Govt to allow black money investment with penalty
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WEDNESDAY, AUGUST 17, 2022
Govt to allow black money investment with penalty

Economy

Jasim Uddin
23 June, 2021, 10:30 am
Last modified: 23 June, 2021, 11:05 am

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Govt to allow black money investment with penalty

Undisclosed bank deposits and savings instruments will also be allowed to be legalised on similar conditions

Jasim Uddin
23 June, 2021, 10:30 am
Last modified: 23 June, 2021, 11:05 am
Infographic: New Opportunity for Investing Black Money
TBS Info

The government is going to allow the investment of untaxed money in the stock market in the next fiscal year beginning from 1 July, subject to paying 25% tax plus a 10% penalty on the payable tax, according to sources at the finance ministry. 

Undisclosed bank deposits and savings instruments will also be allowed to be legalised on similar conditions.

The government will also offer an opportunity to legalise undisclosed property such as flats, paying Tk200-Tk6,000 for per square metre depending on sizes and locations, alongside the penalty. 

Finance Ministry officials said the National Board of Revenue (NBR) on Tuesday sent such a proposal responding to demands from the business community and other stockholders. 

The NBR has also incorporated a legal indemnity provision in the finance bill amendment to bar relevant government agencies from asking any question about the sources of such tainted money.

As per the NBR proposal, the applicable rate will be 25% – the highest tax rate for an individual investment in the stock market, and a 10% penalty on the tax amount for ensuring justice to other regular taxpayers.

If anyone withdraws the investment before one year, he/she must pay another 10% in additional penalty, ministry officials added.

The officials also mentioned that the government is offering the opportunity to make scope for investment of undisclosed money to bring that into the formal economy, which also helps prevent capital flight. 

The finance bill placed in parliament on 3 June does not have any such provision for whitening undisclosed money.

As per the proposed provision, people who will avail the facility to invest in securities such as stocks, mutual funds and bonds will have to pay a total 27.5% tax (25% regular tax and 10% penalty on tax amount) within 30 days of their investments.

However, in the outgoing fiscal year, there is a provision offering the black money whitening facility by paying only a flat 10% tax. 

The current black money whitening provisions – special tax treatment in respect of investment in securities and special tax treatment in respect of undisclosed property, cash, etc. – in the Income Tax Ordinance 1984, will be scrapped in the upcoming budget if decided so.

NBR officials said in the first nine months of the current fiscal year, 10,034 people legalised cash and assets worth Tk142.95 billion under the scheme. The NBR received Tk14.39 billion in taxes against the disclosure.

Of them, a total of 9,693 people whitened Tk138.60 billion mainly in cash, fixed deposit receipts, saving certificates and assets. They have paid Tk13.90 billion in taxes against the disclosure.

Also, s341 people legalised Tk4.35 billion through investment in the capital market and paid Tk490 million in taxes.

There is currently no accurate statistics on the amount of black money in the country. But a finance ministry report in 2010 revealed that the amount would be around 37% of Bangladesh's GDP.

Besides, the US-based think tank Global Financial Integrity (GFI) revealed that Tk5,30,000crore have been laundered from Bangladesh in the ten years between 2005 and 2015. The organisation estimates that more than Tk50,000crore is being laundered out of Bangladesh every year.

According to a survey conducted by the Bangladesh Economic Association in 2018, undisclosed money amounting to Tk5-7 lakh crore is being circulated in Bangladesh's economy annually. 

Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry, said, "Allowing the black money investment by imposing a penalty is a good initiative. But the amount of penalty is too low and not acceptable. The government should make a reasonable difference between the regular tax rate and the untaxed money legalising penalty."

Abul Kasem Khan, chairman of BUILD Bangladesh, "The black money whitening penalty should be at least 35% as the total tax burden of high-income group goes over 35% as they need to pay tax on wealth too."

Top News

black money / Whitening Black Money

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