The special provision for whitening black money paying minimal tax will possibly be scrapped in the next budget for the fiscal 2021-2022.
The tax-free income threshold and tax rates might remain unchanged, said sources at the finance ministry.
In the current fiscal year, the government has given the scope for investing untaxed money in the capital market, savings certificates, bonds or any other securities, paying a flat 10% tax within 30 days of their investments without any penalty.
The facility will not continue in the next fiscal year. The National Board of Revenue (NBR) has already obtained approval of the proposals from the government high-ups.
In the meantime, after a meeting of the cabinet committee on economic affairs, Finance Minister AHM Mustafa Kamal on Wednesday told the media that people having undisclosed money will be given the chance to legalise it by paying tax in the next financial year as well to bring it into the formal economy.
He, however, did not clarify if the special provision of legalising undisclosed money by paying 10% flat rate in some sectors will continue or not.
Ihe finance minister will place the budget proposals in Parliament on 3 June.
Economists and business leaders have welcomed the government's move.
Dr Debapriya Bhattacharya, chair at Southern Voice and distinguished fellow at the Centre for Policy Dialogue (CPD), said, "The government has finally taken the move to not continue giving the scope for whitening black money. It was our long time demand."
The economist also mentioned that it is now the duty of the government to find out black money holders and bring them under the law.
"At this moment, we should also go for increasing the number of potential taxpayers instead of enhancing the threshold", opined the eminent economist.
Talking about the government's move to abolish the black money whitening option, Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industries (DCCI), told The Business Standard, it will be a great honour for businessmen who are doing business after paying taxes.
Giving a tax waiver to whiten black money is unjust with other taxpayers, said Rizwan.
Abul Kasem Khan, chairman of the Business Initiative Leading Development (BUILD), said, "It was our demand for a long time. We do not support the provision for whitening black money."
"If the government wants to allow black money holders for investment, it should be done through a penalty," he added.
But those who are doing business maintaining all compliances should be rewarded by the government, which will boost businesspeople's confidence, said Kasem.
The former DCCI president said the government may rethink increasing the tax-free income threshold to relieve people from financial burdens amid the coronavirus pandemic.
The current black money whitening provisions – special tax treatment in respect of investment in securities and special tax treatment in respect of undisclosed property, cash, etc. – in the Income Tax Ordinance 1984, will be scrapped in the upcoming budget if decided so.
NBR officials said in the first nine months of the current fiscal year, 10,034 people legalised cash and assets worth Tk142.95 billion under the scheme. The NBR received Tk14.39 billion in taxes against the disclosure.
Of them, a total of 9,693 people whitened Tk138.60 billion mainly in cash, fixed deposit receipts, saving certificates and assets. They have paid Tk13.90 billion in taxes against the disclosure.
Also, s341 people legalised Tk4.35 billion through investment in the capital market and paid Tk490 million in taxes.
There is currently no accurate statistics on the amount of black money in the country. But a finance ministry report in 2010 revealed that the amount would be around 37% of Bangladesh's GDP.
Besides, the US-based think tank Global Financial Integrity (GFI) revealed that Tk5,30,000 crore have been laundered from Bangladesh in the ten years between 2005 and 2015. The organisation estimates that more than Tk50,000 crore is being laundered out of Bangladesh every year.
According to a survey conducted by the Bangladesh Economic Association in 2018, undisclosed money amounting to Tk5-7 lakh crore is being circulated in Bangladesh's economy annually.
Tax free income limit will remain unchanged
The government may not raise the tax-free income ceiling for individual taxpayers in the upcoming national budget for the fiscal 2021-2022 despite the economic hardship of lower and middle-income groups due to the lockdown and restrictions in economic activities amid the Covid-19 pandemic.
Officials of the finance ministry said the tax-free income threshold might remain unchanged at Tk3 lakh for individual taxpayers in the budget as the government considered the limit consistent with the per capita income and economic growth.
The tax rates ranging from a minimum of 5% to the highest of 25% for individual taxpayers may also remain unchanged.
The limit was raised to Tk3 lakh in the national budget for the current fiscal year after five years from Tk2.5 lakh, they said.
According to the NBR, the existing tax-free income limit is Tk3.50 lakh for women and senior citizen taxpayers, Tk4.50 lakh for physically challenged people, Tk4.75 lakh for war-wounded freedom fighters.
The government in the last budget reduced the lowest income tax rate to 5% and the highest income tax rate to 25% from the previous 10% and 30% respectively.
Individual taxpayers need to pay 5% income tax on the next Tk1 lakh income after enjoying tax exemption on income of the first Tk3 lakh while the highest income tax rate is 25% on annual income above Tk16 lakh.
The other tax rates include 10%, 15% and 20% based on the annual income.
According to the NBR, there are more than 61 lakh electronic taxpayers' identification number holders in the country.
Only 24 lakh taxpayers filed their income tax returns in the current FY21.