Is private car a luxury?

The government imposes an exorbitant amount of tax on imported cars to ration their use by people. High taxes raise the price of a car to such an amount that a middle class family can hardly afford it. The classes of people who can afford cars for their private use are mostly upper middle class and higher class. This raises the question: why should a private car be luxury? Obviously there are arguments behind such tax imposition. However, when we deeply look at the issue, the high tax rate can't be justified. Moreover, justification has hardly anything to do with the revenue of the government since once one source is closed another source is opened up immediately through the chain of reaction of economic activities.

One of the foremost grounds of rationing the use of private cars is the traffic system. It is usually thought that relaxation of tax on automobiles will induce people to buy and use private cars, and this will contribute to more traffic congestion. But anybody who has studied the major causes of traffic congestion in Dhaka city must have noticed that increase in the number of private cars is hardly the dominant cause. Traffic jam in Dhaka city has much to do with the faulty road and infrastructure system and the unsystematic maintenance of traffic signals and less to do with the number of private cars.  For example, traffic police do not follow time synchronisation method to determine how much time should be allocated for a traffic cross section so that car flows are harmonised all over the roads.  They maintain traffic signals according to their personal judgment. This personal judgment base is totally erroneous, and it has hardly any connection with the number of cars flowing per second or minute on a road. But if the whole traffic system is harmonised following time synchronisation method based on flows of vehicles per second on a road, traffic jam would be reduced substantially.

As for the road and infrastructure, higher taxes are, paradoxically, responsible for faulty and bad road system. Instead of advancing the lame argument that relaxing higher taxes on private cars will worsen traffic system, the government should concentrate on improving roads and infrastructure. It is not the task of a government to deprive its citizens of their right to use private cars imposing unwanted and unjustified taxes on these vehicles. What the government is doing in the name of controlling traffic jam is making a product luxury which in fact must not be so. Owning car is not a luxury; owing cars does not mean that one has to be an aristocrat or rich.

Higher taxes have been a critical factor in allowing the government not to overhaul the roads and highways.

The government should also take it into consideration that making private cars a luxury item has significant social repercussions. In this modern age, having car has turned out to be a necessity not a luxury. As the economy will develop more and more, owning private cars will become an utter necessity. The social impact of higher taxes is very much evident. To own a car, people may commit corruption. A significant part of corruption can be attributed to exorbitant prices of cars and houses. Having a house or a private car shouldn't be luxury. But we have been made to believe that  only the rich and well-off are entitled to have houses and cars. If you are poor and middle class, you don't have that right. This kind of sordid feeling and implications of economic theories - the demand and supply theory, for example - have denigrated us as a corrupt nation.

Higher tax is a source of revenue for the government, but the government should not become blind by that revenue since the amount of revenue the government collects by imposing taxes on automobiles is more than surplussed by the incurred cost in terms of corruption and less economic growth.

We just need to overcome the conventional and unrealistic proposition that removing taxes on private cars will make these affordable for people in general and will worsen the traffic system in the country. Rather the concern of the government should be improving the roads and highways with better technology. Mitigating the traffic congestion imposing higher taxes on automobiles means making a product unjustifiably luxury and accessible only to the rich and aristocrats. The task of government is to build better infrastructure and not to make the life of people harder and uncomfortable imposing high taxes on automobiles.

The writer is Faculty Member, the School of Business, North

South University. [email protected]