Black money lives on

Walking back on its election pledge to eradicate black money, the government in its first budget of the current tenure has once again kept the scope for whitening money.

Black money holders will not face any question about the sources of their income if they invest in economic zones and high-tech parks by paying a tax of only 10 percent on the amount invested, which for regular taxpayers is between 10 and 30 percent, depending on the income. The scheme will be open till June 2024.

"With a view to drive up investment and create employment, I propose a new provision in the income tax law to accept investment in economic zones and high-tech parks, without any question on the sources of the invested fund by the income tax department," Finance Minister AHM Mustafa Kamal said during his budget speech.

The government hopes the initiative will boost private investment, although such a practice failed to yield any fruitful benefit in the past.

Before the December 2018 elections, however, the Awami League's election manifesto promised strong measures against those having undisclosed money.

Economists and corruption watchdogs said that successive governments had been allowing whitening of black money due to "pressure from influen-tial quarters" and it was proof of how the state was being "captured by corrupt and influential people".

At present, the income tax department does not raise any question about the sources of fund invested in the purchase or construction of any apartment, flat or building, as long as the tax on such investments is paid at certain rates.

During his budget speech, the finance minister said the taxpayers were not availing this opportunity due to the high tax rates on such purchase.

He proposed decreasing the existing tax rates to encourage taxpayers to voluntary disclose the purchase or construction of any apartment, flat or building in their tax returns.

"I do not support scope of whitening black money. Such scopes in the past did not yield any positive benefit for the economy," a former caretaker government adviser and economist AB Mirza Azizul Islam told The Daily Star.

"Black money holders will need to pay only 10 percent tax, which is lower than what regular taxpayers pay. The scope will encourage the corrupt to amass more wealth through illegal means, and discourage honest industrialists and taxpayers," he added.

Previous Awami League governments since 2009 also offered a similar amnesty, overlooking their election manifesto.

The opportunity to legalise black money in the industrial sector was first given during the BNP-led government's tenure in the fiscal 2003-2004. But the facility was withdrawn after two years, amid criticism from various quarters.

In fiscal 2006-2007, the caretaker government again offered the scope for legalising black money by paying a penalty.

Since independence, successive governments have offered various schemes for whitening money but the response has been lukewarm, according to finance ministry data.

According to data from the National Board of Revenue, Tk 18,372 crore was whitened between 1972 and 2017, with the NBR getting Tk 1,528.74 crore in taxes. Of the amount, Tk 9,682 crore was whitened during the tenure of the last caretaker government.

Khondkar Ibrahim Khaled, former deputy governor of Bangladesh Bank, said the opportunity was given in the past but the response was poor.

This is a good initiative from the perspective that the money would be invested in industries, he noted.

"But I have doubts whether any such move will be fruitful," Khaled added.

Transparency International Bangladesh Executive Director Iftekharuzzaman termed the scope of whitening black money "unconstitutional, discriminatory and unethical". "This will encourage corruption and illegal income," he said.

He said the scheme was unconstitutional as it was contradictory to article 20(2) of the constitution, that stipulated that the state shall endeavour to create conditions in which, as a general principle, persons shall not be able to enjoy unearned incomes.

It is also discriminatory, as it will provide advantage to particular groups going against the policy of everyone is equal before the law. According to Iftekharuzzaman, no country in the world offers scope for whitening black money. "It is very rare. Black money is discouraged across the globe," he said.

"Successive governments keeping the scope proves that our state is being captured by corrupt and influential people," he added.

Black money is largely attributed to tax evasion. Its direct impact is the loss of the government revenue. It also plays a role in buying political power.

There is no accurate data on how much black money Bangladesh has.

The Bangladesh Economic Association in May 2018 estimated that around Tk 5-7 lakh crore black money is used in the country's economy.

A finance ministry report prepared on the underground economy in 2012 implied that the amount of black money was around 45 percent to 85 percent of Bangladesh's gross domestic product.

A report of Global Financial Integrity published in January 2019 said some $5.9 billion was siphoned off from Bangladesh in 2015 through trade misinvoicing.