Facility to whiten black money to be withdrawn soon

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Nazmul Ahsan Prime Minister Sheikh Hasina has approved an NBR proposal to scrap the existing money whitening facility for investment in stock market, a high official in the Prime Minister's Office (PMO) said. The prime minister endorsed the proposal of the National Board of Revenue (NBR) last week. Following the Prime Minister's approval, the revenue board submitted the draft Statutory Regulatory Order (SRO) to the law ministry on Wednesday last for vetting, sources confirmed. The SRO that will scrap the 'unethical' provision is expected to be issued by the NBR within a couple of days, a high official said. "The existing provision to whiten black money for investing in the share market after paying 10 per cent tax would no longer exist after the issuance of the SRO," a PMO top official told the FE. "The government cannot afford losing its image internationally," he added. The drastic measure has been taken following pressure from Financial Action Task Force (FATF) and the Asia Pacific Group (APG) on money laundering, the global watchdog organizations assigned to combat money laundering and terror financing. A high-powered team of FATF urged the government last month to scrap the money whitening facility to avert being black listed globally, a source in the PMO said. According to the draft SRO submitted to the law ministry, a copy of which was seen by the FE, black money or money earned through illegal means will not be eligible for investment in the capital market by paying 10 per cent tax. However, untaxed yet legally earned money, could be invested in the share market by paying 10 per cent tax. The government in the current 2011-2012 budget has allowed money whitening facility through investment in share market on payment of 10 per cent tax. The provision clearly mentioned that no question will be raised from any government agency in the case of such investment of black money or untaxed legal funds. After the controversial fiscal measure came into force from July this year, the FATF and the APG repeatedly asked the government to scrap the facility. At the insistence of global anti-money laundering watchdogs, the government in August last amended the SRO that said only the tax department will not ask any question for such investment. However, the amendment could not satisfy both FATF and APG. APG's Executive Secretary Gordon Hook in late November led a five-member joint team to Bangladesh. The FATF-APG team met Finance Minister AMA Muhith and Prime Minister Sheikh Hasina. "Both Hasina and Muhith agreed to scrap the money whitening facility latest by December this year," a source said. "We are implementing our pledge made to the FATF to help brighten our image," he added. Meanwhile, the FATF in its latest report, submitted to the government, said Bangladesh is the only country in the globe which offered an unethical opportunity to whiten black money in the current fiscal. The FATF warned Bangladesh that it may be identified as a "risky country" like North Korea in global financial transactions if the government failed to scrap the provision now, another top official in Bangladesh Bank said. Meanwhile, a plenary meeting of the FATF, held in Paris on October 27-28 last, gave the government a clear message that if it did not scrap the offer, Bangladesh had every chance of being 'black listed' by all major watchdogs on money laundering.