Bangladesh’s Legalising Black Money: Editorial
The debate over allowing or disallowing of whitening of undisclosed sums of money is a strong one. The proposed provision for legalising moneys that is off the books envisages a payment of a flat penalty @10 percent.
This facility of making black money white is likely to take effect in the next fiscal despite strong reservations of the various bodies representing the business community. The reasons for such opposition are obvious.
On the one hand the government is pressing ahead with widening the tax net and encouraging people and commercial entities to pay what is due to deepen the State’s coffers; simultaneously it is extending the scope for legalising income generated illegally.
The latest move is bound to send mixed signals to those who remain outside the tax brackets for it smells of double standards.
Furthermore, how exactly does the government intend to legalise ill-gotten money when it is signatory to international anti-money laundering statutes remains to be seen. The fact that such undisclosed sums are commonly associated with corruption, crime or other illegal activities is not lost on anyone.
More importantly, granting of such facility year after year encourages, even the otherwise honest tax payer to reconsider paying taxes. When one may ‘whiten’ one’s money at a flat rate of 10 percent as opposed to the multi-layered tax slabs that exist under the tax laws, does it not make more sense to go with the latter?
Despite the government’s plea that black-money-turned-white could potentially help rebound the subdued stock market, the fact remains is that untaxed money is simply impossible to control.
So long as we don’t find an antidote to the temptation to retain black money, we won’t be able to control its black money.
The lure of it stems from the fact that it can be used in various ways including in politics and influence peddling to obtain ‘favours’.
It is possible that vested and powerful lobbies are pressurising to allow for such facility to be given, but taking into consideration the ills that far outweigh the benefits, it is imperative to take stock of such a move.
The Daily Star June 1
Those seeking to whiten black money may have to pay a fine in addition to normal taxes in the next fiscal year, said a finance ministry official.
Currently, people pay a flat tax — usually 10 percent — to get amnesty for black money. But this is going to change except in case of stockmarket and infrastructure bonds, said the official asking not to be named.
In the next fiscal year, one will have to pay normal taxes and a fine between 5 and 10 percent of the undisclosed money he will whiten, said the official.
The matter has already been discussed by the government high-ups and may come up in the finance minister’s budget speech.
Scope is there now for legalising black money on a limited scale. One can avail himself of the opportunity by investing in the share market and infrastructure bonds.
In the next fiscal year, the government may allow people to whiten black money from any fiscal year, provided that the sources of undisclosed money are mentioned.
The official said the government is under pressure from some influential quarters to give scope for legalising black money — income obtained illegally or not declared for tax purposes.
As the Asia Pacific Group on Money Laundering, a global anti-money laundering body, strongly opposes giving scope for whitening illegal money, the government is now weighing how to give amnesty for black money without disregarding its international obligations, said the ministry official.
Seeking anonymity, an official of the National Board of Revenue, told The Daily Star last week that none had taken the opportunity in the current fiscal year to legalise undisclosed money by investing in the stockmarket or infrastructure bonds.
Civil society members, economists and even the business community oppose giving such scope. But time and again successive governments have given the opportunity under pressure from some vested quarters.
During the BNP-led government’s tenure between 2001 and 2006, the then finance minister Saifur Rahman in a TV interview on the night before a budget day said no scope for whitening black money would be given under any circumstances. But the next day he placed the budget keeping provision for legalising undisclosed money.
Despite the fact that governments have given amnesty for black money almost every fiscal year since 1975, not a big amount of undisclosed money has been legalised each year and the state has not earned much revenue from it.
According to NBR statistics, Tk 12,996 crore has been whitened and Tk 1,368 crore has been collected as taxes since 1975.
The present government has been giving amnesty for black money from its first year in office. In fiscal year 2009-10, it allowed whitening undisclosed money in four sectors, where 1,923 people legalised Tk 923 crore.
Investments of black money in the stockmarket will continue through the next fiscal year, Finance Minister AMA Muhith said yesterday.
“I always oppose black money in principle. It doesn’t benefit the country,” said Muhith at a pre-budget discussion.
