The government is offering money launderers the opportunity to legalise their unreported offshore assets. The launderers will not face any questions. And the finance minister wants us not to object to this amnesty.
So why are money launderers being let off with a slap on the wrist? Because this move, the government expects, will lure back the assets that have been syphoned off the country. The finance minister gave examples of countries like the United States, United Kingdom, Malaysia, Indonesia, etc., who took similar measures and benefited from them.
But is this really as simple and bright an idea as the finance minister insists? Economists are not on the same page as the minister.
"Yes, some countries like Indonesia benefited with such amnesty, but Bangladesh won't because we don't have a single country concentration like Indonesia (Indonesian launderers syphoned off billions of dollars to Singapore alone)," said noted economist Ahsan H Mansur.
"Launderers from Bangladesh buy houses abroad and become permanent residents there. Would they bring back money selling those assets?" he added.
On the topic of the minister's mention of countries like the UK, USA and Malaysia taking similar measures, economist Zahid Hussain said that it is essential to see if our policy has similarities with theirs; and if the circumstances and the nature of money being flown out of those countries are similar to ours.
"If we compare it with the US and UK, it would not be the right form of comparison because there is no capital control there. There you can take money out, bring money in. The capital account is convertible, and so is the current account. Unlike ours, in these countries, illicit flows happen for tax evasion. In our case, people look for a safe haven, not a tax haven."
In Bangladesh, launderers are anxious about their illegally earned money as they feel authorities like the NBR would come after them eventually. So, there is a need to find a safe haven. Here, the question of tax evasion is not the most important one. This money is said to end up in countries like Canada, the USA and even the UK.
Some of these countries have schemes for investment to get citizenship. In such cases, authorities in these countries would not ask you about the sources of this money.
While our launderers are said to end up in Canada, the USA, UK, launderers from these countries, on the other hand, seek countries like Caiman Islands, Bahamas and Ireland, where the tax rate is very low.
"This is why their situation is not comparable to ours. Saying our money is being laundered for tax evasions is not realistic. Because where the money is going, Canada's Begum Para, for example, or second home programmes, or buying restaurants or houses in Thailand's Bangkok, these are not necessarily low tax countries," Zahid Hussain said.
These developed countries' offers have been damaging countries like Bangladesh for a long time, and it has not gone unnoticed or free of criticism either.
Many noted economists and organisations like UNCTAD, Asia Pacific Group, and Transparency International have been vocal for quite some time that this is not only about the source countries' administrative weakness and corruption; policies of these developed countries are also contributing to this illicit capital flow.
Recently 130 countries reached a tax agreement that no country will be able to charge corporate tax below 15% to fight back illicit outflow of money as tax competition is a major reason for the illegal outflow of money.
It has not been implemented yet. But the pattern of Bangladesh's laundering makes it unlikely that it would benefit much from this, because the issue here is a safe haven, not a tax haven, as mentioned already.
Now the comparison with Indonesia is also not appropriate because of its nature and other circumstances.
The Indonesian scheme was only for nine months. They distributed the process into three months each. If you bring the money back in the first three months, the tax rate would be 4%, 6% in the next quarter and 10% in the last three months.
So it had a nine-month timeframe, and secondly, these nine months were split into three slabs each. The more you delay, the more the tax rate.
Indonesia was also part of the OECD's Automatic Exchange of Information initiative back then. The countries under this framework would share information with each other, for example, how much of Indonesian wealth was in another signatory country. The Indonesian government would also do the same.
Besides this, there was also a warning from the government about the consequences if they did not comply with this within the nine months time frame.
"None of the provisions is present in our scheme," Zahid Hussain said.
The economists said that as per our scheme if you show that you have an immovable property like a house in Canada, you must pay 15% in taxes. If you have movable property, for example, a deposit in a bank in Canada, you have to pay 10% in taxes. And if you bring back the money, you must pay 7% in taxes. But this offer is for the entire time – there is no fixed window like the Indonesians.
"It is also not mentioned if this offer wouldn't be in the next budget. Suppose this opportunity has been given for this year only. If I look at the history of Bangladesh, we see once such opportunities are given, they are not rolled back," Zahid Hussain said.
"If someone has money abroad, as long as he doesn't get caught, why would they disclose it? Because the offer is not going away, as it is not clear whether this offer is temporary or not. And if he has property abroad, why would he disclose it and give the government 15% in taxes if he is not selling the home to bring money back home, or not repatriating the money from the foreign bank accounts.
What is the point of allowing them to keep the money abroad and taxing it instead? The logic behind this is unclear," he added.
Besides, what everyone seems to be forgetting, is the moral weakness of such a decision.
"All we see is how much money is returned and how much tax is paid. If the amount of money is higher, it is considered successful. These are the benefits. But what about their impact on the honest taxpayers? On tax compliance rate? What does it say when a dishonest man's maximum tax is 15%, but the honest taxpayers' highest tax is 25%?" Zahid Hussain asked.
Ahsan Mansur agreed that "lowering the tax rate like this is unethical."