THE proposed budgetary provision for legalising illicit income has drawn criticism of economists, civil society actors and, even, ruling Awami League lawmakers. The proposal says that no authority can raise any questions if people willing to legalise undisclosed wealth pay taxes at fixed rates for immovable property such as flats and land and 15 per cent tax on other assets, including cash. The ruling party lawmakers during a discussion on the budget proposal on June 22 criticised the provision, saying that such a proposition would demotivate honest and regular taxpayers and encourage tax evaders to continue with their misdeeds.聽The World Bank, too, has criticised the provision on similar grounds and added that such policies have failed to earn a significant amount of revenue in the past. Since independence, schemes to legalise undisclosed money have been introduced at least 22 times, but responses have been lukewarm. National Board of Revenue data show that about Tk 45,522 crore was legalised in 1972鈥�2022, with the collector getting Tk 4,641 crore in taxes in total. The records, therefore, dispute the government鈥檚 claim that the provision would help to increase revenue.
The impact of an illicit economy, including distressed revenue generation and widening income inequality, has already been manifest. In 2023, the size of the shadow economy, as the Centre for Policy Dialogue says, was 32.2 per cent of the official gross domestic product and the volume of tax loss because of illicit economic activities was Tk 84,200 crore. In April, a World Bank report showed that around $3.15 billion in illicit financial flows from Bangladesh occurred annually. The State of the Tax Justice Report 2020 estimated the offshore financial wealth of Bangladeshis at 0.7 per cent of the country鈥檚 gross domestic product. The reports suggest that the huge amount of illegal wealth, which a ruling party lawmaker referred to as 鈥榞rey money鈥�, is not only generated as a result of financial crimes and corruption but is also used to commit further corruption. The maximum tax rate for individual taxpayers now is 25 per cent, which the revenue board plans to raise up to 30 per cent. Illicit money holders can, therefore, legalise undeclared wealth by paying at only half the regular tax rate. Economists, therefore, say that such a provision is discriminatory and moral government support for holders of undisclosed money.
The government must, therefore, consider the criticism, stop politically patronising money launderers and establish an effective and foolproof mechanism to check the unabated practice of trade mis-invoicing and other forms of illegal financial transaction. In addition to a judicious investigation of the allegation of money laundering, the government must immediately initiate procedures with 鈥榯ax heaven鈥� countries to bring back the money already laundered out.