In the national budget for the current financial year, the government has yet again offered the opportunity to legalise 'undisclosed' cash and other liquid assets by paying tax at a nominal rate of 10 per cent.
The word ' actual' has been deliberately used to hide the true colour of the money.
The government can hardly check the tendency of offering the opportunity to legalise the black (undisclosed) money almost every year. But the reasons for its strong inclination towards this unpopular move are not understood.
Every time the government includes the provision for whitening black money in the national budget, it takes a flak from the economists and relevant other people. Then again, the benefits coming from this particular provision are not worth the criticism it has to digest.
The Finance Act of this FY does include a special provision that bars the government agencies from asking any question about the source of the undisclosed money, if anyone declares the same to the tax authorities. .
The incumbent chairman of the National Board of Revenue (NBR) late last week said anyone willing to declare his/her undisclosed income is free to go to court challenging questions raised about the source of funds by any government agency.
He, however, said such questions are unlikely to be asked as they are convinced about the spirit of the government's move.
The NBR chief's assumption that the ongoing buoyancy in the country's stock market has much to do with the money-whitening provision appears to be misplaced.
Bangladesh stock market has always been unpredictable; it goes up when it is supposed to be subdued and does plunge when all macroeconomic indicators are rather healthy.
The current market rally is natural as an affluent section of investors is grabbing the opportunity to buy stocks at almost rock-bottom prices. There is, however, uncertainty over market buoyancy.
It is widely believed that the opportunity given to legalise undisclosed money is unlikely to bring any notable dividend for the government. The experience gained from similar move made in the past has prompted many to believe so.
Why should an owner of so-called undisclosed or black money pay 10 per cent tax to 'legalise' the same when he or she has not faced any trouble owning the same year after year?
A few people might volunteer, but most holders with undisclosed income, in all probability, would prefer to stay away.
When a large part (between 45 to 83 or more per cent) of the economy is thought to be black, the money-whitening provision is unlikely to produce any tangible outcome as far as tax receipts are concerned. The problem is a deep-rooted one and it needs tougher solution.
Instead of offering baits the government should make rigorous exercise to locate the tax evaders. The rate of tax evasion is high among the various types of businesses. Taxmen should locate them and make them pay tax regularly.
Before that the tax administration needs to be overhauled thoroughly, updated and automated. We have heard lots about reform of the tax machinery, but it is still half-done. Such a move will never be successful unless the government resolutely overcomes pressure coming from all directions.