A layman's perception
DISCUSSION on the merits and demerits of the opportunity offered by the finance minister in his budget speech is of late getting a lot of ink in the print media and a lot time from the electronic media. The issue that has become rather hot to the erudite deserves a scrutiny by a layman as well.
The big question is: how far is the finance minister's proposal tenable? From a moral point of view, surely it is not a desirable proposition. But how much is it worth supporting from a practical perspective?
Our country is not a heaven-protected isle. In fact there is no such isle on earth. This is because men are not incorruptible and have no pretension to carbrundum probity.
Men also have a tendency to consider income tax laws as unjust and unfair, and want to avoid and evade income tax. In Bangladesh, this tendency is stronger. Mainly two reasons fuel it.
Firstly, the number of persons whose annual income crosses the threshold, but who are still outside the tax net, is extremely large. Secondly, even those who submit tax returns and pay income tax honestly are often questioned and sometimes harassed by tax officials, who have too much of discretionary authority and too little accountability.
Black money is of two types. The first type includes all that is earned dishonestly, which is never shown in income tax returns. The second type is that income which is earned or acquired honestly, but not reported in the income tax returns.
Where does this black money lie? A part of it is invested in assets like land, residential buildings, commercial and industrial undertakings, shares, savings certificates, etc. and quite a big part is deposited with banks, financial institutions and investment companies.
But a considerable part leaves the country for a safe heaven abroad. Black money invested in real assets may be made white automatically, if the tax authorities discharge their responsibilities scrupulously. It will be a Herculean Task to trace out the black money lying abroad and to induce or compel the owners to bring it back to the country to whiten it.
The huge amount of so-called black money can be easily ferreted out. But with the present economic and social order, it is neither practicable nor desirable to rope in this portion black money. Under the current secrecy law, banks and financial institutions generally won't disclose any information relating to their depositors, unless directed by the court. If the secrecy law is amended so as to make financial institutions submit particulars of their depositors to tax officials at their mere asking, the whole financial sector, along with the entire economy, will collapse. Nobody will opt for such an eventuality.
In a sense, the black money automatically gets whitened, although partially. The tax deducted at source by banks and financial institutions at different rates, from the interest on the deposits of even those whose total worldly income is well below the taxable limit, is certainly an overstep in the process of whitening black money, and provides the government a "system gain."
In this country, tax laws are anti-frugal and pro-prodigal. Nobody asks about the source of income when hundreds of thousand of taka is lavishly spent on foreign tours or matrimonial functions, but as soon as somebody comes forward to invest their little savings in some productive ventures, he has to pass through a crucible.
Many people fail to distinguish between income and savings. Income is taxable if it is more than the exemption limit. But savings are not income. So the savings of a person, say a housewife, amounting to Tk.14 lac is not to be treated as black money even if she doesn't pay any income tax thereon.
This is the reality in Bangladesh that there is neither an effective mechanism to wallop the growth of black money nor an alternative to inducing black money to whiten it. The need for increased investment, to create additional jobs and generate national production, is dire.
On the other hand, there is very little likelihood of the existing regular tax-payers declaring a part of their taxable income as undisclosed income, to benefit from the marginal 10% tax.
In this context, the move to open a way for black money to surface merits appreciation. Once declared, and incorporated in the statement of assets and liabilities, the income from the erstwhile black money will be taxable and this will widen the tax base in the future. After all something is better them nothing.
Abdul Karim is a retired Secretary to the government
Comments