The presentation of the national budget for the fiscal year (FY) 2017-18 is less than a couple of months away. As usual the debate over granting the opportunity in the budget for 'whitening black money' is on again.
If not others, the real estate developers have been demanding persistently the opportunity to invest 'undisclosed money 'with nobody asking any question about the source.
However, different people look at the issue of black or undisclosed money from different angles. Some are staunchly against giving any opportunity to invest undisclosed money while some others tend to demonstrate a soft attitude towards any move designed to mop up resources as much as possible.
The Transparency International, Bangladesh (TIB) executive director in a statement issued Tuesday last urged the government not to allow the investment of undisclosed money in any area of the economy, including the real estate. His appeal came against the backdrop of the demand made by various quarters, including the real estate sector, for unhindered investment of undisclosed money. The proponents of the hindrance-free investment of such money are asking for one particular favour--- no agency will ask any question about the source of money.
The reality is that the Income Tax Ordinance does provide opportunity to invest undisclosed money in the real estate sector under the provision 19BBBBB by paying revenue to the government exchequer at varying rates, depending on locations of the property before the assessment of a tax assessment year. Besides, under clause 19C one can legalise his/her undisclosed income by paying penal tax at the rate of 10 per cent in addition to normal tax rates.
The issue, thus, is the scrutiny of the undisclosed money invested in areas allowed by the government. It does appear rather surprising as to why people do raise the issue of scrutiny of the source of undisclosed money every time before and after the presentation of the budget.
The National Board of Revenue is legally mandated to levy or exempt tax or hike or reduce its rate. It is not authorised to search the source/s of the money one earns. Constitutionally, the Anti-Corruption Commission (ACC) is authorised to locate the source of the money, if it desires so, and institute cases against the holders of funds earned through corrupt practices.
"It is a matter of ACC and other entities, not taxmen, to find out legality or illegality of the money (undisclosed)", noted economist Dr. Wahiduddin Mahmud told a pre-budget meeting with NBR in Dhaka last Tuesday.
Yet the governments with a view to mopping up revenues at times exempt holders of undisclosed or black money from prosecution if the latter whiten their wealth paying taxes at very high rates. The Bangladesh government offered the opportunity to whiten black money on a number of occasions since 1975. But barring one or two occasions the outcome was not that impressive. In neighbouring India, in 2016, the government allowed whitening of black money between June 01 and September 30 by paying tax at the rate of 45 per cent that includes 7.5 per cent surcharge and 7.5 per cent penalty.
It is often argued that any kind of rebate for disclosure of undeclared income comes as a disincentive for the genuine taxpayers. None would dispute such an argument. But in a country where the size of the black or underground economy constitutes nearly half of the formal economy and the government can hardly do anything substantial to reduce its size, getting some revenue by levying tax on undisclosed income or black money at higher rates need not be discouraged.
However, there should be no reason to oppose in any form the ACC's efforts to nab the holders of the ill-gotten wealth and confiscate the same.