Around 3,220 individuals have taken the advantage of the black money whitening opportunity by investing their undisclosed money in the real estate sector by paying 10 per cent tax in the current fiscal so far.
Some 3,358 individuals of different professions have whitened around Tk 35 billion so far. Of them, 3220 people have invested black money in land or apartment purchase, allowing the government to earn Tk 3.81 billion in revenue. The remaining 138 people invested in stock markets by paying Tk 188.4 million in taxes, according to information received by National Board of Revenue (NBR).Though the NBR yet to disclose the amount of money whitened so far by paying 10 per cent tax, it assumed that the volume may not be below Tk 35 billion as the government earned Tk 4.1 billion in taxes from whitening of undisclosed money.
Usually, black money refers to the money that is legal income in Bangladesh but has not been shown in income tax returns.
But replying a quarry, Finance Minister AHM Mustafa Kamal said no matter whatever in the laws of Bangladesh, if someone disclosed black money with paying 10 per cent tax, no one will question him or her about the source of that income. As a result, it is not certain whether this money is legal or illegal income, whose source is not legal. Only legitimate undisclosed income has the opportunity to be whitening, but in reality, a lot of illegal money becoming legal through this process, economists said.
According to a survey of the Ministry of Finance (MoF) in 2011, some 62.75 per cent of GDP is black money. According to a World Bank survey, the amount of black money in Bangladesh from 1990 to 2000 was 35.6 per cent or 7 per cent GDP in 1971.
“The privilege will set a bad example in institutionalising corruption instead of removing it from society,” Dr AB Mirza Azizul Islam, an adviser to a caretaker government, said, adding, "Honest taxpayers will be discouraged and corrupt persons will be encouraged by this move."
"While the provision to legalise black money is already much criticised, loosening the grip further is a sign of the government's leniency towards corruption," he added.It will negatively impact the national economy too, he noted, pointing to no notable yield being there from such facilities in the past.
Centre for Policy Dialogue (CPD) senior economist Khandaker Golam Moazzem said the honest taxpayers are discouraged in this system because of black money, there is a flat rate of 10 per cent tax while the honest taxpayers are paying up to 35 per cent tax.
"The economy needs to have a system to identify who actually owns black money," he said. “If that is possible, the source of black money will be stopped,” he added.
Earlier, the government has widened the scope for whitening of black money in almost all sectors from stocks, real estate to bank deposits in the proposed budget for the fiscal year 2020-2021.
Untaxed money holders will not face any question about the sources of their income while whitening their undisclosed money, paying a flat 10 per cent tax to invest in the capital market, deposit into banks, and invest in savings certificates, bonds or any other securities.
Undisclosed house property can also be legalised by paying a certain amount based on the size and location of the property.
This provision is effective for one year starting from July 1, 2020.
According to the new budget proposals, individual taxpayers will be able to make any disclosure of undisclosed cash, bank deposits, savings certificates, shares, bonds or any other securities between July 1, 2020, and June 30, 2021, through paying taxes at a rate of 10 per cent on the value of the declaration. Any individual can invest money in the capital market in the same period and show it in his or her tax returns on paying tax at a rate of 10 per cent on the value of the investment subject to satisfying certain conditions, including a lock-in period of three years.
Any individual also can disclose any type of undisclosed house property including land, building, flat and apartment in the new fiscal year by paying tax at a particular rate per square meter of the asset.
The finance minister said this move will increase the flow of money into the mainstream economy, generate employment and enhance the collection of tax revenue.