Liberal act, little gain
Only Tk 500 crore was whitened in the first 10 months of fiscal 2012-13 under the new provision that gives amnesty to black money in return for full payment of outstanding taxes and fines.
The figure, which is only 0.12 percent of the estimated black money circulating in the economy, yielded Tk 139 crore in tax to the state coffers, according to National Board of Revenue (NBR).
Black money, according to NBR, is “undisclosed” money against which no tax was paid.
The exact amount of undisclosed money in the economy cannot be determined, but Finance Minister AMA Muhith, in his post-budget press briefing on Friday, said it is “at least 40 percent of the GDP”.
The country’s GDP, at present, stands at Tk 10,37,987 crore; so based on Muhith’s citation, the amount of black money in the economy is at least Tk 4,15,194 crore.
For fiscal 2013-14, the government has proposed extending the scope to whiten undisclosed money via the housing sector without questioning the source of money, which the economists argue would be counterproductive for the economy.
The Centre for Policy Dialogue, the country’s pre-eminent think-tank, in its post-budget reaction said the provision would act against the growth of industries as the prices of land, which is already high, would skyrocket.
When in fiscal 2007-08 and 2009-10, the government gave scope to whiten money via real estate, it did actually cause the prices to spiral somewhat, particularly in urban areas.
A flat that cost Tk 32-35 lakh eight years ago now costs upwards of Tk 2 crore, Mubasshar Hussein, president of the Institute of Architects Bangladesh, told The Daily Star.
“The price of construction materials did not show any significant increase, so the reasons for the phenomenal rise in flat prices are the skyrocketing price of land and the injection of black money to the real estate sector,” he said.
In fiscal 2007-08, some 1,651 people legalised their undisclosed money by investing in real estate, which raked in Tk 81.70 crore in taxes for the NBR.
In fiscal 2009-10, after the present government assumed power it listed four sectors which included real estate via which amnesty to black money could be attained. A total of 1,320 people availed themselves of the opportunity and NBR received Tk 28.91 crore in taxes.
Since independence, every government has given amnesty to black money, but it did not bring in substantial revenues for the NBR. Between 1971 to April 2013, a total of Tk 13,516 crore of undisclosed money was legalised, against which Tk 1,407 crore was received.
It is often said that black money holders prefer to launder their money abroad instead of availing the government provisions for amnesty.
A report of Global Financial Integrity published in December 2012 estimated that Bangladesh has had an illicit financial outflow of around $14 billion during 2001-2010.
The report said the most black money flight took place in 2006, 2007, and 2010, with the corresponding figures being $2,778 million, $2,737 million and $2,367 million.
TIB STATEMENT
The provision of legalising black money is an example of institutionalisation of corruption, Transparency International Bangladesh (TIB) said yesterday.
TIB considers it unconstitutional, immoral, discriminatory and contradictory to the government’s election pledge, Dr Iftekharuzzaman, executive director of the graft watchdog, said in a statement.
“[The scope for] whitening black money as proposed in the national budget is against the spirit of article 20 (2) of the constitution. It is immoral as it rewards illegal and corrupt behaviour and discourages honesty. It’s a clear violation of the government’s own electoral commitment.”
He said it would also discriminate against honest customers in the real estate sector and encourage people to earn beyond legal means.
Available evidence, including the finance minister’s statement, renders any financial argument illogical and unacceptable for such a provision, as no substantial revenue has been earned as a result of the provision over the years, Iftekharuzzaman continued.
“Politics may indeed be a game of compromise, as the minister told the media, but if the core principles of honesty, constitutionality, equality of all and justice are compromised for politics, then politics will have nothing to do with public interest and democratic values.”
