The pernicious practice of whitening black money

However strange it may sound, the practice of whitening black money has long been accepted -- albeit controversially -- by successive governments, including the current interim administration, as a source of substantial tax revenue. Despite repeated and strong opposition from economists, think-tanks, and budget analysts every year following the national budget announcement, the trend continues unabated. There is no disputing the fact that legitimising undisclosed income grants impunity to financial wrongdoers, undermines public trust, and promotes a culture of non-compliance. Yet no government has had the political will or resolve to end the practice. The current interim government, which had initially declared it would not allow black money or undeclared income to be legalised through investments or by paying a premium tax, appears to have walked back on that promise. In the Tk 7.9 trillion budget proposed by Finance Advisor Dr. Saleuddin Ahmed, the provision to whiten black money through investment in the real estate sector remains intact, though with a significantly higher tax penalty.

The Finance Ordinance promulgated on June 2, 2025 to ratify the budget retains the provision allowing undisclosed income to be whitened through purchase of land, apartments, and construction of residential buildings. While the tax rate has been increased up to fivefold and other government agencies (apart from tax officials) can question the source of income, the incentive remains compelling for people with illicit money looking for easy amnesty. Though there are reports that the government's advisory council may review the provision at its June 22 meeting, expectations of a reversal remain slim.

 The reason is not difficult to fathom. The National Board of Revenue (NBR) earns considerable revenue through this route, and with minimal effort. According to a report, in FY 2021 alone, 11,839 individuals whitened around Tk 205 billion -- the highest ever in a single year. Of this, Tk 168.3 billion in cash was legalised (whitened) by 7,055 individuals. The remaining amount was channelled into land, flats, or stocks. The NBR received Tk 20.64 billion in revenue from these disclosures. Some may argue that bringing black money into the formal economy supports economic activity. But at what cost? This policy not only legitimises ill-gotten wealth -- often amassed through corruption, tax evasion, or illegal trade -- but also demoralises honest taxpayers who comply with the law. It sends a troubling message: wrongdoing pays, and compliance is optional.

It is, therefore, neither a sustainable nor ethical proposition to justify such measures in the name of revenue generation. The government must not treat earnings from unethical sources as a quick fix for revenue shortfalls or as compensation for the inefficiencies of the NBR. No conscious citizen will endorse the idea as it largely ignores the inherent illegality of holding black money through immoral and illegitimate means. What is urgently needed is a comprehensive overhaul of the revenue collection system. Reforms should focus on automation, restructuring, capacity building, and robust regulatory enforcement. Only through systemic changes can the country hope to boost domestic revenue sustainably -- without compromising integrity or fairness.