The Financial Express

Disclosing overseas assets in IT returns  

Disclosing overseas assets in IT returns   

Despite claims of progress in revenue generation, the tax-GDP ratio in Bangladesh is inexplicably the lowest in South Asia, and one of the lowest in the whole world. As against an 8.5 per cent tax-GDP ratio in Bangladesh during 2019, it is 11 per cent in Pakistan, 11.6 per cent in Sri Lanka, 16.8 per cent for India, and 23.1 per cent in Nepal.

The tax revenues comprise income tax including corporate tax, value added tax (VAT) on sales and imports, and supplementary duties, administered by the National Board of Revenue (NBR). But in spite of sustained efforts to bring about reforms and transparency in tax administration over the years alongside expanding the coverage, Bangladesh seems to have remained stuck in the same quagmire of meagre tax collection and low coverage over many decades. 

In this backdrop, attention has been drawn recently by the media to the absence of stipulation for recording overseas assets by the country's dual citizens, especially in the wake of scandals surrounding some prominent business houses.

Unfortunately, this provision has not been incorporated in Bangladesh, although such disclosure is mandatory in neighbouring India and Pakistan. The NBR cites a simple argument that as Bangladeshi citizens are not ordinarily allowed to invest abroad, no such requirement should be kept in the IT form. But observers allege that unscrupulous quarters are resorting to money laundering and asset purchase abroad without any obstacle by taking advantage of this loophole.

A former comptroller and auditor general (C&AG) told a Bangla daily recently that those who laundered money were very influential. Law cannot touch them. That is why money laundered to Canada could assume the shape of a 'Begum Para' neighbourhood. These people lead a luxurious life in Canada, but they have no apparent income there. The origins and sources of their money and lifestyle are known to many, but no action has been taken against them. Initiatives should therefore be taken by the NBR for disclosure of these foreign assets and incomes in IT returns through reform initiatives.

A taxpayer has to submit three kinds of information in his/her income tax return: income, expenditure, and assets. Incomes from businesses or professions are shown in the table of Schedule-24C. But information on income from abroad has not been sought here. Even in the statement of assets, no query is made regarding assets outside the country.

Experts view that although tax has to be paid as per law for economic activities conducted inside Bangladesh, one's assets are not always confined within the country. Question arises if anyone hides these overseas assets what can be done then? The answer lies in section-19 of the Income Tax Act, which empowers the tax commissioner to levy additional taxes. And if someone violates the country's law by transferring asset to foreign land, then it is a crime under the Money Laundering Prevention Act, and that asset can be confiscated.

The NBR took an initiative in 2019 to incorporate the provision of declaration of overseas assets in IT files. A team of the tax department even started working for the purpose. But the team did not submit its final report on the ground that there would be legal complexities. Besides, it was said in defence that the dual citizens showed their incomes and assets in Bangladesh and their foreign abodes separately. But the sticking point is that many do not take money through legal channels for purchasing overseas assets.

Many Bangladeshi businessmen have obtained citizenship or permanent residency in numerous countries of the world including the USA, Canada, the UK, Malaysia, Thailand, and Cyprus. Money has been allegedly laundered to those countries through various ploys including over and under-invoicing in imports and exports as well as Hundi. There are also allegations that a chunk of our bureaucracy could obtain foreign citizenships by laundering ill-gotten wealth.

Faced with this problem of tax evasion through money laundering by dual citizens, many countries have taken the initiative to gather information about overseas assets and incomes of their citizens. Both India and Pakistan have made the provision of showing such assets in IT returns.

Through an ordinance promulgated in May 2019, Pakistan has given its citizens the opportunity to show undeclared overseas assets by paying 4.0 per cent tax, and overseas money by paying 6.0 per cent. This facility was extended up to June 2020 subject to payment of surcharge. The central board of direct taxes of India provided a similar opportunity to Indian citizens from 2018-19 fiscal year. Initiatives have also been taken by the Indian missions abroad for gathering information about such overseas assets and incomes held by Indian citizens. There are even overseas income tax units in Indian missions operating in countries like the USA, the UK, France, Germany, Japan, Singapore, the Netherlands, the UAE, Cyprus, and Mauritius.

Experts think incorporation of the provision of showing overseas assets and incomes in the IT files of dual citizens is ethically and morally correct, as many Bangladeshis are laundering money to safe havens outside the country. The launderers feel secure by keeping those assets in foreign lands and many of these influential people are also dual citizens. According to the latest report of the US-based Global Financial Integrity, an average amount of $7.53 billion is laundered from Bangladesh each year, mostly under the cover of international trade and transactions.

The people having dual citizenship are in fact individual citizens. Therefore, it is the responsibility of the NBR to ensure transparency and accountability of their assets and incomes. There may be a dearth in the NBR's capacity, but it should not lack the goodwill to do whatever is required for the country's betterment. The dual citizens do not have the right to acquire illegal assets and the NBR has a duty to enquire whether these are legally obtained abroad, or whether money is laundered illegally. It is therefore high time that disclosure of overseas assets was made mandatory in the country's tax files.


Dr. Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.

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