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Economists and policy advocates say 'no' to whitening black money

  • Published at 06:10 am May 18th, 2013
Economists and policy advocates say 'no' to whitening black money

The government may continue its policy of whitening undisclosed incomes through fines, apparently under pressure from the business community, reports say.

Economists and policy advocates oppose the provision of whitening black money calling it “unethical and of no significant benefit to the economy.”

“It’ll be frustrating if the government allows black money in the next budget again. It’s just a showing of the thumb to the constitution,” Transparency International Bangladesh (TIB) executive director Iftekharuzzaman said yesterday.

The chief of the corruption watchdog gave reasons to oppose it: “It’s constitutionally illegal and it’s ethically unacceptable.”

“It is just like rewarding the illegal earners instead of punishing them and discouraging those who are earning legally and paying taxes honestly,” he added.

There is no evidence that the whitening has brought any significant benefit to the economy, Iftekharuzzaman said.

He also said the government had an election pledge to fight graft and it had broken the commitment by allowing black money into the economy.

Mustafa K Mujeri, Director General of the Bangladesh Institute of Development Studies (BIDS), also opposed the provision and emphasised on expanding the tax net gradually instead.

Mujeri said he does not think that the economy got benefited from whitened black money.

“A large number of people still remain outside the tax net. The revenue collection won’t increase if these people can’t be brought under the net,” he said.

The economist suggested that these people could be asked to pay some “token money”, which would gradually lead to regular tax payments.

Economist and chairman of Unnayan Onneshan, Rashed Al Mahmud Titumir said the government needs to concentrate on structural reforms to expand the tax net to increase revenue collection for meeting the revenue shortfall.

“The government should also take stricter measures against tax evasion,” he said.

Finance Minister AMA Muhith has been known to defend the policy for whitening undisclosed money by fines, saying it is practiced internationally. “Black money also exists in the US economy. It’s very difficult to remove black money from the economy,” he is reported to have said.

The minister has supported his arguments by quoting some studies and surveys which claim that black money in Bangladesh represents 40-80% of economy.

Most of this black money is engaged in the real estate sector, Muhith says.