• Thursday, Sep 23, 2021
  • Last Update : 05:45 pm

Budget FY22: What about money whitening?

  • Published at 10:51 pm June 3rd, 2021
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Allowing the provision discourages honest taxpayers, say observers

The proposed budget for the 2021-22 financial year has no clear instruction on the continuation of the existing provision for whitening black money under certain conditions — leaving many to wonder whether it is the end of the scheme this June.

Even though Finance Minister AHM Mustafa Kamal recently said that the government would retain this facility in the next fiscal year, he did not mention it in his budget speech on Thursday.

There is no mention of the matter in the Finance Bill too.

He, however, told the parliament that during the current fiscal year till February, as many as 9,623 taxpayers had whitened black money worth Tk1,386 crore.

“This additional revenue was very helpful for the economy during the Covid-19 pandemic,” the minister said.

Under the provision of allowing previously undisclosed income to invest in the capital market with some reasonable conditions like mandatory one-year lock-ins, some 311 taxpayers have paid income tax of Tk43.54 crore as of February this year. This additional liquidity has strengthened the market, according to Finance Minister Kamal.

According to Bangladesh Economic Association, Tk54.8 lakh crore was whitened in the last 10 years.


Also Read - Kamal: Black money strengthened stock market


However, even if the facility is canceled, it is not the end at all. The system of whitening black money paying additional tax fines is still in force under the existing income tax law.

But the existing fiscal year 2020-21 grants a special “opportunity” with 10% tax to cover undisclosed money or black money investments in the capital market, cash, fixed deposits, land-flat returns shown and whitewashed. This opportunity is available till June 30.

There has been strong criticism of the special benefits of whitening black money only at 10% tax. The civil society and research institutions have strongly opposed it. Even several business organizations and business leaders have sharply criticized the facility, describing it as discriminatory.

The highest tax rate in the country is 25%. Many honest taxpayers have to pay that. But those who accumulated a mountain of money by depriving the government of revenues, even by evading taxes, have the opportunity to legalize money through only 10% tax.

If this trend continues, honest taxpayers will be discouraged from paying taxes in future, they say.

Even the National Board of Revenue (NBR) is reportedly opposed to the facility.

The existing income tax law gives the opportunity to legalize black money with a 10% penalty with applicable tax.

Speaking to Dhaka Tribune, senior Awami League leader Mahbubul Alam Hanif said: “Ethically, we are against black money. As long as the budget documents are presented before us, we have not seen any provision of whitening the black money yet.”

He said that earning black money should be discouraged. “Businessmen do not earn black money but the service holders do. As the government is giving more facilities for the service holders, I think they should stop earning black money," Hanif added.

Dr Iftekharuzzaman, executive director of Transparency International Bangladesh (TIB), also praised the government for not mentioning the provision of laundering undisclosed money in the proposed budget.

In a statement on Thursday, he said: "Amid strong objections and protests from all quarters, the decision of the finance minister not to renew the money whitening scheme in the forthcoming budget can be taken as an understanding of the government."

He hoped that the authorities would not continue to use this “unethical benefit as it undermines the legal status of the Income Tax Ordinance or under the pressure of vested interests” and stop this practice by respecting the prime minister's statement of “zero tolerance against corruption.”

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