Sustained anti-graft drive to encourage tax payment: Farashuddin

A sustainable and visible anti-corruption drive is necessary to encourage people to pay taxes, Dr Mohammed Farashuddin, a former governor of Bangladesh Bank, said today (5 July).

"Many people tell me, 'You tell us to pay taxes. I paid taxes. In other countries, it costs Tk30 crore to build one kilometre of road, but it costs Tk100 crore in our country. It costs Tk600 to buy a pillow, but the budget allocates Tk17,000 for that pillow.' These things have to stop," he said.

Dr Farashuddin made these remarks while speaking as the chief guest at a shadow parliament, titled "This Year's Budget Will Help Sustainable Development", organised by Debate for Democracy in Dhaka on Friday.

Dr Farashuddin said that tax evasion must be prevented. A survey in the country says that of 27 lakh very rich people in the country, only 9 lakh pay taxes.

"If we could collect taxes from 27 lakh people, the budget deficit would be even lower. Those who are supposed to pay taxes should be made to pay taxes without coercion, without fear of jail or oppression.

"However, the condition is that unless a sustainable and visible anti-corruption drive is launched, it cannot be strongly said that those who do not pay taxes should pay taxes," he said.

He added that four years ago, there was a strong drive against casinos and drugs, but it has now stopped.

Referring to the recent corruption allegations against some government officials, Dr Farashuddin said, "Now that the anti-corruption drive has started, let's see how far it goes. Or will this drive lose its way like the one against drug lords? That too has to be seen."

He said, "Corruption can be stopped and it should be done. I am very hopeful given that the prime minister has spoken of zero tolerance against corruption. She will definitely implement it this time. If that happens, other tasks will be easier for us."

Farashuddin on loan defaulters and budget FY25

Mohammed Farashuddin shared his concerns regarding the government's approach to loan defaulters and the overall direction of the FY25 budget.

"The finance minister mentioned reforms to loan defaulters in the budget speech. But he was not properly briefed on the issue." Farashuddin said.

He explained that what has been reformed is the system where regular borrowers can reschedule their loans by paying a 10% down payment.

"But those who are willful defaulters, for whatever reason, can reschedule their loans up to 10 times by paying only 2%. This needs to stop. You cannot give a gold medal to a failing student," he said.

"Large loan defaulters are getting their loan interest waived off. Waiving interest on loan defaulters' loans is very objectionable. The Tk50,000 crore interest waived by the government banks should be considered as defaulted loans," he added.

Farashuddin expressed disappointment with the lack of concrete measures in the budget to address money laundering and smuggling.

"A weakness of this year's budget is that it was prepared in close consultation with the International Monetary Fund (IMF). There are no specific guidelines for repatriating smuggled money. The IMF is also silent on this issue," he said.

"Under no circumstances should currency smuggling be allowed. Currency smuggling can and should be stopped," he said, adding, "If issues like money laundering, corruption, and loan defaulters are not addressed, they will become a threat to the government."

Farashuddin questioned the official inflation figure of 9%, suggesting that the actual rate is closer to 10%. He expressed scepticism about the budget's target of reducing inflation to 6.5%.

"A serious effort is needed to strike a balance between money supply and product availability to control inflation. Those who understand these issues, who can do the math, and who understand supply chains should be involved," he said.

Farashuddin drew parallels between the current food supply situation and the 1974 famine, highlighting the dangers of hoarding and supply chain disruptions. He underscored the need to maintain a balance between stock and supply.

The former central bank chief expressed concern about the government's reliance on foreign loans, particularly the Tk96,000 crore planned for the 2024-25 fiscal year budget. 

"The government should reduce its dependence on loans from domestic and foreign sources. Focus on borrowing from savings certificates. If more loans are taken from banks, investors will not get loans, and investment will stagnate. However, taking loans through savings certificates will reduce inflationary pressure and strengthen the social security sector," he suggested.

Farashuddin argued that increasing savings through the issuance of savings bonds would not only reduce inflationary pressures but also strengthen social security programmes.