The analysts made the comments at a post-budget discussion jointly organised by The Institute of Chartered Accountants of Bangladesh and The Business Standard
- Tk16,000 crore has been whitened through this facility since the independence of the country
- Of the amount, Tk9,000 crore was whitened in 2007-2008 alone during the caretaker government
- DCCI President Shams Mahmud says the opportunity should be given for two to three months instead of one year
- CPD Executive Director Fahmida Khatun identifies the system of equal taxes for both the rich and the poor as a social injustice
Unlike on previous occasions, this time, analysts are not very critical about the facility to whiten black money offered in the budget – as they understand the economy is in dire need of money during this pandemic.
However, the finance minister surprised them with the way he has given the blanket facility – with huge tax benefits.
For Tk1 crore of legal income, a regular taxpayer must pay Tk25 lakh to the national exchequer, but under the latest offer a taxpayer must pay Tk10 lakh, regardless of whether the individual's income was legal.
Economists, businesses and professionals said this at a virtual post budget discussion organised jointly by The Business Standard and The Institute of Chartered Accountants of Bangladesh (ICAB) on Sunday. Planning Minister MA Mannan attended the event as chief guest.
"It is an injustice to those who pay taxes regularly," Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue, said on the way the government has given a blanket immunity to individuals holding black money.
She said this facility was given at different times in the past but people did not use it that much.
She said only Tk16,000 crore has been whitened through this facility provided by different governments since the independence of the country. Of this, Tk9,000 crore was whitened in 2007-2008 alone during the caretaker government.
She said, "No one would use this opportunity again this time if the government just kept the option without forcing it on anyone."
Mosharraf Hossain Bhuiyan, the immediate past chairman of the National Board of Revenue (NBR), said it was not the right move to give a chance to whiten black money with just 10 percent tax.
He said, "It could be in line with the regular rates plus a penalty – it may be symbolic."
He said a flat 10 percent tax cannot be imposed on all amounts. If someone is whitening Tk100 crore and another Tk10 lakh, it is not the same.
Shams Mahmud, president of the Dhaka Chamber of Commerce and Industry, said the opportunity to whiten black money should be given for two to three months instead of one year.
"It should have been given only in investment, not wholesale. It could increase the flow of money if the opportunity was given for a maximum three to four months to overcome the novel coronavirus crisis," he added.
Shams Mahmud demanded the speedy disbursement of the incentives packages announced by the prime minister to provide working capital support to companies affected by the novel coronavirus.
He added that businesspeople are in fear about the capital support of banks in the private sector as the government has set targets for a large borrowing from the banking sector.
The panelists criticised the budget's reliance on indirect taxes instead of direct taxes for revenue collection.
Mosharraf Hossain Bhuiyan said the tax system globally is direct taxes. "That means collecting money from the rich and spending it on the development of the state and poverty."
"In our country, burdens are placed on ordinary people by levying indirect taxes on goods and services. We tried to change it. However, in this year's budget, reliance on indirect tax has increased again."
Fahmida Khatun identified this system of equal taxes for both the rich and the poor as a social injustice.
She said in almost all the countries of the world, more than 50 percent of the total revenue is collected from direct taxes. "This is only 30 percent in our country."
Economists have termed the new imposition of a five percent supplementary duty on mobile recharges and the increase in excise duty on bank deposits unjust.
Ahsan H Mansur, executive director of the Policy Research Institute, said, "Mobile companies currently give 54 percent to the government. Following a five percent increase, it will be 59 percent. This will disrupt the business of mobile companies and increase the suffering of the public as well."
Criticising the increase in excise duty on bank deposits, he said, "A common man will deposit his hard-earned money in banks. Why should excise duty be paid on it at a compounded rate? Why should it increase every year?"
"On the one hand, the opportunity is being given to whiten black money and, on the other hand, a fine is being imposed for keeping hard-earned white money in banks," he added.
Calling it a bizarre structure, Mansur criticised the NBR for changing the system of income tax, VAT and customs sectors. He recommends a cost-benefit analysis before making any changes.
Dr Nazneen Ahmed, a senior research fellow at the Bangladesh Institute of Development Studies, said the increase in supplementary duty on mobile recharges would hamper the advancement of e-commerce and online activities.
She said people in villages are using the Internet through mobile phones – many are doing e-commerce business with mobile internet and many are studying through this. The supplementary duty will increase the cost of talking as well as disrupt this work. Internet cost will also go up due an increase in import duty on WiFi routers.
Nazneen Ahmed said the five percent increase in the supplementary duty on local cosmetics would have a negative impact on the business of women entrepreneurs and beauty parlors and demanded it be withdrawn.
Mosharraf Hossain Bhuiyan also proposed the excise duty on bank deposits and supplementary duty on mobiles be withdrawn.
Rakibur Rahman, director of the Dhaka Stock Exchange, said the announced budget did not give anything to the capital market.
He said none of the stock exchange's demands for the stock market were kept. He said a condition of a three-year lock-in for investing black money in the stock market has been imposed. On the other hand, if one keeps black money in the banks, there is no condition for a lock-in. In such a situation, no one will go to the stock market.
In his budget speech, the finance minister said it was not the government's responsibility to improve the stock market. The government will boost the economy and achieve growth. Criticising this statement, Rakibur Rahman said, "All the countries of the world keep the stock market well with incentives."
Former ICAB president Nesaruddin proposed lifting the three-year lock-in for the stock market investment of black money.
Speaking as the chief guest, Planning Minister MA Mannan said, "Listening to today's discussion, the budget seems to be a business-friendly budget."
He said the prime minister has described it as a recovery budget. The agriculture and health sectors have been prioritised. The increase in tax on mobile recharges, increase in excise duty on bank deposits are popular items. There is an opportunity to discuss this before the budget is passed.
"We have a challenge in financing the budget," he added. Efforts should be made to solve this by increasing the tax net. There has been discussion of unrestricted opportunities to invest black money. There is also a discussion about the effectiveness of this opportunity given by the government. "We are ready for reform. We are taking your feedback."
Earlier in his introductory speech, ICAB President Muhammad Farooq praised the budget for raising the minimum tax rate to five percent and the provision of a 50 percent fine for money laundering. He criticised the provision of 20 percent advance payment to appeal to the NBR in VAT cases.
He also mentioned, in the proposed budget, there is no direction of any government initiative to bring in foreign investment.
At the discussion, ICAB member Shahadat Hossain spoke about budget revenue and expenditure. Snehashis Barua then spoke about changes to income tax, VAT and customs – as well as their impact on public life and business.