PM Sheikh Hasina defends legalizing black money in budget proposal

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Awami League, Sheikh Hasina

In a move that has sparked widespread debate, Prime Minister Sheikh Hasina of Bangladesh has come out in support of the budgetary provision allowing the legalization of black money. Addressing a gathering organized by the Awami League in Dhaka’s Tejgaon area to mark the historic Six-point Day, Sheikh Hasina articulated the necessity of incorporating undeclared wealth into the legal economy through the banking system. Her comments have stirred a mixture of reactions, highlighting the complex nature of fiscal policy and economic management in the country.

Prime Minister Sheikh Hasina’s rationale for supporting the provision is rooted in a pragmatic approach to economic integration. She emphasized the importance of bringing unaccounted money into the legal financial network by paying a nominal tax. “The money should be allowed to come to the appropriate place (the banking channel) first with payment of a nominal amount of money (tax) and then they will have to pay tax regularly… If you go to catch fish, you need to provide feed,” she explained.

This analogy underscores her belief that by providing an initial incentive, individuals with undeclared assets will be encouraged to integrate their wealth into the formal economy, thereby becoming regular taxpayers. This step, according to Sheikh Hasina, is crucial for enhancing the financial base of the country and supporting its economic infrastructure.

Acknowledging the concerns raised by critics who argue that this move might discourage legal tax prayers, Sheikh Hasina countered by highlighting the real estate sector as a significant contributor to undeclared wealth. She noted that the price of land has skyrocketed, making many landowners millionaires. However, transactions often occur at prices significantly higher than the government rates, leading to surplus money being kept outside the banking network.

By addressing this issue, the Prime Minister aims to bring these funds into the formal sector, which can then be utilized for the country’s development. Sheikh Hasina’s government’s budget for FY25, amounting to Tk 7,970 billion, reflects this intention by prioritizing education, health, agriculture, local industries, and social safety nets to ensure the basic rights of the people.

The proposed budget provision allows taxpayers, including companies and firms, with undisclosed money to legalize their wealth without facing inquiries about the sources of their income. Under this scheme, a 15 percent tax on cash, bank deposits, financial securities, or other forms of wealth must be paid. Additionally, specific taxes on properties such as land, buildings, flats, or commercial spaces will enable the whitening of their wealth.

Finance Minister Abul Hassan Mahmood Ali, while presenting the budget, pointed out that the introduction of a data verification system had created legal complications over the disclosure of undeclared income and assets. He noted that errors might occur due to taxpayers’ ignorance in filing returns. “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,” said Ali.

One of the significant challenges facing the Bangladeshi economy is high inflation, which has disproportionately affected people with limited incomes. The Prime Minister acknowledged this issue, stating, “Now the biggest challenge is to control inflation, particularly food prices.” To mitigate this, the government has introduced family cards for low-income individuals, allowing them to purchase essential commodities like rice, pulses, and edible oil at fair prices. Moreover, the government is providing food and financial assistance through approximately 150 social safety programs and distributing free textbooks and medicines.

The decision to allow the legalization of black money must be viewed in the context of broader economic strategies. The budget deficit, which stands at 4.6 percent, is a concern but is reportedly lower than the deficits in many developed countries. PM Sheikh Hasina reiterated her call to not leave any land uncultivated to boost food production amid global uncertainties, emphasizing self-sufficiency in food production as a critical national goal.

The provision to legalize black money represents a delicate balance between ethical concerns and economic necessities. While it is essential to maintain moral and legal standards in tax collection, the pragmatic approach recognizes the need to integrate substantial amounts of undeclared wealth into the formal economy. This move could potentially broaden the tax base, increase government revenue, and support public expenditure on critical sectors like health, education, and social welfare.

Prime Minister Sheikh Hasina’s defense of the budgetary proposal for legalizing black money is a controversial yet practical approach aimed at economic stability and growth. By addressing the issue head-on and providing incentives for integrating undeclared wealth into the legal financial system, the government hopes to strengthen the economy, reduce the budget deficit, and support essential public services. However, the success of this initiative will largely depend on its implementation and the broader acceptance of this policy by the public and the business community. As Bangladesh navigates these economic challenges, the balance between ethical considerations and pragmatic solutions will remain a critical focus.

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