• Wednesday, Aug 17, 2022
  • Last Update : 04:24 pm

Whitening black money approved, move draws both criticism and praise

  • Published at 09:18 pm June 29th, 2021
Black undisclosed money whitening

A total of 10,034 taxpayers have whitened their black money worth Tk15,000 crore in the first nine months of the current financial year

The holders of undisclosed income can whiten their money without any question, according to the Finance Bill 2021 passed in the parliament on Tuesday.

This bill permits whitening of undisclosed money through investments in the capital market, purchase of land and properties, or establishment of new industries for the next fiscal year. 

No questions will be asked about the sources of the income and the holders have to pay taxes at specified rates. 

Finance Minister AHM Mustafa Kamal moved the bill in the house and it was passed by voice vote.

The passage of the bill means a continuation of the government’s policy of whitening undisclosed money — popularly known as black money — for what it argues is in the greater interest of the economy.

Also read - Kamal: Black money strengthened stock market

But many disagree with the notion, saying instead that this is against economic good governance and contradictory to the government's policy of zero tolerance against corruption.

Talking to Dhaka Tribune, Professor Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), said that this kind of flexibility will not bring any results in the long run.

“The decision of unquestioned amnesty of whitening black money will only benefit a certain group and honest taxpayers might be demotivated and demoralized by this decision,” he said. 

He added that the government needs to put more emphasis on implementing the existing laws against tax evasion, corruption, money laundering and capital flight.

“Institutions involved with these, such as the BFIU, need to be strengthened and a link between the central bank, the NBR and other banks needs to be established to identify those who are evading taxes and to take immediate action against them,” he further said.

“Instead of giving this opportunity every year, we have to look at enforcement through which it is possible to increase our tax-GDP ratio,” he suggested.

According to the bill, undisclosed income holders have to pay a higher tax of 25% on their undeclared income and have to pay 5% penalty on the computed tax amount while whitening their undisclosed money by establishing factories in the fiscal year 2021-22.

Holders can also whiten their black money in cash by depositing those in banks, buying savings certificates, or investing in the stock markets.  

Moreover, money can be whitened by buying lands and flats with paying the tax per square metre depending on the location of property, according to the Finance Bill 2021. 

This opportunity will be available from the start of FY22 and will remain unchanged till July 2022. The opportunity to set up new industries in economic zones and high-tech parks with 10% tax is also going to be continued.

The bill was passed partly in response to the demands of market participants including Bangladesh Securities and Exchange Commission, Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange.

Shakil Rizvi, director of the DSE, welcomed the government's decision and said that this opportunity will be “very good” for the capital market.

“The new opportunity of unquestionable amnesty of whitening undisclosed money will encourage investment. Our capital markets are having a hard time during the pandemic and I think it is a good decision to go through this transition. There is a shortage of investments and it will increase.” 

Also read - Budget FY22: Money whitening scheme awaiting govt decision

He also said that the large amount of black money has to be brought into the mainstream economy.

“This opportunity will discourage money laundering, capital flight and increase investment, which will also play a role in increasing employment in the country,” he added.

“But the tax rate has become a little higher; 20% tax would have been better. Anyway, we still welcome the decision,” said the DSE director. 

A total of 10,034 taxpayers have whitened their black money worth Tk15,000 crore in the first nine months of the current financial year.

Taxpayers did not take the opportunity to whiten black money by investing in the stock markets, however. 

From July to March, only 341 investors had invested their black money in the stock markets, said a source from DSE.