Money-whitening facility unlikely in next fiscal

The much-debated black-money-whitening facility is unlikely in the upcoming fiscal year as the provision incorporated into the Finance Ordinance may finally be dropped amid outcry.

The finance ordinance, promulgated on June 2, 2025 to ratify the interim government's maiden budget, has retained the provision allowing black-money whitening through real-estate investment, purchase of land, apartments and construction of residential buildings.

The tax rate has been increased up to five times and scope kept for raising question on source of the declared money by other government agencies excepting taxmen.

According to sources, the advisory council of the government may scrap the provision, incorporated into the Finance Ordinance 2025, in its meeting to be held on June 22.

Sources familiar with the change of heart have said the National Board of Revenue (NBR) is preparing to place the proposal for blocking the money-whitening scope, including the existing one in the outgoing financial year.

An amendment to the finance ordinance will be passed at the meeting separately through gazette as the ordinance was promulgated and issued on June 2.

The NBR may propose some other amendments, too, to the ordinance, including offering VAT exemptions on import of raw materials for compressor manufacturers.

If passed in the council meeting, the scope to whiten black money would end in June 2025.

Although the interim government scrapped some of the money- whitening provision in September last year, the opportunity to get undeclared money legalized through investing in realties was retained.

Hinting at a review of the provision, Finance Adviser Dr Salehuddin Ahmed, at the post-budget press conference, also admitted the measure is not 'commendable'.

However, officials have said the fiscal measure has aimed at bringing informal economy onto tax net.

The opportunity was offered to purchase of apartments, land with the undisclosed money by paying three-to five-time higher taxes.

Transparency International Bangladesh, the Centre for Policy Dialogue, economists and civil-society members deplored the retention of the facility for FY 2025-26.

Dr Fahmida Khatun, Executive Director of the CPD, has said the measure is morally discouraging and discrimination to the honest taxpayers.

"It encourages immoral practices---one is evading taxes and another not showing source of income," she said in the CPD disapproval of for the facility.

The advisers of the interim government too always spoke against such opportunity, Dr Fahmida reminded.

Rather, the government must intensify effort to reform total revenue- mobilisation process, she said.

Automation, restructuring, human capacity skills, regulatory measures "should be focused".

Unless the government overhauls the total revenue system, the country cannot achieve the expected domestic revenue-mobilisation growth, she said.

"First, the government must stop tax evasion and realise proper taxes from eligible taxpayers," she added.

To check automatic generation of undisclosed money on purchase of land property, Dr Fahmida found the necessity to ensure coordination between government's relevant institutions.

Dr Iftekharuzzaman, Executive Director of the Transparency International Bangladesh (TIB), terms the provision unjust and contradictory to the country's constitution.

"We have long been advocating for abolishing the black-money-whitening provision in the law," he has said about the interim government's move.

Citing reform commission's report, he said the report also recommended scrapping the law that encourages corruption.

According the ordinance, the tax rates for whitening black money through real-estate investment vary by location and property size.

A total of 11,839 people whitened about Tk205 billion in the fiscal year 2021 - the highest in the country's history in a single year.

Of the amount, Tk168.3 billion in cash, which was kept in banks or cash as a temporary provision of the National Board of Revenue, was legalised by 7,055 untaxed money-holders.

The rest of the money was invested in land, flats or stocks. The NBR received Tk20.64 billion in revenue from those investments.

Earlier in the 2007-2008 and 2008-2009 fiscal years - encompassing the regime of the military-backed caretaker government - about Tk96.83 billion of black money was whitened.

The government has provided the opportunity to invest money earned from undisclosed sources in various sectors, including the stock market and real estate, to overcome the fragile state of the economy brought about by the pandemic.

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