Finance minister Mr Mostafa Kamal's recent statement that the budgetary scope to legalise black money would continue as long as the menace exists in the economy has given rise to a bit of hullabaloo. Many have taken an exception to the minister's statement.
It is not clear what message Mr Kamal has tried to convey. If he has referred to Section 19E of the Income Tax Ordinance (ITO) 1984, there should not be any reason to feel aggrieved by his statement.
The government had incorporated a permanent provision (19E) into ITO 1984 in the financial year (FY) 2012 to13. The provision allows people to disclose their 'undeclared' funds by paying penal tax at the rate of 10 per cent, in addition to normal payable tax. In the case of such disclosure, taxmen would not want to know the source of the fund in question.
Before the incorporation of the proviso, the government used to offer the disclosure facility whenever it felt it necessary. However, barring the years 2007 and 2008, response to it had been poor. Under the military-backed caretaker government in 2007 and 2008, fear, not spontaneity, had prompted many people to disclose their tainted money.
Even the 19E, the permanent proviso of the ITO, could not do anything extraordinary even though the size of undisclosed money continued to grow unabatedly. There is no genuine or practical way of knowing the size of it, but most people could feel the bulging volume of ill-gotten wealth in society. The government in the budget for the outgoing financial year (FY) came up with a different formula to facilitate disclosure of so-called undeclared income. The opportunity is set to expire on June 30 next.
Individual taxpayers have been allowed to disclose any type of undisclosed property by paying a certain tax per square foot; declare undisclosed cash, bank deposits, savings certificates, shares, bonds or any other securities by paying a 10 per cent tax; and invest money in the capital market by paying 10 per cent tax on the value of the investment.
Under the new budgetary provision no authority, including the income tax authority, can raise any question on such declarations. The finance minister justified the provision saying "extraordinary times demand extraordinary measures."
The owners of tainted money have responded enthusiastically. During the first three-quarters of the fiscal, they legalised a record amount - more than Tk 142 billion.
According to a report published in The Financial Express, in the first nine months of the current FY, some 10,034 people legalised the amount. The NBR received Tk 14.39 billion in taxes against the disclosure at the rate of 10 per cent tax.
A total of 9,693 people legalised Tk 138.60 billion mainly in cash, fixed deposit receipts, saving certificates and assets. So, a major part of the money whitened has not been invested in any of the productive sectors of the economy. Thus, the special opportunity is just helping the government earn some revenue. The broader objective of bringing black money to the mainstream economy has remained unmet. The tax revenue received against the disclosure would have been far bigger had provision 19E of the ITO been applied.
It is no denying that the response to the special opportunity has been overwhelming. At the end of the current fiscal, the amount disclosed might reach Tk 200 billion.
A regular taxpayer is required to submit the tax return at the end of every year and pay tax at a rate as high as 25 per cent while tax evaders have got the opportunity to legalise their money just by paying tax at a blanket rate of 10 per cent.
As expected, the generosity extended by the government to the wrongdoers irked the honest taxpayers, including a few business leaders, and leading economists.
They have openly criticised the special tax provision terming it 'unfair'. The opportunity that discriminates against the honest taxpayers would encourage many to take recourse to a dishonest path.
The latest statement made by the finance minister has raised some concern about whether the special opportunity given this fiscal will be retained in the budget for the next FY.
The minister, however, did not say anything about that opportunity. When newsmen asked whether the special provision would stay next year, Mr Mostafa Kamal advised them to wait until the announcement of the budget, which is due for June 3 next.
The tax amnesty for the holders of black money might have fetched a good amount of tax revenue, but a sense of discrimination that the measure has been creating in the minds of honest taxpayers should not be ignored.
The finance minister rightly pointed out that some systemic problems are also responsible for creating black money. In this context, he mentioned that the mismatch between the market value and the government-set price of land has been creating problems for both sellers and buyers of land property.
But the fact remains that most of the black money is generated through illegal and irregular means. The grey area in the economy is thought to be quite wide. The corruption that breeds black money is both systemic and extensive. Everybody is aware of this menace. Yet there have been no effective measures to rein in the same. In such a situation, the size of the black money is bound to be bigger by the day. The special provision to whiten black money offered in this year's budget would encourage the accumulation of the same further.