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Bangladesh’s Voluntary Income Disclosure Scheme On Anvil On Budget Day

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(Finance Minister priorities healthcare, ‘unlimited scope’ for legalizing black assets likely soon)

Bangladesh’s Awami League government is all set to announce an Indian-style voluntary income disclosure scheme to boost revenues likely to be hit by the corona pandemic.

Finance Ministry sources, finalizing the national budget to be placed in Parliament on Thursday, told Easternlink that the special scheme would provide ‘unlimited scope’ for legalizing untaxed assets including land, real estate cash holdings, and other savings without having to disclose the source of the income, so long as the declaration is accompanied by a payment of tax at approved rates.

While government officials say this scheme was to decimate the black economy by drawing out its reserves into the legitimate economy and boost government revenues to meet budgetary demands for maintaining the growth trajectory,  economists say this was to prevent flight of  capital through money-laundering and strengthening employment potential by turning stashed-away black assets into liquid capital to finance ambitious growth targets.

Once such a declaration of black asset is made, the government has a better data base to boost tax revenues by continuous but discreet surveillance.

Finance minister AHM Mustafa ‘Lotus’ Kamal will possibly announce the scheme parameters during his budget speech in parliament on Thursday when he presents the national budget for the 2020-2021 fiscal starting from July 1.

Black money holders would be able to invest such money in shares, bonds, debentures and real estate , paying only 10 percent tax without being questioned on the money source during the new fiscal.

The only condition to be imposed on such assets would be a three-year lock-in period on the investment made.      

Currently, black  money that had escaped taxation can be invested in economic zones and hi-tech parks by paying 10 per cent and in purchase of apartments  paying certain amount of tax.

But the Anti-Corruption Commission has jurisdiction to question such investments  since the country is a member of the Egmont Group, a Paris-based financial intelligence unit created to check money laundering.

According to Transparency International Bangladesh executive director ,Iftekharuzzaman easing the scope of investment of black money would ‘severely undermine’ the authority of  the ACC in its fight against corruption and would be unfair to honest tax payers.

This voluntary income disclosure scheme is also anti-constitutional, he said. 

Scope for investment of Black money investment has been provided on a number of previous occasions.

Black money holders availed of such opportunity mostly in 2007-09 when highest Tk 9682.99 crore untaxed money was invested with the payment of Tk 911.3 crore in tax , according to NBR officials.

Former National Board of Revenue chairman Abdul Mazid said the continuation of such opportunities actually encouraged black money generation.

According to officials, the finance minister might announce heavy penalties to check the under- and over-invoicing against the backdrop of growing flight of capital through money laundering.

Illicit capital outflow recorded by Washington based Global Financial Integrity in 2019 from Bangladesh was a whopping $81.74 billion in 11 years since 2005, done mainly through under- and over-invoicing.

The finance minister is also likely to announce an increase in lowest income ceiling. It would be to Tk 3,00,000, reducing corporate tax for the non-listed companies and would decrease the highest income ceiling in a bid to appease various different quarters.

He may also enhance duties for discouraging import of luxury goods consumption of which is increasing.

In a message in the eve of announcing his second budget, Mustafa Kamal said the new budget would not be an ordinary one, but a special one to overcome the current COVID-19 crisis and included future plans.

He said that the health sector would get top priority in his speech attended by a limited number of parliament members to ensure social distancing as the COVID-19 crisis forced such a novel arrangement.

Besides, agriculture, food production and marketing would be given more focus in the upcoming fiscal year, he said.

He expected that there would be programmes friendly towards agriculture, food safety, social safety net and affected industries and employment.

The COVID-19 crisis is set to do away with the traditional grandeur amid which the budget was placed in the parliament until last year.

For the first time in the history of Bangladesh, journalists, foreign diplomats and guests will not be allowed entry during the parliament’s budget session.

The traditional post-budget press conference will be arranged virtually on the following day.

The discussion on the fiscal measures will also be a brief one.

COVID-19 has already affected the budget-making process as the discussions with stakeholders were suspended.

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