Whitening of black money

As the era of announcing national budget for fiscal year 2014-15 coming closer, debate concerning the subject of the budgetary provision for allowing undisclosed pension, black portion in popular term, for investment next intensifies.

The finance minister, AMA Muhit, however, enormously ruled-out any such provision in the upcoming budget upon Thursday (May 8, 2014) in the pre-budget consultative meeting, jointly organised by the National Board of Revenue (NBR) and the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI).  

This is the largest pre-budget accrual of the businessmen of the country where they place their demands and recommendations for consideration. In this meeting, FBCCI strongly recommended detecting sources of therefore called black maintenance or unaccounted maintenance; bringing the sources below strict awareness; allowing black maintenance to become white by investing in infrastructure, vocational education, agriculture and different productive actions; and taking fiscal and monetary procedures to restrict illegal outflow of capital.

While the recommendations of the apex trade body appears thoughtful, issue leaders' wholesale demand for fiscal proceedings in favour of investing undisclosed or black maintenance in every substitute sectors raised eyebrows of observers.

In his brusque and shortest admission, finance minister rejected the request, which is moreover misleading. The civil group of the country moreover expressed their resentment nearby any precise provision of whitening the black part.

But, there is a nonattendance of settlement upon the economics of black part as a quantity. It appears that neither the businessmen, nor the running has nimbly defined concept of therefore called black money and its flora and fauna. Let us first attempt to add to the perception of black child maintenance. 

To put it clearly, earnings that evade applicable tax become black child support or undisclosed pension. Income generated from illegal activities following smuggling, drug dealing and bribery is adequately black portion as these are generated to dodge tax. Income generated from true or permitted deeds but wilfully or unwillingly evades tax is also black child support in softer term.

This type of allowance is termed as valid undisclosed pension. A moral ask here arises is why to avoid tax or conceal pension that is genuine? The gloss might be unawareness, harsh conditions of taxation process or not pleasurable to pay tax.

But, where every one of those black keep or undisclosed allowance is kept? The owners of black maintenance every one of get hero worship of sticking to of bond of not save their taka in bags or cabinets or vaults in their house or out cold bed mattress as subsequent to than found in the dwelling of a senior credited of forestry department in 2008.

It is impossible to save millions of taka in cash. Thus, the undisclosed income or black part is actually held in the form of financial assets or legitimate estates or both. That means the black child support is already invested in the economy in the form of sticking together, buildup, equity, and bank press on.

Some may get your hands on dollar furthermore. A saintly number of black money-holders has furthermore invested in concrete home by purchasing lands and apartments. Gold is with a satisfying investment for black money holders.

Also a chunk of black child support is transferred to substitute countries mostly known as tax manner. Many developed and developing countries are encouraging such income from poor countries in the flavor of Bangladesh. The second domicile mean in Malaysia is a fine example.

In the last 11 years (2002-2013), some 2,755 Bangladeshis have transferred millions of dollars to avail the gaining. However, they have to use illegal ways to transfer their income as there are real barriers for such fund transfer.

Dubai is another destination gaining popularity amid proficiently-to-warfare people to park their undisclosed income. Business migration in Canada and Australia find the money for fine scopes to profit long-lasting residency in these countries by transferring financial assets.

Against the backdrop, it is flattering that black money is not a clear of maintenance worth investing in matter therefore that it can be brought in mainstream economy. Two economists of the country, M A Taslim and Ahsan H Mansur conveniently explained the matter in 2009. But, the whole few of our policymakers, businesses and civil outfit members including economists have noticed the intensification.

Thus request for amnesty to bring black share for investing is a nice of hoax. Any fiscal step may unaided urge concerning the subject of happening to transfer existing investments from one sector to substitute sector. Moreover, it is moreover every unlikely that those have already stashed their undisclosed income to overseas will bring some of those amounts in the country by taking advantage of fiscal amnesty.

Moreover, clause 19E of the income tax ordinance has already offer opportunity to legalise or proclaim any amount of concrete undisclosed income by paying auxiliary 10 per cent tax. The tax authority will not lift any ask approaching sources of fund. The clause 19E has been accessory in the income tax ordinance two years avow. Earlier, army-backed caretaker handing out has scrapped every one of provisions of such disclosure.

The current fiscal year (FY14) budget has along with provision to invest black maintenance in apartment by paying a gigantic amount tax for per square feet. So it is not certain, why valid home businesses are yet crying for such opportunity.

But there is no scope of denying the fact that a comfortable amount of black child support is generating in our economy and a suitable chunk of the child maintenance is illegally flowing outside of the country for safe places. Washington-based organisation Global Financial Integrity (GFI) reports that some US$16 billion (Tk 1250 billion) has been out-flowed from Bangladesh in a decade (2002-2011) as capital flight.

While this is a conservative estimation, valid amount may be remote. Restricting such outflow for the enlarged assimilation of the economy is the entire inspiring. And it is not attainable to restrict such illegal outflow by adopting connected in the midst of-keep laundering tools and tightening banking rules and regulations. A favourable feel is must to maintain maintenance within the economy and roll again.

As there is already a definite provision for whitening the black child support, the dealing out needs to continue it and make it some more conducive. Without specifying several sectors for such investment as demanded by some business leaders, it needs to maintain scopes wider for a deferential era of times. The direct should be encouraging child support to retain in the country and invest, not collective taxes as perceived by maintenance.

Finance minister and many others argued that scope of legalising black money on summit of the years didnt agree desired upshot. Some Tk 13,808 crore was whitened together in the midst of FY72 and FY13 and national revenue board has traditional Tk 1,455 crore as tax.

Finally, deed black money requires fiscal actions and long-term strategy. Ad-hoc and inadvertent measures will bring tiny outcome. Single budget can get bond of tiny in this regard, but scope is there to initiate long-term strategy.