From the Red Line
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From the Red Line

Should employers pay for public transport?

Working on incentives and disincentives.

One thing that is apparently common in Japan is the “commuter’s allowance” where the employer pays up to a certain sum for your commute to work. This comes as part of the benefits suite that Japanese employers provide to their employees. Likewise, in the West, employers are given tax incentives for helping their staff with public transport expenses. Sometimes it might even be compulsory.

That said, this is unlikely to ever happen in Singapore. Why is that so, what has happened as a result, and how might things possibly change?

One might argue that the government might be ideologically opposed to such measures. In Singapore, one gets paid their salary, they can do whatever they want with it as long as the appropriate taxes are paid. This practice is what the civil service calls the “clean wage policy” — notably transgressed by MOE when free parking was offered to teachers in schools; in contrast to the rest of the civil service who have to pay for season parking at their workplaces.

There’s some logic in this, which tells us what they think. The idea is that the teacher who gets $720 worth of free parking gets $60 a month off the price of owning a car, while the teacher who takes the bus, everything else equal, gets exactly zilch off from the bus fare. Everything else equal, the teacher who drives is effectively paid $60 more than the teacher who doesn’t.

I must note that it should be your own decision to purchase a car that you mostly use only twice a day during the daily commute to and from work. Whether you want to spend $128 on a monthly public transport pass, $400 on Grab, Gojek, taxis or carsharing, or $1000 on installments, season parking, and petrol on your own vehicle, is none of the business of your employer.

It goes the other way too. Companies who need to buy vehicles for business purposes are also subject to the same COE bidding exercises as everyone else. We don’t give companies tax breaks for owning vehicles nor do we exempt them from COE, even if these company vehicles are chiefly used in the mid-day when traffic conditions aren’t at their worst.

In Japan, as pointed out in the linked article above, the commuter’s benefit has become something long expected of employers to provide to its workers; among a larger package that it’s not really in this blog’s remit to describe. So 86% of companies in Japan pay that allowance. And as the article also describes, this commute allowance encourages people to use the public transport services covered by the pass the allowance pays for.

The same can probably be said about claims for taxi rides home after working overtime and/or till late night in Singapore, though I can’t really find much documented on the internet on this. Consult your HR department, mileage may vary. But should this be a widespread practice, it creates some kind of captive market for private hire vehicles, which I daresay might be one of the reasons why most people don’t seem to care for night public transport here.

The thinking on policymakers’ end probably goes something like this: If you need to work that late past public transport operating hours, your fare is highly likely to be covered by someone else; if you don’t, you’re probably rich enough anyway. What matters then is to provide a level of service to allow second-shift workers to head home, and overnight-shift workers to get to work.

This could yet change. While taxi fares may have been somewhat predictable in the past, being a direct factor of distance and clearly-spelled out surcharges for certain use cases, the opaque surge pricing algorithms of the ride sharing companies may present new questions for finance departments on whether to continue providing such benefits.

The key point of everything I’ve said so far in this article is that the appropriate financial incentives can be put in place to encourage certain behavior. The Americans encourage companies to subsidize public transport use, to get their staff to leave their cars at park and rides so they don’t jam up freeways. The French mandate it, and the Japanese offer it.

But the way it works in Singapore is that transport claims are mainly for travelling by taxi or private hire. This helps the taxi and private hire lobby, mostly small proprietors that live a daily wage which varies depending on how much driving they do. It’s honest work, but as older drivers step out from the steering wheel with few to replace them, it’s only inevitable that taxi and private-hire fares are going up due to demand and supply.

It may be possible that higher taxi fares result in political pressure on the government to maintain some level of provision of late-night public transport. But if the companies are paying for enough of the late-night taxi riding demographic, the chances of that happening are far lesser since the user doesn’t actually feel the pain, and it’s more likely that companies may choose to just grin and bear it, or simply eliminate or downsize such benefits. A hard pill to swallow for us workers, but it is what it is.

The taxi lobby, quite interestingly, appear to have been up in arms over the introduction of night bus services in 2001, which threatened to muscle in on their market. Well, 21 years later, we know who’s left.

It would not be that much an issue if taxi and private-hire vehicle supply wasn’t dropping. But it is, despite the imposition of ostensibly-temporary fare hikes to encourage more drivers to enter the business.

If public sentiment thus turns away from the taxi and private-hire industry towards the public bus and MRT system, then things might change. But what could they change?

Why does it work this way, though? Simply put, because the taxman says so. Employees are not required to pay income tax on transport claims arising either as a result of overtime work or travelling on official business. But they are required to pay tax if paid a Japanese-style fixed transport allowance. Going back to the example of the teachers, IRAS in fact now spells this benefit out as taxable, though they may have updated the policy in the four years since; even if before that it might have been considered as part of a “fixed transport allowance” albeit in kind and not in cash.

In Singapore, as in much of Asia, public transport is viewed as the choice of those who don’t have a choice. This is a fact, unfortunately for some people. It’s a bit of a status symbol to be able to afford your own car — especially a Continental car — but even if you can’t, the time savings afforded by travelling by taxi or private hire vehicle are still considerable. Relatively speaking.

On the other hand, it’s not inconceivable for the taxman to provide concessions. For example, on a greater social level, the taxman also offers incentives for things like having children and topping up your CPF. More directly related to transport, the cost of hiring a shuttle bus to carry company employees from their work premises to a “convenient meeting point” (usually an MRT station, though probably not the nearest) is already not taxable.

And so it creates situations like at Jurong East, where companies from all over the island descend on Venture Avenue for the special private bus pick up points, maybe one of two only such facilities on the island apart from those along Boon Lay Way. (edit: there’s one more in Woodlands too)

Bus country (source: Google Maps Street View)

This also discourages employees from wanting to spend 20 cents extra a day to go out to Joo Koon, when they could take a free shuttle bus provided by their employer from Jurong East. This means a much busier Jurong East Station (possibly why it’s the busiest MRT station, not somewhere in the CBD?), and relatively emptier trains westbound in the morning peak.

Of course, as manager of road infrastructure, the LTA might be able to restrict use of such bus stops in the hopes of pushing relevant private bus pickups further west, but is it really wise to offer the stick when the carrot might also work as well?

We could, of course, do it the American way with tax incentives for the provision of public transport access for a company’s staff. Companies could negotiate a fixed cost, preferably with tax-exempt blessings, to subscribe to monthly passes for their staff. If this cost is kept lower than that of hiring a private shuttle bus, it might provide a steady revenue stream whilst maintaining the pressure to keep service standards up even in lower-density industrial areas.

This can be easy for HR departments to administer, by just providing names and a monthly payment to facilitate the issuance of Adult Monthly Travel Cards. Even the cards may not be necessary with a smarter SimplyGo system that can be linked to such entitlements. That said, it does make me wonder how free public transport for public transport staff is handled, and whether that arrangement can be scaled up.

So ultimately, it’s probably on what we want to prioritize at a governmental level. The taxman can easily change his tax collection methods in support of other greater goods — if we assume the use of public transport over taxis or something like that can be counted as one. But for now, the answer might be no. It’s your money, you decide how you want to spend it.



Here to make you think about transport issues in the Garden City of Singapore. You can say that I love controversy. Posts can get technical! Abuse of comments may be blocked. Subscribe to Telegram for updates:

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