The government of Bangladesh proposed the national budget for 2022-2023 a few days back. No doubt, the amount of the budget is the highest to date and there are many positive aspects including an emphasis on domestic investment and export diversification. The budget can lead to economic development if it is implemented with plans. But it remains unclear whether the budget will be implemented as planned. Moreover, there are some negative aspects including its limited focus on facing the potential challenges of the Russia –Ukraine war, huge budget deficit and over dependence on borrowing from domestic sources. Of course, one of the most discussed aspects of the budget is the whitening scheme of black money laundered abroad (the opportunity to bring laundered money back to Bangladesh from abroad) by providing a certain percentage of tax, on which this commentary is written.
Of course, the impacts of this measure are not altogether negative. The initiative to whiten black money sent abroad is a good initiative from one point of view. Indeed, the black money, usually undisclosed money which may be legally acquired but undisclosed or illegally acquired and undisclosed, is largely attributed to tax evasion and, moreover, it is the total loss of the government’s revenue and does not bring any other benefit to the country. The measure of whitening black money especially the money that was illegally earned and sent abroad will enter into the formal economy and increase investment in Bangladesh. Without such a scope, the transferred money would have not come back to Bangladesh. The investment will not only bring economic benefit to industries or investors but also generate employment, provide revenue to the government and contribute to society in many aspects.
It is undeniable that such a measure is especially needed for a country like Bangladesh which is progressing economically and graduating from the least developed country status to developing country status. According to available sources (though there is a lack of verification), thousands of cores of BDT are illegally transferred to other countries from Bangladesh each year. No doubt, Bangladesh has limited financial resources to invest in different development sectors that can boost the economy of the country. Consequently, the black money whitening measure has some considerable justifications in Bangladesh given that at least a significant amount of money sent abroad can be brought back and invested in development sectors in a planned manner. But there are some remarkable concerns that unjustify such a measure in the national budget.
Firstly, to what extent such a scope actually benefits the national economy remains unclear. Indeed, results achieved from the black money whitening policy in the past had mostly been disappointing in terms of the amount brought back, investment and revenue collection, though there are some achievements. According to available sources, around 10000 crores BDT was brought back to Bangladesh in the first eight months of the last fiscal year. Of course, the amount primarily seems to be a huge amount, but it seems to be much lower than the amount illegally earned and sent abroad each year. In addition, the government has not received the desired revenue. Consequently, such a measure has not yet brought any notable benefit as was deemed, though it has the potential to bring enormous benefits to the country.
Secondly, this measure leads to the criminalization of the economy and politics. Since the government provides a legal scope of whitening black money, it not only indicates the inadequacy in fighting corruption or the laxity in the application of the anti-corruption measures but also encourages corruption including large-scale corruption. Alternatively saying, such a measure is supportive of corruption. Given that such a scope is given repeatedly, political leaders, government officials and others may increasingly get involved with corruption and money laundering with an intention to whiten it later. Its possibility is higher as the possibility of the punishment remains low. As a consequence, this measure can make it difficult to stop corruption and money laundering, rendered as a serious crime in Bangladesh.
Thirdly, there are some other notable problems with the proposed black money whitening measure. It is an injustice and discriminatory approach in that a regular (honest) taxpayer pays more tax (thirty percent or more), while a black money holder pays less in investing their money in economic activities. Consequently, regular taxpayers may be discouraged to pay taxes and disclose their money since undisclosed money that can be whitened later can bring more economic benefits to them. Moreover, this is a clear contradiction to the national constitution. Indeed, Article 20 (2) of the constitution states, “The state shall endeavor to create conditions in which, as a general principle, persons shall not be able to enjoy unearned incomes…” No less important is that such a measure is a contradiction to the government’s zero tolerance policy for corruption.
Thus, there are more negative outcomes of the whitening black money measure than positive outcomes. Moreover, providing repeated scope of whitening black money, along with no indication of the punishing of the future corruption based money transfers to other countries, is a cause of serious concern in the long run. Even if the latest budget has some justification for the black money whitening measure based on its possible positive outcomes especially in terms of bringing money back to the country, it clearly fails to provide an indication of any measure to prevent corruption needed for the prevention of illegal earning and the transfer of illegally acquired money from Bangladesh to other countries through illegal means. Otherwise saying, the national budget for 2022-23 does not recognize the importance of negative aspects of such a measure on the national economy and public administration at all.
It is, therefore, more justifiable to say that the government should cancel such scope from the budget. Yet, if the measure includes the prevention of corruption and further illegal earning that is aimed at whitening later, it may have some justifications. In this case, the outcomes are likely to be more positive. But legal aspects still make it unjustified. But the budgetary efforts to whiten the black money laundered abroad may still have some justifications only if it is given special consideration for the financial benefit of less resourceful (especially financially less resourceful) Bangladesh and made subject to addressing all concerns with it. Thus, the government needs to address all associated concerns. But the government should not repeat the scope year after year and should take action against those who transferred illegally earned money abroad but do not bring it back within a specified time frame. Also, raising the fine above the regular tax rate seems to be more convincing if the scope for legalizing money laundered abroad is given.
More importantly, since corruption can increasingly go on in Bangladesh without any corruption prevention effort with the scope of whitening the black money, emphasis needs to be given to corruption prevention. Of course, the government needs to make sure that corruption is reduced at the desired level. For this, transparency and accountability need to be ensured at all the tiers of society. But the special focus needs to be given to monitoring the channeling of money to prevent future illegal transfers. Also, punishment needs to be ensured against those who do not disclose money and who illegally transfer money abroad from now on. Clearly, institutional measures need to be strengthened in Bangladesh.
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