Over-consumption

LAHORE: Businesses are reacting to recent rate hikes and the rupee depreciation knowing well that it was in their knowledge and was inevitable to keep the country afloat. The consumptive nature of our society must be curbed to avoid such steps.

Those living in Lahore have witnessed record breaking revenue that a Canadian coffee franchise Tim Hortons collected on its opening day a few weeks back. The rush gave an impression as if Pakistanis have tonnes of spare money to spend on a branded coffee. Lahore’s population is 16 million and its most affluent class is only 5 percent of the population. It comes to around 800,000 persons. Let’s suppose, just 5 percent of the affluent class decided to visit the first outlet of Tim Horton's on the first day, the total number of coffee lovers would come to 40000, which resulted in record sales.

Poor Pakistanis are not major consumers. They might account for at most 20 percent of the country. The major consumers are affluent residents.

The sales of top and expensive brand ladies fabric account for maybe 10 percent of the total ladies fabric (lawn) sold in Pakistan in terms of quantity. But in value terms, the sales are 60 percent of the total ladies fabric sold in the country. And ladies lawn buyers also include some middle class families. The value of every item bought by the richer segment of the society from gold to cosmetics, milk to other dairy products is many times higher than purchase of similar items by the affluent class.

Our troubles are because of the high consumption of 5-10 percent of the population. Most of our problems would be solved if we curb this consumption.

The interest rates would come down and the dollar would become stable against the rupee if we start considering unnecessary consumption as a sin.

There should be a monthly federal tax on luxury vehicles starting from Rs50,000 per month to Rs100,000 per month for more expensive vehicles. All residences above two kanal (1000 square yards) must pay a monthly tax of Rs3000 to the federal government on each additional Kanal.

The government residences above 2 kanal must also pay the tax until the government sells the property. Farm house concept should be abolished and property taxed like any other residential property.

The government must close all avenues of unnecessary consumption through punitive taxation on specific items consumed by the rich. The general public is paying the price of high consumption of the rich. It is a known fact that rate hike increases cost of doing business and the rupee decline makes all imported items expensive. The increased cost is recovered by the business by increasing the prices.

The man on the street suffers from the steps. The rich continue the spending spree as they are treated at par with the poor. If they are made to pay for their luxurious lifestyle through heavy taxation they will feel the pinch.

The government for instance may abolish or reduce taxes on small cars and motor bikes and increase taxes of luxury cars 15 times to make up the duty lost on smaller cars or bikes. All branded edible oils may be subjected to punitive duties and sales tax while reducing duties on normal raw edible oils.

Rate hike hit the government as it is the largest borrower from commercial banks. The rupee devaluation would further jack up the petrol rates. The government would be forced to increase the rates of all National saving products.

The amount that the government collects from national saving schemes is not invested anywhere it is consumed by the state.