The opportunity given to the holders of dirty money in the budget for the immediate past financial year had raised lots of hullabaloos. The honest taxpayers---their number is unlikely to be very large, in particular, were annoyed.
Economists and some business leaders protested the insertion of special provisions in the Income Tax Ordinance of 1984, saying that the scope given for legalising black money at a nominal tax rate was highly unfair.
Holders of black money got the legal option to whiten their tainted money by paying tax only at a flat rate of 10 per cent when regular taxpayers are subjected to the highest rate at 25 per cent. The special facility, however, meant for funds to be invested in certain economic activities.
Given such a situation, all concerned focused their eyes on the government's action concerning the issue in the national budget for the financial year (FY) 2021-22. The declaration of a record amount of tainted money during the just concluded financial year generated interest more than expected earlier.
In the months preceding the adoption of the budget, there was no obvious idea about the government's next move on the black money whitening issue. The finance minister's statement that legalising undeclared funds would continue created some confusion. Still, most people waited for the last actions in the budget for FY 2021-22. As the Jatiya Sangsad (national parliament) passed the Finance Bill-2021 on Tuesday last, the government's actual intention could be known.
The government has remodelled the special opportunity for black money whitening. It is found to be less generous this time. Those who intend to invest their undeclared money in the stock market will have to pay tax at 25 per cent along with 5.0 per cent penal tax. The conditions relating to an investment in the designated areas also are not as easy as those were before. Thus, the remodelled scope of whitening black money is likely to pacify the critics of the FY'21 opportunity, to a great extent.
One important condition that no agency will ask any question about the source of funds to be declared under the special facility has remained unchanged. The exemption will remain in force during the current financial year as well.
So, it needs to be seen which of the two conditions---low tax rate and unhindered investment opportunity---lures the holders of the black money.
In the immediate past FY, the special facility offered both--- flat tax rate of 10 per cent and exemption from any official probe--- when anyone volunteered to whiten his/her undeclared fund. This time, the first one has been made less attractive, but the second condition remains in place.
It is most likely that the remodelled opportunity would appear less attractive to the holders of black money. The scope for whitening money paying only 10 per cent tax might have attracted them most during the FY 2020-21.
In Bangladesh conditions, the threat of legal actions against the holders of tainted money is not taken very seriously. It is because the relevant agencies may be at best lukewarm in taking such actions. The reality is one can accumulate dirty money as much as one wants and use the same in any area. The instances of taxmen grilling anyone for holding undeclared funds have not been too many.