Black money must get entry into main-stream economy

Enayet Karim: It is an unwritten proven truth, “There must be a window to enter the black money into the main steam economy for boosting the economy of country, create fresh job opportunities, full stop on the money siphoning, money laundering and finally vibrant the development activities of a country. Bangladesh is not out of the theory.”
According to Nobel-winning economist Amartya Sen, since the beginning of civilization, white and black money have gone hand in hand, more or less within a boundary line in all countries of the world. For example, in the Western world, middle-income countries in Latin America and some countries in Asia have a practice called offshore accounting. Where investing black money in specialized areas does not face any questions. which occupies a large share in the economy.
The proposed budget for FY 2024-25 provides an opportunity to show black money or undisclosed income. The ethics of laundering black money and its impact on the economy have been debated. The Russia-Ukraine war, high inflation, rising commodity prices, the global crisis, the dollar crisis, a slowdown in business investment and employment, and other global uncertainties have increased government spending demands. Due to this, there is an increase and need for revenue collection, experts opined. There is a need to mainstream undisclosed income. Facilitating the whitening of black money, especially through tax incentives, will help in the development of the overall economy of the country. As long as the hidden money or black money does not appear, the mainstream economy will slow down.
According to the Finance Ministry’s 2011 research paper “Underground Economy of Bangladesh an Econometric analysis” in 2009, 62.75 percent of the country’s economy was black money. The amount of which is Tk 5 lakh 65 thousand crores. Which is more than double the national budget of 2014-15. Black money or untaxed income is untaxed income when a person knowingly or unknowingly does not contribute any income while paying income tax. Income is not black but that income is not taxed. As a rule, this is non-taxable income.
According to the National Board of Revenue (NBR) data, 7,445 taxpayers have declared undisclosed income of around Tk 18,220 crore in the first six months of the fiscal year 2020-2021. Which is the highest in the history of Bangladesh and beyond all past records, Tk 20,600 crores of undisclosed or black money has become white in the fiscal year 2020-2021. About 12,000 taxpayers whitewashed this money. In total, the government received Tk 1,683 crores of tax. Doctors, government employees, garment exporters, bank entrepreneur owners, gold traders and many others are on the list of black money laundering. But the rich have laundered more money.
Economists say that people from all walks of life have laundered black money. In the financial year 2020-21, the amount of black money that has become white is Tk 282.4 million in the capital market and Tk 2,513.2 million has become white in the housing sector. According to the data, from 1971 to 2021, about Tk 30,824 crores of undisclosed income has been disclosed, out of which about Tk 3,900 crores of tax has been collected. Due to Corona, the connection with foreign countries has not been that way or has been disrupted. Because of that, it was not possible for many people to keep this money out of the country or to keep it hidden. They have taken the opportunity to launder the money with special benefits in the country.
Investment in the industry almost came to a standstill during the Corona crisis. As a result, new jobs have not been created, but many establishments have either closed or laid off workers to survive due to reduced consumer demand. In this situation, to keep the wheel of industry moving and to increase employment, undisclosed money in the productive sector was given a special opportunity to invest in the budget of the fiscal year 2021-2022. According to the new section (19) of the Income Tax Ordinance, there was an opportunity to invest unrealized money by investing in productive sectors in all parts of the country. For this reason, 2,251 taxpayers have declared directly by paying 10 percent tax. The amount of which is Tk 1,128.70 crore.
Currently, as per the Income Tax Act, any taxpayer can take the opportunity to turn black money into white by paying a maximum tax of 25 percent along with a penalty of 10 percent. But there is room to question the source of the money. Any organization can later question the source of that money.
In the proposed budget for the financial year 2024-25, not only individuals but also institutions have been given the opportunity to legalize undisclosed money or black money by taxing it at a fixed rate. The proposal to whiten black money states that, notwithstanding anything contained in the Income Tax Act-2023 or any other law, no statutory government authority, including the Income Tax Authority, shall raise any question about the source of any wealth of a person. If the person shows the assets in the return by paying tax at the rate of 15 per cent while filing the return or revised return for the tax year 2024-25 between 1 July 2024 and 30 June 2025. Also, provision has been made to legalize unexplained land, apartments without question by paying fixed amount of tax and penalty in proportion to the area.
Black money is an unexpected reality in Bangladesh. According to a document published in 2015 titled “Shadow Economics around the world, what did we learn over the last 20 years” by the IMF, the size of black money or shadow economy in Bangladesh is 27.60 percent of the country’s total GDP. There is no formal definition of black money. Black money generally refers to money earned without accounting. For example, an owner sold a flat for Tk 1 crore. He received Tk 60 lakhs through check. He got the remaining Tk 40 lakhs in cash. If he does not show this Tk 40 lakh in the receipt section, then that Tk 40 lakh will become black money or unrecorded money.
Professor Friedrich Schneider mentions in his study entitled “Shadow Economics all over the world new estimates for 162 countries from (1999-2007)”- shadow money or black money is increasing in various countries due to the weakness of tax administration. Due to which various individuals and companies are able to move outside the formal economic structure.
The question of how undisclosed income is generated arises in many of our minds. Income of professionals in Bangladesh such as doctors, engineers, architects, teachers, NGO sector or many professions earn money through professional practice outside of employment or have opportunities. For example, doctors do private practice, teachers teach students in special subjects, engineers supervise the design and work of engineers of various individuals or organizations. Now if any doctor, teacher or engineer does not show the money earned from it in income tax return then it becomes black money.
Service sector, procurement sector such as trade in prohibited goods, arms and drug trade are prohibited under the existing laws of Bangladesh. In other words, if a person earns money by selling drugs or selling arms, it is not allowed to show the black money in the income tax return. Then in the case of traders, it can be observed that a lot of money remains undisclosed because they do not show the whole amount of sales and profit in the shop every day. It is also called black money.
There is a special need to bring undeclared income or black money into the mainstream economy. Whitening of undisclosed money or black money through special tax facilities will help in the development of the overall economy.