Whitening black money now more lucrative than ever
With the opportunity offered to money launderers by the government to whiten black money failing to draw a significant response, the new budget has made a new, lucrative proposition -- invest the money and no one, not even the income tax authority, will be able to question its source.
For the last five years, black money holders have been able to whiten their assets by investing in residential buildings, among others. This offer was mainly for those who had not filed their taxes in other years.
As per the existing law, the Income-tax Ordinance, people with undisclosed wealth could only take advantage of this opportunity if the money was not from a legitimate source or derived from criminal activities.
An addition was made in the outgoing fiscal year -- black money holders will not face any questions about the sources of their income if they invest in economic zones and hi-tech parks.
In the fiscal year 2020-2021, this amnesty has been widened to cover just about any kind of black money.
Individual taxpayers between July 1, 2020 and June 30, 2021 will be allowed to: disclose any type of undisclosed property by paying a certain tax per square foot; declare undisclosed cash, bank deposits, savings certificates, shares, bonds or any other securities by paying a 10 percent tax; and invest money in the capital market by paying 10 percent tax on the value of the investment.
"No authority, including the income tax authority, can raise any question on such declarations," said Finance Minister AHM Mustafa Kamal, in his budget speech. "Extraordinary times demand extraordinary measures."
The Finance Bill 2020 codifies this provision.
"These provisions, when [they] come into effect, will increase the flow of money into the mainstream economy, generate employment and enhance collection of tax revenue," the minister also said.
The 10 percent tax levied on black money earned from all sources, including criminal activities like human trafficking and drug dealing, is the same rate that a job-holder earning Tk 58,000 per month will be paying as income tax this year.
The minister, however, is going to be hard on those earning black money through under-invoicing, over-invoicing or false declarations of investments.
"I propose to insert a new section in the Income Tax Ordinance… a 50 percent tax will be levied on the proven amount of over- or under-invoicing, or on the proven amount of false declaration of investment," Kamal said in his budget speech.
"Our government has zero-tolerance for such misdeeds," he added