Govt bows down to black money

Rejaul Karim Byron

The government yesterday proposed to allow whitening of black money in exchange for payment of 10 percent tax on the amount, with a caveat that the whitened money must be invested in any of prescribed 62 sectors.

The 62 prescribed sectors are divided into three categories: industries, share market, and purchase of apartments, and the opportunity of whitening money through investing in these categories will be available for the next three financial years (FY).

The whitened money may also be invested in Balancing, Modernisation, Rehabilitation and Expansion (BMRE) projects in the prescribed industries.

In cases of apartment purchase for whitening black money, the beneficiaries must pay specially fixed rates of taxes per square metres of the apartments, instead of the flat 10 percent tax on the total amount of money whitened.

The stipulated rates of taxes for legalising undisclosed money through apartment purchase are Tk 400, Tk 600, Tk 800, Tk 1,000, and Tk 1,500 per square metres depending on sizes and locations of the flats.

Besides, the government might include more investment sectors for the purpose, through official gazettes.

Finance minister in his budget speech yesterday said, the opportunity is being provided to boost investment, to ensure employment for a large number of people, and to create opportunity for people to purchase residential flats with their savings without having to answer to a lot of questions by the tax department.

But economists said the government's move amounts to cheating honest regular taxpayers. They said providing such opportunity time and again to black money holders, will lead to a break down of the tax administration.

The National Board of Revenue (NBR) high officials however said the government took the step to cope with the fallout from the global economic recession, the move will increase employment through increasing the scope of investment in the country.

The NBR officials expect Tk 15,000 crore to Tk 20,000 crore of investment over the next three years.

Expatriate Bangladeshis also contacted the government saying if they are given special tax offers they might invest their money in the country, the NBR officials added.

Many quarters however do not see eye to eye with NBR officials on the issue, they rather are wondering aloud whether the government's move, immediately after coming to power, is being wise enough.

Some sources said there are pressures on the government from entrepreneurs, bureaucrats, and politicians for providing the money whitening opportunity, so they may legalise their illegally earned money in an effort to avoid problems in the future.

In the last few years, black money could be whitened by paying tax only, without any mandatory investment in any sector.

Economists said if the government allows whitening of black money, tax on that should be much higher than what is paid by regular taxpayers. Regular taxpayers now pay 10 to 25 percent tax on their income.

Adviser to a former caretaker government Dr Akbar Ali Khan said honest taxpayers are being cheated by the opportunity of whitening black money. If the opportunity is provided time and again there will be no more honest taxpayers, he said.

In some countries such opportunities do exist, but only for rare occasions. In Bangladesh the opportunity is being provided much too often, he quipped.

Taking the opportunity of whitening black money on the share market, old shares are changing hands, no new share is coming to the market, he added saying, it will neither increase investment nor will it give the share market any real boost.

Dr Debapriya Bhattacharya at a media briefing on Saturday said, "The Centre for Policy Dialogue is against frequent amnesties. If the government wants to allow whitening of untaxed money, there must be a punishment rate in addition to the normal tax rate."

Under the immediate past caretaker government's regime 56,845 people legalised a total of Tk 9,773 crore of black money paying Tk 911 crore in tax.

Since FY 1976-'77, all successive governments provided opportunities to whiten black money, but responses were very dull in the early years.

Under the last Awami League regime in FY 2000-'01 only Tk 1,000 crore was whitened.

During the last BNP-Jamaat four-party alliance rule under a money whitening opportunity for three fiscal years, around Tk 2,000 crore was legalised.