LTA drops need to park private-hire cars under a business

Posted on October 03, 2017.


SINGAPORE – FROM this month, a private-hire car (PHC) can be owned by an individual, without the need to first register a business entity with the Accounting and Corporate Regulatory Authority (Acra).

While the rule change by the Land Transport Authority (LTA) appears to be a small step, it has sparked some discussion on what is the motivation behind it.

Under the current private-hire scheme, an individual must first set up a company, then register a vehicle to be used for private-hire purposes under that company name as a “private car for hire”.

But other requirements remain the same from Oct 1, 2017: The car must have tamper-evident decals and commercial motor insurance, and drivers must hold a Private Hire Car Driver’s Vocational Licence (PDVL).

For convenience, vehicle owners can go online to convert a vehicle into or out of the PHC scheme.

Neo Nam Heng, chairman of the Prime group of companies, said of the impending change: “The impact is not great.”

He said those who want to be private-hire drivers can register a company to buy a car and “drive away for as low as S$1, depending on your credit profile”.

“If you buy as an individual, you are subject to MAS (Monetary Authority of Singapore) rules,” he said.

Another issue is that if a car has outstanding vehicle financing, “the bank will not allow you to convert it to a private-hire car unless the loan is settled in full”.

“Converting it to commercial use not only requires commercial insurance, but subjects the bank to higher risk,” he added.

But professor Lee Der-Horng of the National University of Singapore’s Department of Civil and Environmental Engineering called the move “an interesting signal”.

While it lowers the barrier to entry, “why do we want to do this when we have more private-hire drivers than taxi drivers”, he asked.

“If we don’t have enough private-hire drivers, it may be necessary to review the hurdle,” he added.

Singapore has about 41,000 private hire cars and about 25,000 taxis.

Prof Lee suggested that there may be fiscal reasons behind the move.

“If there are 40,000 private hire drivers, that would mean 40,000 companies and this could be an issue for other agencies.

“Also, if a driver has a company, he can claim for other business and from the tax point of view, there will be some leakage.”

But one source said that the tweaked rule could be just the first of more changes to come for the private-hire industry, now that its impact on business in general is clearer.

He said: “Uber is supposed to be a technology company, but its core business here is actually car rental. It has not only affected the taxi operators, but also the major rental and leasing companies.”