Published in The Financial Express on Thursday, 4 June 2015.
The plea made by the private think tank, the Centre for Policy Dialogue (CPD), to put in place a piece of legislation to help bring undisclosed or black money into the mainstream economy deserves priority attention of the policymakers concerned. The CPD suggestion has come in the backdrop of unproductive attempts made from time to time during the last four decades to woo black money into the mainstream economy through ad-hoc measures. In fact, the private think tank’s proposition has gone beyond the issue of undisclosed money to address another important yet overlooked issue – the benami (bought in others’ name concealing the identity of actual buyer/s) properties purchased by a section of people both at home and abroad.
The response to the opportunity offered to whiten black money, barring the period of the military-backed caretaker administration between 2007 and 2008, was poor. Fear factor played an important role in the disclosure of a sizeable amount of black money during the caretaker administration. Successive governments, in the face of criticism from various quarters made promises not to offer any opportunity to legalise undisclosed income. But, for reasons best known to them, they offered the opportunity in one form or the other in the budget documents.
Thus, in the absence of an effective mechanism to address the relevant issues, the volume of black money has only grown bigger and bigger, a large part of which has either been transferred abroad or invested primarily in real estate in the name of benami owners. The National Board of Revenue (NBR) could do little to stop it. The anti-money laundering act has also not been effective either to stop transfer of illegal funds or bring the same back into the country. Under the circumstances, the plugging the sources of black money generation would have been the best option. But, for understandable reasons, that is not possible. Moreover, the political will which plays a key role in stopping the accumulation of black money has, apparently, has always been absent in this country. It is difficult to say whether anyone would ever demonstrate the required level of determination to cut the sources of black money accumulation.
But the CPD’s proposition to formulate a ‘predictable’ legal framework for legalising black money with ‘rate above marginal one’ might appear confusing to many. The current income tax law includes the provision to disclose undeclared income by paying tax at the rate 10 per cent above the normal rates. The issue of ‘benami properties’ is far more complex. It would be a welcome step if legal provisions are made to facilitate a hassle-free voluntary declaration of one’s ‘benami’ properties by paying the right amount of taxes, including the penal one. But unless there remains an effective mechanism to detect ‘benami’ ownership of properties and punish the owners financially, any voluntary declaration is unlikely to take place. The office where land transfer documents are registered could be the most effective point to detect ‘benami’ transfers of real estate assets.
The enforcement of the provisions of the legal measures proposed by the private think tank would remain a key to getting the desired results. Unfortunately, Bangladesh’s performance in areas of law enforcement has been very poor. The opportunity to earn a few extra bucks on the part of the officials concerned makes the enforcement even more difficult. Thus, the act of motivating the holders of black money and ‘benami’ properties to declare their assets and the officials to demonstrate honesty and integrity while discharging their duties in accordance with proposed law would remain a key to success in generating enough revenue for the government.