Black money whitening: Experts call for distinction between legal and illegal income

The proposed budget gave an opportunity to legalise black money with a 15% tax but did not provide a distinction between legitimate and illegitimate income, according to the Institute of Chartered Accountants of Bangladesh (ICAB). 

In a post-budget press conference at the ICAB office in Dhaka today, Md Humayan Kabir, former president of ICAB, said the budget should have provided a distinction in this regard.

While not wanting to comment on the benefits of legalising undisclosed money at the individual level, Mohammed Forkan Uddin, president of ICAB, argued in favour of such benefits given to companies.

“Before 2020, many companies used to submit multiple financial statements. After the introduction of the online document verification system in 2020, they are not able to show many assets due to inconsistencies or irregularities with the previous year’s financial statements.

“As far as we know, the government was already thinking about how to give amnesty to the companies in this regard,” Forkan said.

Meanwhile, Fahim Mashroor, former president of the Bangladesh Association of Software and Information Services (BASIS), at a separate event criticised the proposed option for legalising undisclosed money. 

“This year my effective tax rate is over 40%. While I have to pay over 40% tax, and somebody will get the benefit by only a 15% tax rate. So why should I keep my wealth in the country?” he questioned in a programme titled, “Reflections of Budget 2024-25” jointly organised by the Policy Exchange Bangladesh and Snehasish Mahmud and Company Advisory Services in Dhaka today.

He also said, “Although the government can get some revenue in the short term, there is a chance of massive capital flight in the long run.”

M Masrur Reaz, chairman of Policy Exchange Bangladesh, presided over the programme while Snehasish Barua, director of SMAC Advisory Services, presented the keynote paper.

Honest taxpayers should be encouraged: FBCCI

Also at a briefing today, Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) President Mahbubul Alam said  “We are not in favour of dishonest traders. Undisclosed money should not be used in criminal activities.”

He added, “Honest traders who have been paying taxes for a long time need to be encouraged. There may have been cases that some taxpayers mistakenly did not show any of their income in the tax files. They need to get a chance.”

Violation of tax equity: BIDS

Allowing companies and individuals to legalise undisclosed income and assets at a flat 15% tax rate violates “tax equity,” Bangladesh Institute of Development Studies (BIDS) Director General Binayak Sen said today.

“We are not in favour of fixing tax rates to legitimise undisclosed income. The rates should be based on the amount of undisclosed income or assets of the customers [taxpayers],” he said at a discussion on “National Budget for 2024-2025 and the Medium-Term Outlook on the Bangladesh Economy” held at BIDS office in Dhaka.

Binayak said, “Legitimate income of the customer can also be undisclosed income due to various reasons. In this case, that income needs to be given an opportunity to be disclosed.

“We are not in favour of absolute tax exemption or fixation of a fixed rate for showing undisclosed income. Our position is in-between.”

Binayak also said, “In various sectors, including land transactions, some money is being transacted unofficially. We suggest that the opportunity to disclose this undisclosed money should be provided when submitting regular tax returns. 

“The rate of tax will depend on the amount of undisclosed money being disclosed. It could range from 10% in some cases to as high as 30% in others. But we are against keeping it fixed at 15%.”