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The government may not extend the special indemnity for legalisation of undisclosed and untaxed money and assets in the upcoming national budget for the fiscal year 2021-2022 amid a spate of criticism and strong opposition from economists, businesses and other stakeholders.
Finance minister AHM Mustafa Kamal in the last budget for the current FY 2020-2021 offered the unlimited scope for legalisation of untaxed money and assets for a year between July 1, 2020 and June 30, 2021 along with indemnity to owners of such assets on condition that a specified rate of taxes are paid.
He offered the benefits through incorporation of the ‘Special Tax Treatment in Respect of Investment in Securities (Article 19AAAA)’ and ‘Special Tax Treatment in Respect of Undisclosed Property, Cash, etc (Article 19AAAAA)’ provisions in the Income Tax Ordinance 1984.
According to the National Board of Revenue data, a total of 10,034 people legalised cash and assets worth Tk 14,295 crore in the first nine months of FY21 under the scheme and paid Tk 1,439 crore in taxes.
Of them, a total of 9,693 people legalised Tk 13,860 crore, mainly in cash, fixed deposit receipts, saving certificates and assets, by payment of Tk 1,390 crore.
Another 341 people legalised Tk 435 crore through investment on the capital market and paid Tk 49 crore in taxes.
Officials of the finance ministry said that the ministry had decided not to extend the scheme as the timeframe for the benefit, given for one year, was set to expire on June 30.
Another major reason for the discontinuation is strong opposition from various stakeholders, including business persons, economists and activists who have been demanding discontinuation of the facility and saying that it went against the spirit of tax justice, integrity, fairness and the constitution, they said.
Such an indemnity discourages honest taxpayers from paying tax while it rewards taxpayers who evade tax, they said.
According to the provisions, people can legalise undisclosed money by investing it on the capital market and other government securities, and legalise any type of untaxed properties, cash, bank deposits, financial schemes and instruments and savings certificates by paying tax at the rate of 10 per cent while the regular tax rates range from 5 per cent to the highest 25 per cent.
People have also been allowed to legalise undisclosed land, buildings and apartments by paying taxes at the rate between Tk 200 and Tk 20,000 per square metre based on the location of the land, building and apartment.
Kamal, in his speech for the last budget, said that the incentives were proposed to generate more revenue to finance greater public spending to stimulate demand in the economy and to provide impetus to the economic activities in the private sector amid the coronavirus outbreak.
Also, in some cases, lack of adequate knowledge on tax return submission may cause a mismatch regarding proper declaration of assets owned by a taxpayer in his or her tax return, he said.
The scopes have been offered to provide an opportunity to the taxpayers to amend such mistakes as well as to pave the way to increase the flow of money into the mainstream economy, he added.
As per the provisions, no question as to the source of such money, popularly known as black money, shall be raised under any law of the land, the provisions stated.
The regular scheme for legalising undisclosed money through investment in economic zones and hi-tech parks and construction and purchase of buildings and apartments, however, will remain in place.
Under the regular provision (Article 19BBBBB and 19DD) of Income Tax Ordinance1984, the tax rate is 10 per cent for legalisation of untaxed money through investment in the economic zones and the hi-tech parks within June 2024 while the tax rates range between Tk 300 and Tk 5,000 per square metre for land, buildings and apartments based on the location.
Under the provision, the money for such investment should not derive from any criminal activities under any other law for the time being in force nor should it derive from any illegitimate source.
