Scope for whitening black money ends

The interim government has finally scrapped the controversial provision allowing the legalisation of undisclosed income through the purchase of apartments and land in the upcoming fiscal year.

"We have made one of the most significant decisions regarding undisclosed income by completely withdrawing the provision," said Finance Adviser Salehuddin Ahmed at a press conference yesterday after the advisory council approved the Tk 790,000 crore budget and Finance Bill 2025.

The development comes following widespread criticism from civil society, economists and anti-corruption watchdogs, who argued that the provision would legitimise illicit wealth and discourage honest taxpayers.

The past government had initially offered a blanket provision for black money allowing it to be whitened at a 15 percent tax rate.

"But we scrapped that as soon as we came into office. The second option we considered was permitting some exaggerated valuation, but we ultimately decided it was no longer necessary. That provision has been completely withdrawn."

The real estate stakeholders are saying flat sales may drop as a result, he said.

"Around 50 to 60 types of professionals are involved in this sector, from masons to painters. Still, I am not saying those with money won't buy flats. Maybe they will just pay a higher tax. So we have completely rolled back that earlier provision."

When asked whether the provision was scrapped due to criticism, he said: "Definitely, we considered that. Besides, there was strong public demand."

On June 2, the government unveiled the finance bill retaining the scope to legalise untaxed assets through investment in real estate but at a much higher cost.

Earlier, Transparency International Bangladesh warned it would fuel corruption, while the Centre for Policy Dialogue described it as a betrayal of the spirit of the July Uprising.

Welcoming the decision, Iftekharuzzaman, executive director of TIB, said this can be a good precedent for the future.

"However, we call upon the relevant authorities to be on guard against any possible manipulation that may facilitate the same evil practice in disguise in the name of investing undisclosed income."

There can be no clear dividing line between undisclosed income and black money, he said.

"While one may fail to fully disclose a fraction of income, no sensible, honest income earner can keep or bring from abroad large amounts in crores for any investment, including real estate, unless the source is illegal."

If such scope is kept, it will imply deception with the public and be self-defeating for the government, he added.

"This is a positive move," said CPD Executive Director Fahmida Khatun.

Allowing black money whitening provision is unethical and discriminatory against honest taxpayers.

Such a provision encourages the accumulation of unearned money through various means, she added.

Meanwhile, the government has granted value-added tax (VAT) exemption at the production stage of cotton produced through the recycling of garment waste (jhut).

The government also VAT exempted the import of ballpoint pens and the rent of space and premises for beauty parlours operated by women entrepreneurs.

Besides, advance tax exemption has been granted on the import of heart stents and eye lenses.

At the customs' end, the government has reduced the import duty on crude petroleum from 5 percent to 3 percent and on other petroleum products from 10 percent to 6 percent.

To make equipment related to solar power generation more accessible, the import duty on solar inverters has been reduced from 10 percent to 1 percent, according to the finance ministry statement.

To encourage the production of quality tyres in the country, the import duty on one of the key raw materials "Technically Specified Natural Rubber" has been halved to 5 percent, it said.

In a separate measure, the government has reduced the withholding tax on property transfers.

The existing rates of 8 percent, 6 percent and 4 percent have been brought down to 5 percent, 3 percent and 2 percent respectively.