- Black money investment makes inequality in investment and tax system
- Investment scope by paying a flat 10% tax creates an economic bubble
- Survey should be conducted to find out sources of black money
- The opportunity to whiten black money indulges injustice
The opportunity of whitening untaxed money through unconditional investment, offered to help the economy recover from pandemic shocks, should not be continued any more, experts noted at a virtual discussion on Tuesday.
Stating that this scope is making a big inequality in investment and tax system, they suggested taking steps to bring black money into the mainstream adopting a different way.
Allowing a black-money holders to invest in a sector by paying only a 10% tax creates an economic bubble. They spend much higher than general investors.
Thus, they get the upper hand, Tabith Awal, vice-chairman of Multimode Group, on behalf of the business community, said at the virtual dialogue titled "Whitening of black money: Profit or loss of the economy".
The market also becomes unregulated with illegal money holders investing more, leading to inflation, he added.
The 2010 stock market debacle was the result of giving the opportunity to invest black money in the previous two fiscal years, he pointed out.
Dr Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD) and convener of the Citizen's Platform for SDGs, Bangladesh, moderated the discussion addressed by businessmen, government officials and civil society representatives.
Echoing Tabith, Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industries said black money is mainly invested in the real estate sector. Whenever such an opportunity is offered, plots and flats go beyond common people's purchasing power.
"This is a kind of injustice. Businesspeople do not want this kind of scope. Undisclosed money should be stopped from investment," he said.
Noting that this is a way to discourage taxpayers, he said it is more expensive to pay taxes rather than whitening untaxed money by paying a minimal amount in tax.
In the current fiscal year, the government has given the scope for investing black money in several sectors, including the capital market and the real estate sector.
According to the National Board of Revenue (NBR), 7,445 people have whitened their undisclosed incomes amounting to around Tk10,220 crore in the first six months – the first in the history of Bangladesh. Most of the money has been invested in the real estate sector.
Mentioning that whether whitening undisclosed income actually benefits the country's economy or harms it, Abdul Majid, former chairman of the NBR, said in his keynote address that defining black money as undisclosed during tax payment is like easing a serious crime, which is contradictory to the constitution.
Bangladesh will not be liberated from the growing inequality of income and wealth unless it moves away from the culture of entertaining black money holders, Abdul Majid added.
Former NBR member Farid Uddin said black money is siphoned off through hundi and trade. But there is no coordination between the Anti-Corruption Commission, the NBR and the Bangladesh Bank to stop the trade-based money laundering.
All transactions must be brought under supervision to rein in black money, he added.
Kamran T Rahman, president of the Bangladesh Employers Federation, asked for differentiating between black money and undisclosed income.
Miraj Ahmed, head of Programme and Communications at Management and Resources Development Initiative, said a survey should be conducted to find the source of black money without giving it an opportunity for unconditional investment.
He commented that it is necessary to find out how the money is earned.
Participating in the discussion, CPD Chairman Prof Rehman Sobhan questioned the benefits of special tax facilities.
Prof Rehman Sobhan such benefits discourage honest taxpayers. He advised the NBR to conduct research on whether special tax benefits are really positive for the economy.
Summarising the discussion, Dr Debapriya Bhattacharya said this opportunity to whiten black money indulges injustice.
Although this opportunity is helpful for the economy in a limited way and for a short period of time, it brings great losses to the economy in the long run.
Alamgir Hossain, a policy member of the NBR, said it is very essential to bring undisclosed income into the mainstream. Several developing and developed countries have done so, offering special tax benefits. The opportunity has been given for the current year under special consideration. The offer will not be available from the next fiscal year.
The NBR has given the scope not for increasing tax collection but for extending tax net and stopping money laundering, he added.