Govt extends generosity to black money holders

The government has extended further generosity to black money holders in the proposed budget for 2019-20 fiscal year.

Untaxed money can now be ‘whitened’ after paying only 10 percent in income taxes and without disclosing its source, if it is invested in manufacturing-oriented industries in economic zones, high-tech park and housing.

At present, black money holders can avail the facility after paying highest 30 percent in income tax and 10 percent in fine on the remainder of the amount.

For example, if one wants to legalise Tk1 crore undisclosed money, one has to pay Tk30 lakh in income tax first. After paying additional Tk7 lakh in fine (10 percent on the remaining Tk70 lakh), one can invest Tk63 lakh.

But as per the new proposal, the person can whiten the whole money by paying only Tk10 lakh in taxes, if the money is invested in the specified sectors.

The National Board of Revenue (NBR) said the facility will be extended for the next one year. To this effect, relevant amendments will be brought to the Section 19(E) of the ‘Income Tax Ordinance’.

“While the provision to legalise black money is already much criticised, loosening the grip further is a sign of the government’s leniency towards corruption,” said Dr AB Mirza Azizul Islam, a former adviser to the caretaker government.

The privilege would set a bad precedence of institutionalising corruption instead of removing it from society, he said, adding that honest taxpayers would be discouraged and corrupt persons would be encouraged.

It will negatively impact the national economy too, he added, pointing to no notable yield from such facility in the past.

In defence of the facility, NBR Chairman Mosharraf Hossain Bhuiyan however said the scope is being provided to prevent laundering of undisclosed money.

The facility, he hoped, would also increase private investment which has been hovering between 22 and 23.4 percent of the GDP for the last several years.
According to Bangladesh Bureau of Statistics, investment in the private sector rose by 1.37 percentage points to 23.4 percent of the GDP in fiscal 2018-19 from 22.03 percent in fiscal 2013-14.

A policymaking level official of the NBR said very few taxpayers availed the existing opportunity to legalise their secret money in the last several years.
As a result, the government has decided to slacken the conditions, he added. 

In fiscal 2015-16, taxpayers legalised undisclosed money worth Tk 450 crore, according to latest NBR data.

The revenue authority has not added any data of the following two fiscal years (FY17 and FY18) to the tally as the amount of tax realised during this period from black money holders was very small.

According to finance ministry data, the response to the provision for whitening black money by successive governments since independence has not been very significant.
In 41 years from 1972 to 2013, a total of Tk 13,808 crore was whitened while NBR got in taxes only around one-ninth of that amount.

Meanwhile, the government has no accurate statistics on black money in the country at present. According to a 2010 report of the finance ministry, the amount of black money is around 37 percent of the GDP.

According to US-based research organisation Global Financial Integrity (GFI), Tk 5.3 trillion black money has been siphoned off from the country, from 2005 to 2015, with an average of over Tk 50,000 crore per annum.

A major part of the money has been laundered in the guise of importing goods, it said.