FBCCI's black money investment proposal draws widespread criticism

The Federation of Bangladesh Chambers of Commerce & Industries' (FBCCI) proposal to allow investments of untaxed money in any sector, with no scrutiny from government authorities, subject to a 10% tax, drew the ire of many.

Experts termed the demand unconstitutional. 

The apex trade body also wants the facility in the real estate sector for up to 10 years.

The FBCCI made the demands in a written proposal placed at the 43rd consultative committee meeting of National Board of Revenue (NBR) on Thursday (13 April).

It said a significant amount of money is being illegally taken out of the country due to the availability of "second home" opportunities in many other countries that do not inquire about the source of money.

"The flow of money laundering will increase further if this special facility is not given," said the FBCCI.

Their demands seeking amnesty drew criticism from various quarters.

Talking with the Business Standard, Transparency International Bangladesh (TIB) Executive Director Dr Iftekharuzzaman said, "It is an unfortunate and embarrassing demand by the business leaders which is also contradictory to the constitution. The constitution clearly mentions that any type of illegal income would not be allowed."

He said, "This type of demand cannot be acceptable in any circumstance as it will cause discrimination against taxpayers who are investing in the sector after paying tax.

"Allowing them to invest a lump sum amount through this process would not be acceptable. It is totally unconstitutional, discriminatory and encourages corruption."

He said, "Those who made this demand are business community leaders and they have relations with influential people."

Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh (PRI), said, "It is very unfortunate the apex trade body has made such a demand to give an unconstitutional favour to a vested quarter, those are very small also."

He said, "In 2008, a small group had whitened their black money out of fear. But the government had not realised enough tax from that.

"In the last track record( we have not had any success rather than getting a bad reputation by such a move. On the other hand, honest taxpayers will be demoralised from this discrimination," the economist added.

He hoped that the government would not approve such a request.

Mostofa Azad Chowdhury Babu, senior vice president of FBCCI, told TBS that they received the proposal for amnesty from various trade organisations.

In 2020, Finance Minister AHM Mustafa Kamal offered the opportunity to whiten black money with a 10% tax as part of an effort to revive the economy that had been hit hard by the Covid-19 pandemic.

And by buying a certain amount of land depending on the area, they were given the opportunity to whiten black money in return for a certain tax for investing in the real estate sector.

And the most important change that had been made was that not only the tax authority but also other agencies could not raise any questions about the source of the money. This means that the owner of illegal money received a chance to whiten black money without question.

Cashing in on the opportunity, a large number of people that year whitened the highest amount of black money since the country's independence.

According to NBR, in FY21 more than Tk12,000 crore black money came into the mainstream economy and the government got Tk1981 crore tax from that.

When the black money was allowed subject to 10% tax, a compliant taxpayer had to pay 30% in tax which was later reduced to 25%.

However, the tax rate for whitening black money was raised to 25% in the next fiscal year 2021-22 in the face of widespread criticism. But the opportunity of not being questioned was in place.

The curtailment reduced the amount of legalising black money.

At present, there is an opportunity to whiten black money by paying a fixed amount per square meter in various areas in the housing sector. Apart from this, there is an opportunity to legalise black money by paying a maximum of 25% tax and 10% penalty on that tax.

But the opportunity could not draw much black money in the mainstream, according to the industry insiders.

Given the context, the FBCCI reclaimed the benefit by paying only 10% tax, without question, whereas compliant taxpayers have to pay a maximum tax of 25%.