violation, the fine goes up to PhP 1,000.00. 4th week PhP2000.00 topping out at PhP5,000.00. All penalty fees must be paid prior to renewal of LTO registration.

Keep it loaded

Tags should not be allowed to be “underfunded”, which is why an auto-pay and auto-accrual app is needed so that the tag can “owe” a load which must be replenished at the next opportunity or else, again, a penalty will be charged. Habitual offenders who fail to use a valid tag should have a schedule of escalating punitive fines too. We shouldn't be encouraging motorists to just keep driving onto the congestion charge network without the tag and without paying the congestion charge. As always, congestion charging should be suspended during holidays and also during extreme weather like floods. Motorists are already suffering due to the weather so why add to their misery?

Singapore vs. Hong Kong style

Much as many would like to copy Singapore's success in using regulations to control vehicle congestion, we do not have Singapore's reliable and comprehensive public transport system. While we still do not have that comprehensive transport system, part of our solution is to build more roads elsewhere. This is akin to Hong Kong's solution which avoids draconian restrictions using common sense to divert heavy traffic by building alternate roads, tunnels and bridges, cost no object. Space on the other hand, is a luxury that smaller Singapore cannot afford.

Our hybrid ERP

Metro-Manila is 40 years behind the infrastructure curve, and moves to transfer many government, shipping and transport hubs to outlying provinces are steps in the right direction. In the meantime we can isolate focus on the Metro as a Singapore, where building more roads within will cause more traffic and take time while the traffic problem snowballs. We've tried many systems but we shouldn't approve laws that are difficult to reverse once passed and implemented, especially when such hare-brained laws fail, they cause more problems, resulting in an unnecessary self-inflicted drag on economic growth. It's about time we adopt a hybrid of the Singapore-London Congestion Charging system which uses the true economic cost of road use and congestion to motivate “common sense” in individuals acting in community to decide on whether driving, riding, hiring or staying will get their jobs done, decongest traffic, saving time and money. As for the vehicle tax, tax if they must, but there's no need to be selective about it.