Keep money whitening scope in productive sectors

Businesspeople have urged the government not to allow any blanket black money whitening opportunity, saying the preferential tax treatment should be extended to the sectors that create jobs and have a positive impact on the economy.    

They argue that job creation for a massive number of people is needed, particularly during the coronavirus pandemic, as the crisis-induced economic slowdown has rendered many jobless.

"The government can allow black money whitening in industries that generate employment opportunities," said Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association.

"However, it would not be wise to allow a blanket whitening scope in all sectors, particularly those industries that create fewer jobs opportunities and have little impact on the society."

The money whitening scope is unfair to honest taxpayers as it creates uneven competition and demoralises businesses, said Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry.

"When the government is trying to expand the tax net, it will encourage many not to pay tax properly. We should introduce a policy to inspire people to pay taxes and not to allow money to become black. It is not prudent to facilitate tax-dodgers."

He said the government could allow the black money to be invested in the economic zones. "However, it should be for a limited period." While unveiling the budget last June, Finance Minister AHM Mustafa Kamal introduced the provision that no authorities, including the National Board of Revenue and the Anti-Corruption Commission, can raise questions on the sources of the untaxed money.

Individual taxpayers can whiten undisclosed cash, bank deposits, savings certificates, shares, bonds or other securities by paying 10 per cent tax as a penalty, way lower than the 25 per cent regular tax rate. 

Over the last several years, the government has allowed untaxed money-holders to invest in areas such as real estate. Taxpayers can legalise any undisclosed properties, including land, buildings and flats, by paying tax per square metre.

As a result, untaxed money-holders rushed to the sector, sending the prices of luxury flats in Dhaka to soar. In fact, the land and flat in Dhaka are as expensive as in many cities in Europe, Canada, and the US.

The prices of land and flats have already gone beyond the purchasing power of many belonging to the middle-income groups.

The stock exchange has also seen a fair share of the entry of undeclared money, which sometimes inflates the price of stocks abnormally for a few sessions during a particular time of a year.

Several business people say black money is a double-edged sword for any country. If the undeclared fund is not allowed in lucrative sectors, a big chunk of money will flow out of the country through illegal channels.

On the other hand, the provision to allow such funds in some sectors may cause price volatility. This is being noticed in the real estate sector.

Alamgir Shamsul Alamin, president of the Real Estate and Housing Association of Bangladesh, objected to the term black money.

"It is not black money; it is undisclosed money."

About Tk 2,000 crore undisclosed money was invested in the real estate sector as of December of the current fiscal year, helping it to remain vibrant even during the pandemic.  

The sector employs 30 lakh people, but it has not laid off any workers during the crisis. And the thriving industry is contributing to the revival of the economy, Alamin said.

He urged the government to retain its stance on the untaxed money in the housing sector in the upcoming budget.

"The scope should be provided for many years to come. It will stop illegal capital flight. If the government fulfils our demands, it will lead to a direct fall in the price for flats."