Black revenue

The government has kept scope for a whitening of black money once again -- a move observers see as an attempt to please a section of influential people.
In the last budget of its tenure, the government extended the scope for whitening undisclosed money in the housing sector without questioning its source, provided that black money holders pay a certain amount of tax to avail themselves of the opportunity.
However, the provision will not be applicable for money derived from any criminal activities or illegitimate source, according to the finance bill.
In his budget speech, the finance minister said the special opportunity was given in the housing sector to provide fresh impetus to a sector that had faced a debacle last year.
Though almost every government has provided the opportunity for a whitening of undisclosed money, no huge sum of black money had been legalised during any period except for that of the last caretaker government.
A record amount of black money was whitened through such a provision of scope in 2007-08, when many people legalised money following anti-graft drives.
The BNP-led government had also offered the same scope in its budget of 2006-07.
The present government last year introduced a provision allowing a company or an individual to whiten undisclosed money by paying fines.
Despite the existence of the facility, the government has further extended the scope in the housing sector. The move is being seen as bowing to pressure from a few politicians and influential people, said an official of the finance ministry.
It had always been the government high-ups, who made the decision on whitening black money in every government's tenure. The ministry had always been in the dark on the issue, said a number of ministry officials.
On the issue, the finance minister on Tuesday told reporters, "This is a matter of compromise."
He admitted that compromises were made while preparing the budget, and said, "Politics is the art of compromise. We always do it."
According to the new provision, holders of undisclosed money can invest in the housing sector, through paying taxes between Tk 750 and Tk 7,000 a square metre of floor space subject to the location.
If anyone buys more than one flat or a plot of land, the buyer has to pay additional taxes.
Criticising the provision, a number of analysts said it would only promote corruption and fail to have any positive impact on economic growth.
Dr Iftekharuzzaman, executive director of Transparency International Bangladesh, told The Daily Star that it would be discriminatory to legal money earners and would take flats and plots beyond their reach.
Terming the provision unconstitutional, he said, “It goes against the government's pledge to establish good governance and combat corruption.”
Former Bangladesh Bank governor Saleh Uddin Ahmed criticised the new provision, and said it would allow holders of black money to amass more wealth unfairly.
It might have been justified had the government imposed a 40 percent tax as penalty, said Saleh Uddin.
This type of investment would not directly contribute to the country's economic growth, he added.
Dr Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue, said there were other justifiable alternative ways of whitening black money in the manufacturing sector, including pharmaceuticals and agro-based industries, which would create employment.
Though this opportunity has been provided time and again since 1975, it has failed to yield any significant results, he said.
Mubasshar Hussein, president of the Institute of Architects Bangladesh, said the rationale of introducing the provision to boost the real estate sector was simply ridiculous.
It implied that corrupt people would be allowed to buy a luxury apartment or a plot of land with their ill-gotten money, and turn those white, he said.