There are certain series of data that would appear to be very ordinary but could tell a lot about the quality of governance and policy conduct in a country. The latest figures released by the Pakistan Automotive Manufacturers Association (Pama) about the car sales during July-November, 2011 could be regarded as highly relevant or even intriguing, in this context. At a time when everybody is crying aloud about deteriorating economic conditions and falling incomes coupled with high inflation, buyers in Pakistan have purchased over 10,000 more units of locally assembled cars during the first five months of the current fiscal year as overall sales hit 62,353 units as compared to 52,200 units in the same period of 2010. The Pama data revealed strong demand even in higher engine capacity cars, with sale of cars (1300cc and above) rising to 27,647 units in July-November, 2011 from 24,828 units in the corresponding period of last year. Toyota sales stood at 17,867 units as compared to 17,149 units followed by Honda Civic and Honda City at 2,615 and 4,175 units each as compared to 2,577 and 3,670 units respectively in July-November, 2010. A total of 2,802 units of Suzuki Swift were also sold as compared to 1,270 units a year earlier. In the 1000cc segment, overall sales surged to 11,969 units as compared to 9,750 units, with Suzuki Cultus holding the major share at 6,016 units as against 4,800 units last year. In 800cc and 1000cc segment, total sales touched 22,737 units as compared to 17,622 units in July-November, 2010. Another interesting aspect was that November, 2011 sales were almost flat due to usual year-end phenomenon when consumers opt to wait for next year's model cars. It may be mentioned that cars are usually classified as luxury goods in a country like Pakistan as against a necessity in advanced economies where their level of sales is usually influenced by the state of the economy at a certain time. It was expected that high prices, thin sales through car financing by banks, increasing petrol and gas prices, rising impact of used cars under various schemes, higher maintenance costs etc would dent car sales, especially at a time when the economy was performing very poorly but strong prospective buyers' sentiment tells a different story. Even if we exclude the provision of about 1500 units of Bolan and Mehran cars every month under the Punjab government's yellow cab scheme, the demand from other buyers could still be interpreted as very active and this is despite the fact that car assemblers are also passing on the impact of falling value of the rupee against yen and dollar to the consumers in the shape of price hike. This situation is of course, bizarre and not easy to explain in a normal setting but Pakistan, it seems, is a different country where the government seems ineffective in applying fair canons of taxation to narrow the divide between the rich and the poor. Higher car sales at a time when their demand should be either flat or falling could, in our view, be due to several reasons. Growers' farm incomes which continue to be out of the tax net might have played a major role in increasing car sales. The informal economy might have grown at an accelerated pace in the recent period and this part of the economy is not only out of the tax net but is also not properly accounted for when overall GDP growth rate is compiled. And lastly, as generally perceived, the FBR may be incapable to collect taxes from affluent and powerful sections of society, thus contributing to growing income inequalities in the economy and depressing marginal tax-to-GDP ratio which generally is an indicator that incremental incomes are not properly assessed and collected by the authorities. Looking from various angles, although higher car sales in a particular period would hardly attract the attention of public authorities or the general public but if we read between the lines, the existence of such a phenomenon is an indicator of the bigger problem of poor fiscal strategy which tends to increase income inequalities and fails to collect taxes fairly and effectively. Copyright Business Recorder, 2011
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