The approach to whiten black money is fundamentally flawed – Dr Debapriya

Originally posted in The Business Standard on 7 June 2024

The issue of whitening black money is highly sensitive. In the past, opportunities provided to legitimise black money have been ineffective. Instead, these measures disrupt financial discipline, increase social inequality, and encourage corruption in politics. Consequently, I firmly believe that this approach is fundamentally flawed.

In their last election manifesto, the government pledged to adopt a zero-tolerance stance against corruption and to reject any undeclared money acquired through illegal means. Legalising such money now would contradict their election promises.

I want to highlight two specific concerns.

Firstly, this is likely the first instance where it has been stated that no questions will be asked regarding the origins of black money. This implies that even if the money was earned illegally, it would not be scrutinised, which undermines the rule of law.

Secondly, while a flat 15% tax is proposed to legalise black money, individuals or institutions who earn money in an honest way are required to pay up to 30% in taxes. This disparity is inherently unfair.

At a time when governments worldwide are implementing strict measures against money laundering and black money, our government appears to be regressing. I am baffled as to how such a decision could have been approved.

Meanwhile, inflation is currently at 9%, and the target in this budget has been set to reduce it to 6.5%. However, I don’t believe this is realistic because the Finance Minister’s speech did not provide a clear plan as to how this reduction could be achieved.

Also, it is quite normal for a country like Bangladesh to have a budget deficit. But what is more important than the deficit itself is where we are getting the deficit money from, what we are going to do with it, and how we are going to repay that money.

We will have to borrow the money from outside the country, and 70 % of the deficit will still be spent on infrastructure. That means it will take us a long time to repay the money, which is a cause for concern.

– Dr Debapriya Bhattacharya, Distinguished Fellow, Centre for Policy Dialogue (CPD)