Black money beckons

The government may allow whitening money in two sectors in the next national budget under pressure from interest groups.
It considers giving scope for whitening money only in the stockmarket and the infrastructure fund, not any other sector, said a finance ministry official asking not to be named.
The issue of whitening money was discussed in detail in a high-level government meeting a few days back, the official said.
The government may give scope for whitening money in the stockmarket on payment of 10 percent tax under pressure from lobbyists, who claim this will help boost the market. Any individual may be allowed to whiten money through investment in an eight-year infrastructure development fund on payment of 10 percent tax.
The fund was to be created in the current fiscal year but has not been introduced yet. It will be created in the next fiscal year and scope may be given for whitening money through investment in the fund till June 2013.
However, a decision to remove scope for whitening money from the next fiscal year was made in a meeting between finance ministry high-ups and the prime minister in April, said a National Board of Revenue (NBR) official, requesting anonymity.
The finance minister told reporters in Sylhet last month that the government would not allow whitening money from next fiscal year. But some vested quarters recently mounted pressure on the finance ministry to give scope for whitening money in different sectors, especially the stockmarket, said the official.
Pressure from vested groups on the government continues to grow as the budget day approaches, he said.
The present government allowed whitening money in four sectors where 1,923 people whitened Tk 923 crore, including Tk 427 crore in the stockmarket by 296 people, in the last fiscal year.
All governments -- both political and military regimes -- have given scope for whitening money almost every fiscal year since 1975.
During the tenure of the BNP-led government between 2001 and 2006, the then finance minister Saifur Rahman in a TV interview on the night before the budget day said no scope for whitening money will be given under any circumstances. But he placed the budget in parliament the next day keeping scope for whitening money.
Mirza Azizul Islam, finance and planning adviser to the last caretaker government, said he does not morally support scope for whitening money.
Many say scope for whitening money will help increase liquidity in the stockmarket but nobody can tell for sure how much money will come to the market.
The former adviser said if black money holders are given the opportunity repeatedly, they will think they can earn black money and whiten those easily paying low tax.
Mentioning that such an offer was made during his stint as finance adviser to the last caretaker government, he said, “The scope given during my tenure and the one to be offered are completely different.”
During his term, the scope was given for undisclosed but legally-earned money with a mention of the source of income, and on condition that the money holder pays tax and a fine, the former adviser said.
Yawer Sayeed, managing director of asset management company AIMS Bangladesh, said if the scope is given in the share market, black money holders will invest in the market and eventually leave it after making a huge profit.
Shares worth Tk 750 crore, more than double the money whitened last year, were traded on Tuesday in the sharemarket, he said.
The government must consider how logical it is for the state to support an unethical act for such a small amount of money, said Yawer.
The stockmarket should be allowed to grow on its own, he said.
“Money or liquidity is not a problem in the capital market. The problem is lack of confidence. If the investors' confidence can be won back, the market will be stable.”