Motor vehicle-related revenues have been declining sharply as a percentage of gross domestic product (GDP) since FY2000, and for FY2006 the amount collected is expected to be lower than budgeted by $600 million, according to government figures released yesterday.

Motor vehicle-related revenues are made up of motor vehicle taxes and vehicle quota premiums, which are receipts from certificate of entitlement (COE) premiums. Before FY2000, motor vehicle taxes - comprising annual road tax and additional registration fees (ARF) - and COE collections typically averaged 2-3 per cent of GDP, higher than the Goods & Services Tax (GST) collections of 1.3 per cent of GDP at that time.

But since FY2000, motor vehicle taxes and COE collections have dived, amounting to less than one per cent of GDP in both FY2005 and FY2006. For FY2006, motor vehicle taxes and vehicle quota premiums are expected to be lower than budgeted by $100 million (7.3 per cent) and $500 million (87.7 per cent) respectively.

According to the government, this is because COE premiums are currently about a third of their FY2000 levels due to expanding vehicle quotas. The OMV or open market value of cars has also declined because of the lower production costs of cars made in Thailand and South Korea.

In addition, ARF was reduced to make cars more affordable, and the government has been shifting the burden from upfront car ownership costs to usage costs via electronic road pricing (ERP).

And on Thursday, the Budget 2007 announced an 8 per cent reduction in road tax from Sept 1. But some in the motor industry do not think there will be a rush to buy a car because of this.

'It won't spur people to buy a car because 8 per cent is a savings of about $120 over a year for a two-litre car,' said Lim Soon Heng, vice-president of the Automobile Association, adding that there was little surprise to the news because the government has stated previously that it is moving away from the fixed cost of car ownership to usage costs.

William Choo, Borneo Motors' director of sales and marketing for Lexus, agreed. 'It is welcome news because the 8 per cent savings will compensate motorists for ERP and carpark charges that have gone up,' he said. 'But it won't make them run out to buy a car.'

However, Mr Choo said that for higher-capacity cars like the Lexus luxury models, the savings will be higher. For example, a three-litre car with annual road tax of about $3,045 will see it cut to $2,800.

'It is especially significant for hybrid cars like our RX400h because its road tax is based on power output. This is good for the environmentally conscious who want to enjoy a luxury hybrid car but with less punishing road tax,' he said.

But a senior executive at a popular Japanese dealership believes the cut in road tax is just a signal of higher usage charges to come.

'As ownership charges come down, usage charges will definitely go up. They may not be directly related but once congestion appears to be getting worse, you can expect not only higher ERP but maybe more ERP gantries,' he said.