Black money finds legal home
Government officials, lawyers, engineers, owners of construction companies, private clinics and doctors mostly whitened their undisclosed wealth last fiscal year.
Some 479 taxpayers of Dhaka Tax Zone-4 washed undisclosed assets worth Tk 1,680 crore in the fiscal year that ended on June 30 by paying a 10 percent tax. The majority of the taxpayers in this zone are government officials.
After Dhaka, most of the undisclosed funds were whitened in Chattogram, Khulna, Bogura, Narayanganj and Rajshahi.
A total of 11,859 taxpayers legalised their black money last fiscal year by paying Tk 2,064 crore in tax.
Save for land and flat valuation, about Tk 17,230 crore has been whitened in fiscal 2020-21, according to the data from the National Board of Revenue (NBR).
As the tax value is different for land and flat in different places, the tax received on the whitened amount could not be determined.
Some 4,514 land and flat owners whitened their assets by paying a tax of Tk 343 crore.
People preferred to keep their funds in hand or banks mostly. Hardly any of the amount whitened was headed to the stock market.
Some 7,055 taxpayers invested their undisclosed money by keeping funds in hand, bank and savings certificates after paying a combined tax of Tk 1,683 crore during the year.
The details provided by the NBR explode certain myths on sectors that benefit from the undisclosed money whitening facility, said Zahid Hussain, a former lead economist of the World Bank's Dhaka office.
The common perception is that the share market and the real estate sectors benefit the most, he said, adding that data shows the share market only accounted for 1.9 percent and the real estate sector 16.6 percent of the total money whitened.
The remaining 81.5 percent went into bank deposits and national savings certificates, he said.
The data also confirms that it is the business owners who account for the bulk (75 percent) of the undisclosed income, but they are not the only ones.
Public officials and professionals such as doctors, lawyers and engineers also account for a significant proportion, Hussain said.
Total tax collected through this policy accounts for less than 1 percent of NBR tax collections through May and the total money whitened is a trivial fraction of total liquidity expansion in the economy.
"This goes to show that the realised return from the policy, even in its most generous form as was the case last year, is not even remotely close to what it is touted to be. These do not seem to be worth the disincentive and demoralising effects on the honest taxpayers."
The NBR deserves kudos for their transparency on the results produced by the undisclosed money whitening facility, he said.
"It is high time to completely phase out this policy and reform the personal income tax system in ways such that the taxpayers are incentivised to disclose income voluntarily without fear," the economist added.
After Tax Zone-4, the second-highest amount (Tk 1,620 crore) was whitened from Tax Zone-8, where business owners, lawyers, engineers and chartered accountants pay their taxes, the NBR data showed.
The government should analyse the legalised fund to realise which sector and which professions are mostly whitening money, said Muhammad Abdul Mazid, a former NBR chairman.
By the analysis, the NBR can realise who are evading tax to a higher extent.
"It would help avoid tax evasion in the future," Mazid added.
Tax Zone-5 Dhaka, where owners of construction companies pay tax, was the third-highest in legalising undisclosed money and they whitened Tk 1,570 crore of their assets.
Big taxpayers whitened about Tk 1,500 crore in the Large Taxpayers Unit but here, only 31 taxpayers legalised funds.
The Tax Zone-10, where most taxpayers are doctors and owners of private clinics and hospitals, received a tax of Tk 142 crore for undisclosed funds of Tk 1,420 crore.
The owners of hotels and restaurants pay taxes mostly in the Tax Zone-7. Some Tk 1,144 crore was legalised here by paying Tk 114 crore of tax, the NBR data showed.
The Tax Zone-2 Dhaka -- where RAJUK officials, contractors and companies whose name start with S (except cement company and hotels) pay taxes -- collected tax of Tk 96 crore for whitening undisclosed sum of Tk 960 crore.
Some 111 taxpayers legalised their flats from the zone, second only to Tax Zone-12. In the zone, Rajuk officials and contractors pay their taxes mostly and around Tk 708 crore was whitened here.
Most flats were legalised from Tax Zone-12 as 116 tax payers legalised the assets here.
Outside of the capital, the taxpayers of Chattogram whitened undisclosed fund of Tk 1,555 crore followed by Tk 538 crore in Khulna tax zone, Tk 347 crore in the Narayanganj tax zone and Tk 340 crore in the Bogura tax zone.
Some 286 taxpayers invested their undisclosed money in the securities approved by the Bangladesh Securities and Exchange Commission. The value of the securities is about Tk 402 crore against which Tk 40.29 crore of tax was collected.
About 65 taxpayers from Tax Zone-12 whitened their black money in the stock market, which is highest among all the zones.
Artists and sportspersons pay their taxes in the zone, where a total of Tk 708 crore was whitened last fiscal year. Most of the flats that were legalised were from the tax zone: 116.
Some 83 taxpayers of Tax Zone-4 and 78 of Tax Zone-6 legalised their lands.
From the outside of Dhaka, taxpayers of Cumilla and Narayanganj whitened their lands mostly.
From outside Dhaka, 293 taxpayers of Cumilla legalised their flats.