Money-whitening scope in budget sparks debate

CPD, MCCI strongly oppose; finance minister terms it ‘political compromise’
The provision for whitening undisclosed money in the proposed budget for the fiscal year 2009-’10 is ‘a political compromise’, said the finance minister yesterday, after several organisations scathingly criticised the government’s move.
Every year during budget time, the issue of whitening black money becomes a topic of hot debates as prominent citizens’ groups think such an opportunity discourages honest taxpayers to pay tax on time.
The incumbent prime minister and her finance minister had opposed allowing money whitening when they had been in the opposition during the last four-party alliance regime. Finance Minister Abul Mal Abdul Muhith opposed it even after becoming a minister.
During a post budget news briefing yesterday in the National Economic Council auditorium, Muhith however said, “Politics is the highest art of compromise.” He was replying to journalists’ repeated inquiries about the controversial provision in the new budget despite his and the prime minister’s prior opposition to it.
The reporters asked the finance minister whether honest tax payers are being cheated, by providing the opportunity to black money holders for three years.
In reply the finance minister said, “So listen to how the provision got incorporated in the budget. Politics is the highest art of compromise. It’s not seen that much in our country, but it happens quite often in other countries.”
He went on, “I personally oppose whitening of black money and was vocal against it even after becoming a minister. I morally don’t support it. The prime minister also opposes it on moral grounds. I opposed whitening of black money on her behalf time and again in 2003 and 2004. I still hold the same position. But as I’ve already said, politics deals with all kinds of people and all kinds of interests.”
“We’ve to coordinate all interests. Expediency you cannot avoid, consistency you must honour,” said the finance minister, adding that the opportunity of whitening money is needed for curbing corruption, the chance has to be given sometimes, so corruption can be avoided in the future.
The finance minister also said, “Secondly we gave the opportunity to increase investment and employment. It will continue till 2012. Then we will look into how much employment has been created. If we see that not much employment has been created, we will scrap the provision.”
According to the proposed budget, black money holders will be able to legalise their undisclosed incomes in exchange for payment of 10 percent tax on the amount, and by investing the whitened amount in the industrial sector and capital market, or by purchasing flats. The opportunity will remain available for three fiscal years.
The Centre for Policy Dialogue (CPD), and Metropolitan Chamber of Commerce and Industry (MCCI) yesterday opposed the provision in their post budget reactions.
“The design of the provision for whitening undisclosed money is wrong. It doesn’t make any distinction between legal and illegal earners,” Dr Debapriya Bhattacharya, a distinguished fellow of CPD told reporters at BRAC Centre Inn.
“It’s an injustice to honest taxpayers,” he said.
A regular taxpayer has to pay 20 percent tax on an income of Tk 3.75 lakh, but a black money holder will have to pay just 10 percent on whatever amount is legalised.
The last BNP-Jamaat-led four-party government in fiscal 2005-’06 allowed whitening of black money for a flat tax of 7.5 percent.
MCCI in a written statement said, “Such a provision will discourage taxpayers from paying taxes knowing that they can pay only 10 percent in these three years in full and final payment for whitening undisclosed income.”
“As it is apprehended on every available occasion, whitening of undisclosed income will have multiplier adverse impact in the long term on the people’s attitude to paying tax,” MCCI added, suggesting that the concession, if allowed, must be limited to income from legal sources, and their investments should be restricted to productive sectors only.

Courtesy of The Daily Star