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Unexposed money should be allowed for investments thru' taxation -The Asian Age

 
A number of financial scholars have stated that the owners of unexposed money should be allowed to invest their money in stock markets as well as in industries. In the same way people who have siphoned away their unexposed money to overseas locations, should be allowed to retrieve the transferred funds and utilize the money for beneficial purposes inside Bangladesh. It will generate revenue for the government at the same time it will boost investments. This initiative will also discourage people from laundering money to foreign countries.

2,313 persons availed the facility up to February this fiscal year paying Tk 951.5 million in income tax, according to a recently compiled data of the National Board of Revenue (NBR). A total of 11,839 people whitened about Tk20,500 crore in 2020-2021 fiscal year - the highest in the country's history in a single year. Last year, the government received a record response -- the highest since independence -- to the money-whitening scheme with some 12,039 people having mainstreamed their undisclosed income by paying Tk 19.80 billion in taxes.

In the budget for current fiscal year, the government jacked up the tax to 27.5 per cent -- the highest tax rate for individual taxpayers -- for legalizing undisclosed income. It was a 10-per cent flat rate during 2020-2021 fiscal year.

As per the Finance Act 2021, no authority will raise any question about sources of the tainted money if it is disclosed under the scheme, which, according to the economists, attracts ill-gotten money to get whitened.

Following trend of the previous year, the highest response has been received about investment in movable and immovable property, cash etcetera.

Analysts think infiltration of 'black money' through this open window inflates property prices, sending housing facilities beyond commoners' reach.

In the current FY, until February, some 2,258 taxpayers had paid Tk 922.9 million under section 19A availing special tax treatment in respect of undisclosed property, cash, savings certificates etc, according to NBR data.

Last FY, the taxmen mopped up Tk 19.40 billion in taxes from 11,755 people who availed the money-whitening opportunity.

Under Income Tax Ordinance1984, undisclosed money holders can avail the whitening opportunity under three provisions: investment in capital market, land and flats, debenture or other securities.

Under section 19A, 46 people whitened Tk 27 million by investing in stocks on the capital market in the first eight months of the current fiscal year availing special tax treatment in respect of investment in securities.

In the last fiscal year, some 284 people whitened money through investing in securities by paying Tk 403 million as taxes.

Under the section, securities mean stocks, shares, mutual-fund units, bonds, debentures and other securities of the companies listed in and approved by the Bangladesh Securities and Exchange Commission (BSEC) and all other government securities and bonds tradable on the capital market.

To legalize money, the securities investors are required to pay the tax within 30 days of such investment.

In case of withdrawal from the capital market within one year of investment, starting from the day of such investment, an additional amount of penalty at a rate of 10 per cent on the withdrawn amount will be payable at the time of assessing the tax files.

Investment under the scheme on securities was moderate in the past year, too, compared to other areas as 286 individuals disclosed Tk 4.0 billion.

In the period between 2005-06 and 2019-20, a total of Tk 145.95 billion worth of undisclosed income had been formalized under such fiscal amnesty.

According to the income tax ordinance, investors in new industrial undertakings are allowed to whiten money paying tax at a flat rate of 10 per cent. To attract investment in hi-tech parks and economic zones, the government has kept the same window of opportunity open until June 30, 2024.

Also, there is a permanent provision on voluntary disclosure of income by paying 10-per cent penal tax in addition to the normal rate of tax.

Former adviser to caretaker government Dr. Wahid Uddin Mahmud said, "It is not bad if people having unexposed money are allowed to invest their money inside Bangladesh paying taxes to the government. It will prevent unexposed money from being laundered abroad. At the same time people need to be motivated to comply with financial rules and abstain from storing black money."

Dr. Zahid Hussain, former lead economist of World Bank, Dhaka office, said, "The government should take necessary measures to build up an investment-friendly ambience in Bangladesh so that people feel encouraged to keep their money inside the country instead of transferring money abroad."

Eminent economist Dr. Hossain Zillur Rahman said, "The opportunity to whiten black money should be provided on a temporary basis. It is not good for economy to whiten black money on a regular basis. Unexposed money can be invested in share markets, real estate sector, industries etcetera. However, the concerned amount of tax will have to be paid to the government by the owners of undisclosed funds."

Dr. Nazneen Ahmed, Senior Research Fellow of Bangladesh Institute of Development Studies (BIDS), said, "If money laundering can be resisted by legalizing unexposed money, it is good. But this privilege should not be given permanently."