Dhaka, Bangladesh

In a bid to bolster revenue, Bangladesh’s government is proposing a controversial amnesty program with substantial tax incentives for individuals who have not declared their assets. This initiative, announced by Finance Minister Abul Hassan Mahmood Ali on Thursday during the unveiling of next year’s budget, has sparked intense debate across the nation.

Critics argue that the scheme would effectively promote corruption by allowing affluent individuals, who have amassed “black money” through questionable means, to escape legal repercussions and be taxed at significantly lower rates than ordinary citizens.

A Bold Budget Announcement

In his budget speech to Parliament, Finance Minister Mahmood Ali proposed an ambitious spending plan of 7.98 quadrillion taka (approximately $68 billion) for the fiscal year commencing on July 1. This marks a 5% increase from the current year’s budget of 7.61 quadrillion taka ($64.8 billion).

“It is necessary to keep the country’s economy dynamic in the changing economic situation due to the ongoing global crisis. In order to generate and sustain effective demand in the economy, we need to provide more revenue on the one hand to generate sufficient public spending and on the other hand to keep the economic activity dynamic in the private sector,” Mahmood Ali told the MPs.

The proposed budget includes a provision that would allow holders of previously undeclared wealth, such as securities, cash, and bank deposits, to declare these assets and pay a 15% tax on them. This is a substantial reduction compared to the 30% tax rate that regular taxpayers would face on their declared incomes, a rate which has increased by 5% from this year.

“In this situation, I propose to add a clause on tax incentives in the Income Tax Act with a view to providing taxpayers with an opportunity to correct this error in their income tax returns and to increase the flow of money into the mainstream of the economy,” Mahmood Ali explained.

Support from Key Lawmakers

The proposed amnesty scheme is the first of its kind in four years, introduced at a time when Bangladesh is grappling with a foreign currency crisis and a severe liquidity shortage in banks. Discussions in Parliament are expected to be robust, with lawmakers needing to adopt the budget by June 30, the end of the fiscal year.

A.H.M. Mustafa Kamal, chairman of a parliamentary standing committee on the finance ministry and a former finance minister, expressed his support for the plan.

“A huge amount of money has gone into the wrong hands. We need to bring the money back to the economy,” Mustafa Kamal told BenarNews. He believes that the investment of undisclosed money could create jobs, spur economic growth, and reduce poverty.

“If we do not make a lucrative offer, the money would not come to the system – the money will go elsewhere,” Kamal added.

Rising Tide of Criticism

Despite support from some lawmakers, the proposal has faced significant backlash from various quarters. Ahsan H. Mansur, executive director of the Policy Research Institute, a private think tank, accused the government of siding with corrupt individuals.

“What sort of offer is this? The genuine and honest taxpayers will be paying 30% tax and the corrupt people, black money holders, and money launderers 15%? This can be called a state-sponsored scheme to promote corruption,” Mansur said.

Mansur criticized Prime Minister Sheikh Hasina’s government for proposing a wholesale “whitening” of black money while simultaneously claiming to fight corruption.

“The government must clearly say which side they would prefer – corruption or anti-corruption. Only lip service against corruption will not convince people,” he asserted.

Historical Context and Data

The concept of declaring “undisclosed money” is not new in Bangladesh. Since the late 1970s, successive governments have allowed individuals to declare such assets, albeit under different terminologies and conditions. According to data from the National Board of Revenue, the process has been utilized to tax at least 364 billion taka ($3.15 billion) between 2009 and 2022.

Rejection from Transparency International

Iftekharuzzaman, executive director of Transparency International Bangladesh, also voiced strong opposition to the proposal.

“The offer to whiten black money is in no way acceptable to the people, irrespective of the government’s explanations. This offer incentivizes the corrupt people and encourages corruption in Bangladesh,” Iftekharuzzaman told.

He warned that this scheme could encourage individuals to earn money through corrupt means with the assurance that they could later regularize their ill-gotten gains with minimal tax liability.

“The genuine taxpayers will pay up to 30% tax against their white money while the corrupt people will give 15% tax against the black money. Thus, the offer causes discrimination among citizens,” Iftekharuzzaman noted.

Moreover, Iftekharuzzaman questioned the legality of the proposal, citing constitutional concerns.

“This is against two articles of the Bangladesh Constitution – Article 20 which prohibits any citizen from enjoying unearned income and another article which guarantees that law must not be discriminatory,” he argued.

Economic Implications

The proposed amnesty scheme reflects Bangladesh’s pressing need to enhance its revenue base amidst a challenging global economic environment. The country’s foreign exchange reserves have been under pressure, and the banking sector is experiencing an acute liquidity crunch.

Proponents of the scheme argue that bringing undeclared money into the formal economy could provide a much-needed boost. The infusion of capital could stimulate economic activity, create employment opportunities, and support infrastructural developments.

However, the broader implications of such a policy on public trust and the moral fabric of the society cannot be overlooked. Critics insist that rewarding financial misconduct with leniency could undermine the rule of law and erode the integrity of the tax system.

A Divisive Path Forward

As the debate continues, it remains to be seen how the proposed budget and the amnesty scheme will evolve in Parliament. The government faces the challenging task of balancing economic pragmatism with ethical governance.

The controversy underscores a broader dilemma faced by many countries: how to integrate illicit wealth into the formal economy without compromising on principles of justice and equity. As Bangladesh navigates this complex terrain, the outcome of this policy debate could set significant precedents for its fiscal and governance strategies in the years to come.

The final decision on this contentious issue will likely shape not only the financial landscape but also the social contract between the state and its citizens. Whether the promise of economic gain will outweigh the potential ethical pitfalls remains a crucial question for the nation.

In conclusion, as Bangladesh grapples with these challenging economic times, the proposed amnesty and tax incentive plan stands at the heart of a heated national discourse. Its eventual fate will be determined by the ability of policymakers to reconcile the need for revenue with the imperative of maintaining public trust and fairness in the tax system.