Blanket opportunities to whiten black money

Now corporate taxpayers are free to show their undeclared assets, for the first time, from July 1 as the government offers blanket whitening of 'black money' in the new budget.
Pay 15-percent tax and bring out the hidden untaxed money is the theme of the budgetary indemnity proposed as the country passes through financial crisis amid local and global crunch.
The same facility would also be valid for individual taxpayers, too, as per the budget proposal placed Thursday-though, in the wake of criticisms from opposition political circles and some economists.
No government authorities can question source of the declared money under the amnesty to be availed paying taxes at a 15-percent flat rate or paying a specific amount of taxes.
The opportunity would be valid from July 1, 2024 to June 30, 2025 (both days included). Taxpayers would be able to declare their undisclosed asset before submission of tax returns or revised tax returns for FY 2024-25.
"Any undisclosed income, not detected by taxmen earlier or not under legal proceedings, could be declared by taxpayers, be in FY 2022-23 or previous years," says AKM Badiul Alam, member of the Income Tax department of the National Board of Revenue (NBR).
The tax has to be paid only through automated chalan and taxpayers would not be able to claim depreciation or amortization of any assets.
On different occasions, the government earlier had offered such amnesties in different forms for individual taxpayers since independence.
This time around, the revenue authorities have considered offering the opportunity to allow taxpayers, mostly companies, to show all of their previously undeclared income in FY 2024-25, Mr Alam explains.
Introduction of Data Verification System (DVS) in December 2020 by Institute of Chartered Accountants of Bangladesh, created legal complications in the disclosure of undisclosed income and assets of various companies who earlier used to prepare more than one financial statement to evade taxes as well as apply for bank loans.
It would be a 'grandfather clause' under which corporate taxpayers would get the amnesty once in a lifetime.
Explaining the offer in the budget speech, Finance Minister Abul Hassan Mahmood Ali said for unavoidable reasons, including ignorance of the taxpayer in filing the return, there might be errors in showing the acquired assets.
"In this situation, I propose to add a clause on tax incentives in the Income Tax Act with a view to providing taxpayers with an opportunity to correct this error in their income-tax returns and to increase the flow of money into the mainstream of the economy," he said while placing the new budget in parliament.
According to the proposed provisions, no authority can raise any question if a taxpayer pays fixed tax for immovable properties like flats, apartments and land and 15-percent tax on other resources like cash, irrespective of what lies in the existing laws of the land.
In the Finance Bill 2024, the government has set a specific tax amount, ranging from Tk 300 to Tk 6000 per square metre, on the basis of areas, for individuals willing to show their undisclosed income in establishment, house, flat, apartment, floor, land.
However, tax amount would double if black money invested in such establishments or land for any commercial purposes.
For investment in securities, cash, bank deposits, financial schemes and instruments, all types of deposits, savings deposits or any other assets, the tax rate would be 15 per cent.
Mr Alam says taxmen found many of the companies hesitant to submit their tax returns showing previous income after being verified by DVS financial statements.
"Though tax authorities have earlier instructed the field-level tax officials to adopt flexible approach in this regard, but companies were not willing to take risk," he adds.
Former Income Tax member Apurba Kanti Das says that undisclosed income usually shifted into sponsor directors' account in the form of cash as the companies, who concealed the income, are not able to show it as they have to comply with the International Financial Reporting Standard (IFRS).
"It's well-known that corporate-tax evasion is persistent in Bangladesh, so the opportunity would help the companies to declare their accumulated assets rather than transferring into individuals' account," he adds.
Among the critics of the measure is Transparency International Bangladesh (TIB) which expressed shock and disappointment over the "unethical" provision that allows "laundering black money disguised as undisclosed income".
The Bangladesh chapter of the Berlin-based anti-graft watchdog airs fears that the facility to legalize black money at just a 15-percent tax will discourage honest and legitimate taxpayers, as no authority will question the money and assets declared under this provision.
"This will foster a liberal environment conducive to corruption in the country. Furthermore, this opportunity undermines the ruling party's election manifesto and its frequently reiterated pledge of zero tolerance against corruption. In light of these concerns, TIB is strongly demanding that the government withdraw this provision allowing the laundering of black money," it says in après statement.
The TIB Executive Director, Dr Iftekharuzzaman, expressed frustration over the logic behind keeping the provision to whiten black money.
He termed the provision of a maximum 30-percent tax on honest taxpayers as discriminatory and unconstitutional. "For a number of reasons this provision is unjustifiable. It is distinctly contradictory to the Constitution, especially article 20(2) which criminalizes illegitimate income," he says.
The TIB executive feels that "compromising morals" in an attempt to collect expected revenue will never succeed in the short or long term.
"A prime example is that two years ago, a 10-percent tax was allowed to legalize undisclosed money, but there was no significant response. Similarly, no one took advantage of the opportunity to repatriate smuggled money. Therefore, it is reasonable to question whose interests are being served by including such provisions in the budget," the statement read.

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