Performance of finance minister

He introduced value added tax (VAT) in Bangladesh much ahead of other countries in the region. It was a revolutionary initiative for which he will be remembered in the history of Bangladesh. However, at the same time, he will be held responsible for making the conditions of living harder for the majority poor. VAT, as a principle, has a particular meaning in fiscal policy for development administration. A rate is fixed and it is applied to values added at different stages of production. It is not the same in Bangladesh. VAT is compounded on accumulated values at every stage of production, resulting in higher prices, which does not affect the producers since they shift the burden on to the end-users. The other side of the VAT story is that the amount collected is neither expended "efficiently" nor "equitably". These are the two key reasons for widening the income gap between rich and poor.

Mr. Rahman initiated various actions to reduce corruption, essentially as a strategy to increase revenue income of the government. One such measure is expansion of the income tax network. There is no denying that people should pay taxes. But the million-dollar question is if the government has the right to collect taxes from income earners then the taxpayers also must have the right to know what for and how it is collected.

Mr. Rahman initiated various actions to restrict money laundering. I wonder how he does not understand that it is his own banking policy, which encouraged over/under-invoicing the L/Cs.

Mr. Rahman recently met with the noted economists of the country to discuss the fuel price hike. Over the past few years, fuel price in the international market increased from US$25-30 to US$55 and now it is hovering around US$70 per barrel. Bangladesh's estimated current annual demand for fuel is 3.7 million tons of which 2.8 million tons are imported. For FY 2006, import of this quantity will cost US$2 billion, i.e. 54% more than the previous year. In other words, subsidising fuel during the current fiscal year will cost the nation a Jamuna bridge! The economists suggested continuing subsidy for the poor's fuel, i.e. diesel (and kerosene); and withdrawing subsidy for the non-poor's fuel, i.e. petrol (and, octane and other POLs) as a measure to overcome the crisis. The finance minister is now left with a dilemma. The economists did not tell him how petrol should be priced to subsidise diesel, which constitutes 80% of imported fuel.

He has a rare quality to cut jokes to dilute serious questions and thus avoid confronting the hard reality. It is also true that he hardly got any advice, which was adequate, efficient and equitable.