The opportunity for declaring undisclosed income through investment in Treasury bonds is set to be scrapped from the upcoming fiscal year (FY) while other two options, investment in flats and voluntary declaration, will remain unchanged, sources concerned said.
The issue for discontinuation of the opportunity was not mentioned in the budget proposals for FY 2014-15, placed in parliament on June 5, 2014.
The National Board of Revenue (NBR) received on Tuesday an instruction from the finance minister for continuation of two opportunities, and for scrapping the one that got least response from the investors.
Following the directive, the NBR has placed a situation paper before the finance minister on the status of the existing three facilities for declaring undisclosed income.
Sources concerned said, in the situation paper the NBR termed the opportunity for investing undisclosed money in Treasury bonds through payment of 10 per cent tax at flat rate as 'ineffective' and proposed for its withdrawal.
Sources said the decision on extension of the facilities might be announced in the parliament on June 29 by the finance minister through the Finance Bill.
As per the NBR's findings, only Tk 2.9 million undisclosed income has been declared by a taxpayer through investment in Treasury bond since incorporation of the opportunity in income tax rules.
The revenue board officials said there is no justification to continue the facility as it failed to attract investors.
On other two opportunities, a senior NBR official said those are not 'black money-whitening' facility as investors will have to pay a penal tax for their legally-earned income which they forgot to show in the tax files.
"Voluntary declaration of income is a part of income tax law which a taxpayer can avail by paying 10 per cent penal tax in addition to normal tax rates. Since taxpayers have to pay the penal tax, it is not a special benefit for them while honest taxpayers will be getting justice," he said.
The official said the opportunity is needed to check huge capital flight from the country.
Another opportunity for investment in flat, the official said, requires holders of undisclosed money to pay an increased rate of tax on per square metre of flat they purchase with the undeclared money on the basis of area.
Considering the ongoing crisis in real estate sector, the NBR proposed for continuation of the opportunity that has been approved by the Finance Minister.
The move for reviewing opportunities for undisclosed income came following a query in the post-budget press conference to the finance minister on the 'controversial' system.
In FY 2013-14, the finance minister in his budget speech said: "The current regulatory regime stipulates that such undisclosed income can be invested by paying extra 10 per cent tax together with applicable tax rates which may come to 2.5 per cent of income."
He considered the difficult period for the real-estate sector for allowing the special facilities for investing in flats.
Although the government is continuing the opportunity in different form, every year response from the taxpayers is not satisfactory considering the estimated size of the informal economy.
In the current FY, the NBR received Tk 260 million taxes from some 2,550 people who purchased flats by investing their undisclosed income.
In another provision, some 205 people voluntarily declared their income worth Tk 2.34 billion under the opportunity.
In 2007-08, the NBR received the highest amount of tax worth Tk 8.02 billion from undisclosed income in the regime of the caretaker government.
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