Published in New Age on Wednesday, 28 May 2014.
Budget: Looking Back
Little impact of untaxed money legalisation
Jasim Uddin
The provision for legalising undisclosed money through investments in income-generating sectors and apartment purchase failed to positively impact the sectors in the current 2013–2014 financial year, experts and industry insiders said.
They said that that there had been no tangible impact on such sectors and the overall economy although a few hundred people had used the provision. The government expected that the provision could draw untaxed money into the mainstream economy and boost revenue collection, but no such thing happened.
The provision regarding investments in sectors such as industrial enterprises, real estate, stock markets and production of goods and services had been there since the 2012–2013 financial year. Untaxed money was allowed to be legalised through investments in apartment purchase only in the current financial year.
Economists, revenue officials and industry insiders observed that that people had not invested their untaxed money as they had other options and feared being mired in corruption charges in future.
Estate sector entrepreneurs, however, could feel a small ripple in the sector, insiders said.
According to statistics of the National Board of Revenue, only 2,755 people legalised undisclosed money by investing in income-generating sectors and the purchase of apartments and land while the revenue board received Tk 44 crore in taxes in the current financial year.
Of them, 205 people invested about Tk 234 crore of untaxed money in income-generating or productive sectors by paying a 10 per cent penalty along with the regular tax at the rate of 25 per cent.
On the other hand, 2,550 people legalised their untaxed money through investment in the purchase of houses, apartment and land by paying between Tk 700 and Tk 7,000.
The Centre for Policy Dialogue executive director, Mustafizur Rahman, said that any such provision in the past had failed to make any significant impact on the economy.
‘The amount of money legalised with the provision in the current financial year is very much negligible compared with the compromise the government made with morality and honest taxpayers,’ he told New Age on Tuesday.
Efforts to bring untaxed money into mainstream economy and boost the revenue collection through the provision failed, he said.
The Real Estate and Housing Association of Bangladesh general secretary, M Wahiduzzaman, said that the response of people holding untaxed money in buying apartments was better considering the political turmoil in the first half of the financial year.
‘Revenue board statistics show that the response is not that bad. Investments could have increased if there had been political stability,’ he said. The sector will benefit if the provision is continued.
Former Bangladesh Bank governor Salehuddin Ahmed said that the efforts had a very negligible impact. ‘People holding untaxed money have not used the provision as they have other means to spend the money in an unaccounted style.’
Not that they have spent the money on illegal or unproductive purposes such as buying assets abroad, laundering or travelling outside all the time, he said adding that they had also invested the money in productive sectors in the country.
The revenue board said that the option to legalise untaxed income had been in place several times since 1976; people holding untaxed money legalised about Tk 14,000 crore and and the government received about Tk 1,500 crore in taxes.
A finance ministry study shows that the size of the untaxed money lies somewhere between 46 per cent and 81 per cent of the gross domestic product.