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The opportunity to whiten black money might help a section of political leaders in election financing, but, as far as the economy is concerned, it could prove to be counterproductive, economists and businesses said at a webinar in Dhaka on Tuesday.
The move that discriminates against the honest taxpayers might also create 'bubble' in the market, they observed.
Taking part in the discussion, Dr Debapriya Bhattachariya, a distinguished fellow of the Centre for Policy Dialoguw (CPD), recommended discontinuation of the money- whitening provision from the next fiscal year (FY) to ensure justice for the honest taxpayers.
The discontinuation of the provision would also help ensure equity and break the vicious cycle, Bhattacharya, said at the virtual discussion on "Black Money Getting White: Gain or Loss for the Economy".
He suggested elimination of the source of black money rather than offering such opportunity every year.
Economists, former government officials, businessmen, policymakers, private sector representatives, journalists and other stakeholders attended the discussion, organized by the Citizen's Platform for SDGs, Bangladesh.
They stressed the need for changing mindset of taxmen and developing capacities of the tax officials to help generation of black money.
In the first six months of the current FY, some 7,445 taxpayers whitened Tk 102 billion by paying a record amount--- Tk 9.50 billion--- in taxes.
Bhattacharya, who is the convener of the platform, said that due to the shortcomings in the seventh five year plan, the government could not achieve the targeted tax-GDP ratio of 18 per cent.
"The eighth five year plan has revised down the target of tax-GDP ratio to 12.26 per cent," he added. He also raised question about the mismatch between tax revenue income and the country's GDP growth rate at over 8.0 per cent.
There is no alternative to increasing the tax collection to cut the budget deficit that is likely to reach around 6.0 per cent due to the stimulus packages offered to help the various sectors of the economy to withstand the Covid onslaught.
Eminent economist Professor Rehman Sobhan, also chairman of the CPD, said the sources of unregulated contributions to election campaigning have remained hidden.
The NBR (National Board of Revenue) is talking about reform initiatives since Pakistan regime, but the country's tax-GDP ratio has not improved to any notable extent, he said.
"Offering such (whitening) facility gives a wrong signal to the taxpayers," he added, suggesting the NBR to find out the sources of money and review the expenditures.
In his keynote presentation, former NBR chairman Dr Abdul Mazid said the opportunity to whiten black money discourages the honest taxpayers.
It also weakens the legitimate right to collect taxes from the taxpayers, he said.
There must be higher punitive taxes and prescribed area of investment which could be offered for a short period of time, he added.
He said that some of the undisclosed income holders, who reside inside the country, showed their income invested in real-estate sector as the scope for sending money outside the country shrunk due to the pandemic.
Dhaka Chamber of Commerce and Industry (DCCI) president Rizwan Rahman said the tax rate for honest taxpayers is higher than that offered to people whitening their black money. This may discourage the tax payment, he added.
"It is unjust and may create bubble in the economy," he said, adding that the government should create opportunity to invest in other areas rather than offering such amnesty.
Farid Uddin, a former member of the NBR, said poor enforcement of other laws has forced the government to incorporate such measures in the income tax law to legalise income.
He said the state organ has to be strengthened along with ensuring commitments, political will and developing capacities.
MS Siddiqui said a vested quarter inside the government is the ultimate beneficiary of the money whitening facility.
Professor Mustafizur Rahman, distinguished fellow of CPD, said the government is offering the opportunity in areas like real-estate where black money is being recycled.
The discriminatory measure is being continued to help a vested quarter, he added.
Alamgir Hossain, tax policy member of the NBR, said the opportunity has been given to expand the tax net so that people having undisclosed legally-earned money can declare their income.
The opportunity meant for legalising the 'grey' money, not the black one, he added.
Multimode Group deputy chief executive officer Tabith Awal, Coast Trust executive director Rezaul Karim Chowdhury, IDLC Investments Managing Director Md Moniruzzaman, president of the Bangladesh Employers' Federation Kamran T Rahman, among others, spoke at the programme.