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The results of the unique opportunity given to whiten black money during the immediate past financial year (FY) are out. The opportunity was unique because of the nominal tax rate and the scrutiny-free disclosure.
As expected, there was a rush to declare unearned income in the last month (June) of the FY anticipating withdrawal of the very generous break from the FY 2021-22. The government has kept the opportunity but in a truncated form. The tax rates have been changed to pacify the honest taxpayers. But the exemption from any sort of scrutiny of the source/s of funds remains in place.
Tk 206 billion worth of funds were disclosed in the just-concluded fiscal. The last month saw the disclosure of Tk 61 billion. Given the size of the country's black or grey economy, the amount declared is just a peanut. Yet it is Tk 60 billion more than the total amount declared during the last 15 years (between FY 2005-6 and FY2019-20).
The government must be happy since it received a tax revenue worth over Tk 20 billion during the Covid time.
But the people who stashed money worth billions through fair and foul means were the happiest of all. They could clean dirty money paying only 10 per cent tax and none asked any questions about the source/s of their funds. For them, it was a golden opportunity. And they took advantage of it to the maximum extent.
While offering the money-whitening facility, the finance ministers, in most cases, express optimism that the wealth hidden from the taxmen would be cleaned and invested in the mainstream economy. But that does not happen.
Of about 12,000 people who legalised Tk 206 billion in the FY 2020-21, some 7,055 whitened Tk 161 billion worth of cash, debentures and bank deposits, 1,645 invested Tk 20 billion in the land, 2,873 people purchased flats, apartments etc valued at Tk14.4 billion. A tiny amount had moved into the stock market belying the government's expectation that there would be a substantial investment there.
Who were the people to make most of the opportunity?
Government officials, present and past, apparel unit owners and business people declared the highest amount---Tk16.77 billion. As many 31 large taxpayers, who included sponsor directors of banks, disclosed Tk 15.27 billion. Some 739 physicians disclosed Tk 1.42 billion. Car importers, contractors and gold traders whitened Tk15.3 billion.
When all these people were legalising an enormous volume of dirty money, many others including the ones who get a fixed amount as salary at the end of the month, paid taxes at rates ranging between 10 and 25 per cent. In addition, they are used to facing some other hassles at the time of tax payment.
So, several thousand people took advantage of what can be termed lifetime opportunity to legalise their huge dirty cash. The government too got some money in the form of tax. But it was an unethical move. The opportunity being highly discriminatory evoked a sense of anger among the honest taxpayers.
For the current fiscal, the government has gone back to the old way of whitening black money barring a few deviations. It is most unlikely there would be a rush to clean dirty funds this time.