In the first six months of the current fiscal year, 7,650 people have legalised Tk10,220 crore of untaxed money
The investment of money earned from undisclosed sources in a fiscal year has reached a record high in the first six months of the ongoing 2020-2021 fiscal year, amid the novel coronavirus pandemic.
As of 31 December 2020, some 7,650 people have legalised Tk10,220 crore of untaxed money through investments in various sectors, including the stock market and real estate.
Earlier in the 2007-2008 and 2008-2009 fiscal years – during the regime of the military-backed caretaker government – Tk9,682.99 crore of black money was whitened, which was the highest amount in Bangladesh's history.
The government has provided the opportunity to invest money earned from undisclosed sources in various sectors – including the stock market and real estate – to overcome the fragile state of the economy brought about by the novel coronavirus pandemic.
According to sources at the National Board of Revenue (NBR), 7,445 people have deposited their black money in banks and/or invested in the housing sector. The NBR has received Tk940 crore in revenue from the investment of around Tk10,000 crore in these two sectors.
Meanwhile, 205 taxpayers have invested Tk228 crore in the stock market paying 10% tax. The government has earned Tk22.84 crore from this.
NBR Chairman Abu Hena Md Rahmatul Muneem said special facilities have been offered this year to allow for the investment of black money to boost the economy, increase investment and develop the capital market. "Taxpayers have responded to this opportunity in an unprecedented way. This opportunity will continue till 30 June, 2021," he added.
"The government will not ask people who whiten their black money by paying tax about the source of their income," he said, adding that investment of money within the country is better than capital flight in every way.
However, economists do not see this move in a positive light. They say providing the opportunity to invest black money by paying a 10% tax has reduced government revenue and discouraged honest taxpayers.
Dr Mostafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told The Business Standard that the government would have received over Tk2,500 crore in revenue had the money been invested through proper tax collection.
"Providing the opportunity to invest black money by paying 10% tax means to compromise with illegal income earners. This discourages honest taxpayers," he observed.
He also argued that the government can catch these illegal asset holders by taking various measures including increasing the capacity of the NBR and automation.
This facility is available for only one year – from 1 July 2020 to 30 June 2021. It should be noted that a maximum of 25% tax can be imposed on the disclosed income of any individual taxpayers, but it is only 10% on undisclosed wealth.
Since the independence of Bangladesh, most governments have provided the opportunity to whiten black money, but the initiatives have mostly failed to get any serious attention, as various government agencies have been able to seek information about the source of the income of undisclosed origin.
Therefore, the NBR amended the law in 2020 so that no one could seek information about the source of the black money during or after the whitening process.
Individual taxpayers whitened undisclosed money amounting to Tk450 crore in fiscal year 2015-2016, but there is no data after that, said NBR sources.
However, the NBR added that Tk9,682.99 crore was whitened during the caretaker government era, while this amount is Tk13,372 crore during the 44 years between 1972 and 2016. The government also earned revenue amounting to Tk1,454 crore from this process.
9% increase in number of taxpayers
Income tax return filings have increased by 9% in the current financial year compared to last year. As of 31 December, 2020, some 24,09,357 taxpayers have filed income tax returns. From this, the government has earned around Tk3,500 crore in revenue.
Last fiscal year, 22,20,000 people filed income tax returns and the revenue earned from those returns amounted to Tk3,120 crore.
The NBR chairman said the revenue board is working by attaching the utmost importance to the political directives of the government.
Based on discussions and partnerships with taxpayers, the NBR has achieved 4.73% growth in income tax in the first six months of the current fiscal year.