Amnesty to retrieve laundered money may lead to more laundering: CPD

The Centre for Policy Dialogue (CPD) believes that the amnesty for repatriating laundered money is less likely to retrieve it and, in fact, may lead to an aggravated laundering trend.   

The think tank on Friday termed such scope as morally, economically or politically unacceptable.

"Although the challenges of the economy were raised in the budget speech, no steps were mentioned to solve those problems. The budget was based on weak estimates and there was no correlation between the two," CPD Executive Director Fahmida Khatun said at a press conference yesterday to analyse the proposed budget for the fiscal 2022-23 at the Lakeshore Hotel in the capital.

Mustafizur Rahman, distinguished fellow of CPD, said although special opportunity was afforded to legalise undisclosed money in the country for years, it did not yield any economic benefit.

"Chances of money returning from abroad this time are also little. Rather, those who have not thought of money laundering thus far, will be encouraged. They will think, why should I pay the highest tax here since I can bring it back with only 15% tax. In other words, they will be encouraged to smuggle money instead," he elaborated.

Terming the opportunity as "morally, economically and politically unacceptable," he said and added that the money has been laundered by breaking the customary law, through hundi or by over invoicing.

Referring to the recent incident of PK Halder, he said, "We have a case before us – the laundering of Tk3,000-3,500 crore. If it was now, nothing would have happened to him."

He went on to say that the government will not even get any benefits through this move politically, because its positive aspects cannot be presented to the people.

Dr Fahmida Khatun called for the proposal to be scrapped, saying the move would discourage honest taxpayers. 

"It is extremely immoral to try to bring money to those who have taken money through corruption," she added.

According to CPD, such an initiative is ethically unacceptable, and unlikely to generate the expected revenue.

Fahmida said, "The country's macroeconomic stability was being undermined by a variety of factors, including global inflation and the pressure of subsidies to control inflation. Most of the economic indicators are stagnant. In this situation, no proper steps have been taken to control inflation. On the other hand, the allocation for social security for the poor, who suffer the most due to inflation, has not been increased." 

She said the proposed budget has set an inflation target of 5.6% and made the projection of the dollar prices falling from Tk91.5 to Tk86.2. 

She also remarked that due to such unrealistic notions, the budget did not take much initiative for the poor.

Fahmida said stagflation is expected to hit many countries around the world and it would be difficult to meet the target of 7.5% GDP growth in such a scenario.

Although there is a huge demand for increasing the expenditure in the health and education sectors following the pandemic, the allocation in these key sectors is decreasing, said Fahmida.

She said the new budget has proposed to allocate 0.83% of the GDP for the health sector, while last year the allocation was 0.81%.

This allocation is far below the demand of the growing health sector, she said, adding that less than 1% of GDP is being invested in the health sector for the last 20 years.

She further said people are having to spend more in the health sector as the per capita allocation from the government is gradually decreasing.

Besides, the allocation is also being reduced as the spending capacity in the health sector has been declining since 2011, he said.

Fahmida added budget allocation to the education sector was 1.9% of the GDP last fiscal year in a bid to recover Covid-induced learning loss, and came down to 1.8% in the current fiscal year. The same ratio, which is the lowest among the 28 LDCs, is being allocated for the sector in the next fiscal year as well. Budget allocation to the education sector has been the lowest in Bangladesh among the LDCs since 1979.

Mustafizur Rahman said, "Although the finance minister spoke of many challenges, the proposed budget does not have the tools to address the challenges. The budget lacks creativity, sensitivity."

People's purchasing power has decreased as the cost of living has increased. The earnings of two people working at a minimum wage are not enough to run a family of four in a one-room house in Dhaka, he said.

Citing a research by the Food and Agriculture Organization (FAO) of the UN, he said the number of people who are unable to maintain a minimum diet in Dhaka city due to declining purchasing power has increased from 19% to 29% in the last six years."

"Despite the need to increase the allocation for social security for such marginalized and poor people through revenue management, the allocation has decreased by Tk3,000 crore, if the pension is excluded," he said.

Mustafizur Rahman said no equitable distribution was seen in the budget such as imposing more taxes on high-income people and providing the benefits to low-income people.

The tax-free income limit for taxpayers has not been increased, while exemption has been made on perquisite. Besides, the reduced tax rate for high-income taxpayers during the Covid-19 situation has not increased, which is not consistent with tax justice, he added.

Towfiqul Islam Khan, senior research fellow of CPD, said "The wealthy and those who have laundered money out of the country seem to be gaining from this budget. Nothing much came of it for the low-income people."

Dr Khondaker Golam Moazzem, research director of CPD, said, "The amnesty provided for bringing back the laundered money is a hard blow to the people who were compliant. As a result, those who have assisted in the laundering process, in addition to the actual culprits, will also seek exemption opportunities." 

On the contrary, no steps have been taken in the budget to curb tax evasion and money laundering. During the budget unveiling, it was said that the NBR will miss the current fiscal's revenue collection target by about Tk30,000 crore.