Topic 1: Tax for higher-end cars to rise again; ARF to go up from 220% to 320% Announcing in his Budget 2023 speech on Tuesday, Deputy Prime Minister and Finance Minister Lawrence Wong said cars with an OMV (the approximate cost of a car before taxes) higher than $80,000 will incur an additional registration fee (ARF, or the main car tax) of 320 per cent. The changes will take effect from the next round of certificate of entitlement (COE) bidding, which closes on Feb 22. Mr Wong said these changes are expected to affect the top one-third of cars and will generate about $200 million in additional revenue a year. Mr Neo Nam Heng, the adviser to the Automobile Importer and Exporter Association and chairman of diversified motor group Prime, said the tax changes are fair and noted that there would be other outcomes. "Unlike the two previous rounds of tax increase, this one will soften COE prices*," he said. The veteran motor trader has long maintained that buyers of high-end cars and private-hire operators were largely responsible for "pushing up COE prices". * COE, or Certificate of Entitlement, grants the owner the legal right to register and drive their vehicle in Singapore for a period of 10 years. It can be renewed at the end of this period. To obtain a COE, you must participate in a bidding exercise that is conducted twice a month. Hinged on demand and supply, the cost of COE fluctuates and affects the price to own a car. Source: https://www.straitstimes.com/singapore/transport/budget-2023-tax-for-higher-end-cars- to-rise-again Do more research and apply what we have learned in "Demand & Supply", "Elasticity" and "Taxation" to answer the following questions. 1. How does the ARF hike impact the luxury car market? Discuss the impact on the price and quantity of luxury cars (Use Demand and Supply graph to interpret your answer). 2. Mr Wong said the ARF hike was expected to affect the top one-third of cars and would generate about $200 million in additional revenue a year. Do you agree with his opinion? Apply the concept of elasticity to justify your answer. 3. Mr Neo commented that the tax changes were fair and would soften COE prices. Do you agree with Mr Neo? Use the relevant economics theory to justify your answer (consider the COE and cars as complements. Graphical analysis is required.).