The saga of ‘easy money’ in Bangladesh
I would deliberately put "black money", "easy money" earned through political cronyism, or even "unearned income" in the same bracket.
In the world of finance and economics, the term "black money" often raises eyebrows. It alludes to the enormous sums of money that move covertly, out of sight of tax collectors and other government inspectors. Black money has profound consequences, which affect both people and the nation.
Black money, also known as illicit money or unaccounted wealth as mentioned above, represents funds that exist outside the purview of tax laws and government oversight. It is money obtained illegally, such as through tax evasion, corruption, or smuggling. Occasionally, lawful income that has been hidden to avoid taxes is also included.
The repercussions of black money are multifaceted. It first reduces government revenue. Governments lose crucial funds that could support public projects, healthcare, and education, impeding a country's development.
Furthermore, black money exacerbates income inequality. Tax evaders frequently build up unreported riches which widens the wealth disparity with the rest of society. Additionally, it undermines the rule of law.
The informal sector in Bangladesh has grown tremendously over the years, nearly matching the formal one. This sector encompasses street vendors, small enterprises, and unregistered businesses operating outside government oversight and taxation. The underground economy flourishes in this setting.
Many informal businesses and workers do not declare income or pay taxes, resulting in a pool of unaccounted wealth. The lack of financial inclusion in the informal sector also compounds the problem.
Black money is a worldwide problem, but it is most pervasive in nations with lax banking regulations and weak tax enforcement.
India has experienced a significant issue with black money, with billions of dollars hidden away in offshore accounts. The so-called "oligarchs" in Russia have utilised offshore companies to conceal their wealth. Nigeria also has a tough time stopping the flow of black money, much of which is linked to corruption in the oil industry.
One common technique for concealing black money is funneling it into offshore bank accounts, often located in tax havens. These accounts offer anonymity and privacy from prying eyes.
Some countries have bank secrecy laws that make it extremely difficult for foreign authorities to access information about these accounts. These regulations are used by tax evaders and money launderers who use intricate financial arrangements and shell companies to conceal the source of the money, making it even more difficult for governments to find.
While black money is detrimental, some argue it can have limited benefits, such as providing liquidity during economic crises. These short-term benefits, however, come at a high long-term price, weakening the government's ability to pay for important services and reducing the confidence of people in their government.
Addressing the issue of black money requires a multifaceted approach. Tax changes must be given priority, financial laws must be tightened, and financial inclusion in the unorganised sector must be encouraged.
To reduce the impact of black money, accountability from top to bottom and transparency are essential along with the rule of law.
International cooperation is essential to combat black money's cross-border nature. Stricter rules for offshore accounts and improved information exchange between nations can stop the flow of illegal money.
As most agree, the effects of black money are wide-ranging and have an impact on tax collections, income disparity and economic stability. Fighting black money is a complicated problem that requires cooperation from both governments and people.
By fostering transparency, accountability, and fair taxation, nations can hope to combat the shadowy spectre of black money and build more equitable and prosperous societies.
The author is an economic analyst