Whitening black money, how long?
Every year at the time of the announcement of the national budget, the issue of black money come forward. The process of transforming black money into white appears as a much-talked-about issue--while civil society, think tanks, rights groups and prominent citizens opine against it. This group argues that such an opportunity discourages honest taxpayers from paying taxes and encourages people to earn money through illegal means.
The National Board of Revenue (NBR) has recently disclosed that Tk 102.20 billion worth of undisclosed incomes have been legalised by 7,445 tax-payers during July-December 2020, yielding tax revenue of about Tk 9.40 billion. Economists were wondered by these figures, as there has been no such precedence of whitening such a huge amount in the past, although opportunities for whitening on a limited scale have been offered for a total of seventeen times having total amount of Tk. 180 billion since 1975.
Anti-Corruption campaigners in Bangladesh are also demanding to stop whitening black money in every budget since long and they viewed that the corruption is being patronised by the state of giving such facilities in repeated times.
But the government said that they are providing such facilities for enhancement of investment in our economy and it is being hindered the illegal money trafficking in abroad, as such they are whitening the black money from illegal source and paying taxes to the government exchequer. On the contrary, Transparency International Bangladesh (TIB), an Anti-Corruption watchdog, termed the matter as patronising corruption from the state and they said it cannot be continue for a long time. They also said government is saying to establish a good government, uttering repeatedly to fight zero tolerance policy against corruption, so it has proved as bistandard policy of the government to continue the whitening black money.
Black money, in general, indicates the accumulation of income that does not figure out in the accounts of books. It is the aggregate amount of income of an individual, acquired through illegal means. On the other hand, it also indicates the income of an individual obtained through legal means which is taxable, but the individual chooses not to pay the tax or report the wealth to the authorities. That is why it can also be termed as hidden money. As a result, this "black money" cannot legally be used in declared and formal business transactions without the proper green light from the authorities concerned.
In many forms, illegal transactions can help an individual or a business group to generate black money. Black money can come from two broad categories--illegal activities and legal but unreported activities. Illegally earned money is obviously not reported to the tax authorities, and so it is black money. The second category comprises income from legal activity that is not reported to the tax authorities. In addition, illegal economic activities that can generate black money also include bribery, gambling, smuggling, extortion, drug and illegal arms trading, work done by illegal immigrants, corruption, tax evasion, information hiding in land and building registration, money laundering and hundi business, terrorist activities and tax free vehicles by MPs, etc.
In the running budget for the 2020-21 financial year, the government has gone for allowing a whitening of black money through investments in the stock market and the real estate industry against a certain percentage of tax for one year starting from July 1, 2020. As stated by the finance minister in his budget speech: "Regardless of the provisions of any other prevailing law of the land, individual taxpayers will be allowed to disclose any type of undisclosed house property including land, building, flat, and apartment between July 1, 2020 and June 30, 2021 on paying tax at a particular rate on per square metre of the said asset.
Individual taxpayers will also be able to make any disclosure of undisclosed cash, bank deposits, savings certificates (Sanchayapatra), shares, bonds or any other securities between 1st July 2020 and 30th June 2021 on paying taxes at a rate of 10 per cent on the value of the said declaration; and no authority including the income tax authority can raise any question on such declarations.
Moreover, clause 19E of the income tax ordinance has already provided opportunity to legalise or disclose any amount of 'legal undisclosed income' by paying additional 10 percent tax. The tax authority will not raise any question regarding the sources of fund. The clause 19E has been added in the income tax ordinance permanently after the resumption of power of the ruling government during 2012. Earlier, army-backed caretaker government has scrapped all provisions of such disclosure.
There is no recent study on how much money was whitening from black money but a study of World Bank in 2005 found that the amount of black money was 37.7 per cent of the total GDP in Bangladesh during 2002-2003 period. On the contrary, a study of the Finance Division of Government in 2011 found that the amount of black money was 62.75 percent of the total GDP in Bangladesh during 2010 period and it was the highest figure in Bangladesh history. The study also found that the average amount of black money was 35.6 percent of the total GDP from 1990 to 2000 whereas it was only 7 per cent in 1973 just aftermath of our independent.
Whitening of black money in the national budget is against the article 20(2) of the Constitution. It is immoral as it rewards illegal and corrupt behaviour and discourages honesty. It is a clear violation of the Government's own good governance commitment. It also discriminates against honest customers of the real estate sector and would encourage people to take illegal path of earning income, Not only is the government pushing the real estate sector to be captured by corruption, but sending a message to the society that the government is the protector of corruption and illegality.
Once one of our former finance ministers said, "Politics may indeed be a game of compromise, but if the core principles of honesty, constitutionality, equality of all and justice are compromised for politics, then politics will have nothing to do with public interest and democratic values".
According to the TIB, this process of whitening black money should be stopped permanently as the amount of tax collection is negligence amount against the facility offered since long. They viewed that the government will actively consider their plea to establish a good governance and corruption free society.
An illegal task cannot be legalized through a legal form for a long time and it cannot be acceptable. Definitely it is used to make frustration among the honest taxpayers, deter the new taxpayers and ultimately it will encourage the corruption among the dishonest peoples. Basically, it patronises corruption and this whitening of black money should stop permanently not only for good governance, but also uproot the corruption from every level of the government.
The writer is a banker and