“But, as the stockmarket is a very sensitive market, we wouldn’t touch it in the upcoming budget,” he said.
Currently, investors are allowed to park black money in stocks by paying tax at 10 percent.
The Metropolitan Chamber of Commerce and Industry and Maasranga TV co-organised the discussion on the upcoming budget for fiscal 2012-13 at Radisson Hotel in Dhaka.
The minister also said the country will keep the upward growth trend and inflation will fall further.
The inflation rate has crossed double digits due to a hike in oil prices on the international market and the government’s heavy borrowing from the banking sector in the current fiscal year, he said.
But, the present trend shows that inflation is going to ease in the coming months. “We expect GDP growth will continue to go up in the next fiscal year,” said Muhith.
Two major challenges the government will face in the coming year are reining in inflation and curbing bank borrowing, he said.
The minister said the government will also continue subsidies for the agriculture sector.
On power outages, Muhith said his government is working to improve the situation.
“The government has attached higher importance to power generation,” said the minister.
Though the government has undertaken a number of steps such as setting up quick rental power plants, those could not produce the required amount of electricity, said Muhith.
He admitted that the government has made a mistake in calculating the actual demand for electricity, resulting in frequent power outages.
Earlier, Muhith said the upcoming budget would be of around Tk 190,000 crore, of which Tk 54,000 crore will be for annual development programme (ADP).
The budget is likely to be placed in parliament on June 7 and to be approved on June 28.
AK Azad, president of the Federation of Bangladesh Chambers of Commerce of Industry, Asif Ibrahim, president of Dhaka Chamber of Commerce and Industry, Shafiul Islam Mohiuddin, president of Bangladesh Garment Manufacturers and Exporters Association, and Moazzem Hossain, editor of The Financial Express, were also present at the discussion.
The Daily Star May 17, 2012
The Federation of Bangladesh Chambers of Commerce and Industry yesterday opposed amnesty for black money that is legalised with a flat tax.
“Scope for whitening black money is injustice to honest taxpayers,” said FBCCI President AK Azad at a consultative committee meeting of the National Board of Revenue.
He, however, said the government will have to impose “appropriate penalty” if it wants at all to allow people to legalise black money.
“We have learnt that a proposal will be placed to the government for allowing people to legalise undisclosed money with a flat tax. Such scope in the budget will discourage honest taxpayers. It will not be a good example,” said Azad.
His remarks come three weeks before Finance Minister AMA Muhith places a Tk 189,000 crore budget proposal for the fiscal year 2012-13.
Muhith told the meeting that he would not comment on black money.
He, however, said, “We will not cut facilities in the stock market. We will not disturb it in the next fiscal year.”
Now, anyone can invest undisclosed money in the share market after paying a 10 percent tax.
Except for the stock market, which is still recovering from the last year’s crash, a provision is there for whitening black money after paying penalty.
On the Padma bridge project, the finance minister said the bridge’s construction would start in the next fiscal year.
The funding of the $2.9 billion project hit a snag after World Bank, the major financier of the project, suspended its funding following allegations of corruption.
The FBCCI chief proposed that the government should dispense with quick rental power plants that have put a huge subsidy burden on the state exchequer.
“Coal-based power plants can be set up under public-private partnership,” said Azad.
The FBCCI chief came down hard on the market manipulators responsible for last year’s stock market crash, and said it made many investors bankrupt and forced some to commit suicide.
He demanded that the government make a law to compel the sponsors of a company to buy back their shares sold at an exorbitant price by showing a loss-making firm profitable.
“Some big fishes have destroyed the stock market where many youths, having no decent jobs, made investments after collecting money from different sources.”
Some youths invested in stocks by liquidating their guardians’ pensions, selling lands and borrowing from relatives, he said.
Azad said the market manipulators raised money from people by showing loss-making firms profitable.
The FBCCI chief also urged Muhith to take an initiative for having dialogue between all political parties to find ways to come out of the current violent political environment.
He said shutdowns affect business activities and harm the country’s image abroad.