Black money whitening in Bangladesh’s 2024-25 fiscal budget

Bangladesh, Budget

The proposed fiscal year 2024-25 budget for Bangladesh has ignited a heated debate among government and opposition parliamentarians, economic experts, and the general public. Central to this debate is the contentious provision allowing individuals to whiten black money by paying a mere 15 percent tax, significantly lower than the over 30 percent tax rate imposed on legal incomes. Critics argue that this policy undermines the principles of economic justice, disincentivizes honest taxpayers, and potentially exacerbates corruption.

In the session presided over by Speaker Dr. Shirin Sharmin Chowdhury, various members of parliament expressed their concerns. Pran Gopal Dutta, a ruling party member, emphasized the persistent issue of informal grey money related to tax evasion, which the budget fails to address. He argued that without tackling this informal economy, any measures to control undisclosed income or black money would be ineffective. Grey money, he suggested, is more detrimental than undisclosed income as it perpetuates money laundering and other illicit financial activities.

Nurun Nahar Begum, a member of the Jatiya Party, echoed similar concerns. She warned that the provision to whiten black money could facilitate money laundering, allowing criminals to legitimize their illicit wealth, further aggravating the country’s economic woes. Housing and Public Works Minister Ram Ubaidul Moktadir Chowdhury pointed out the pervasive presence of black money in the market and criticized the lack of a robust strategy to utilize these funds productively.

The opposition also weighed in heavily. BNP Secretary General Mirza Fakhrul Islam Alamgir criticized Prime Minister Sheikh Hasina’s analogy of whitening black money to “fishing with a hook,” labeling it as ludicrous. Fakhrul suggested that the provision primarily benefits those close to the government, fostering an environment where corruption flourishes. He pointed out that similar provisions in the past, such as during Khaleda Zia’s administration, resulted in minimal tax contributions from large sums of undisclosed income.

At a separate event, Fakhrul contended that the budget catered to the wealthy and powerful while neglecting the needs of ordinary citizens. With commodity prices soaring and inflation rampant, he argued that the budget fails to address the pressing issue of affordability, leaving the general populace struggling to make ends meet.

Economic experts have also voiced strong opposition to the proposed tax disparity. At a national budget review program organized by the Economics Department of Dhaka University, Prof. Selim Raihan, Executive Director of SANEM, criticized the injustice of allowing black money holders to legalize their wealth at half the tax rate paid by honest earners. This, he argued, not only demoralizes law-abiding taxpayers but also undermines the integrity of the tax system.

Prof. Masuda Yasmin, Chairman of DU’s Economics Department, expressed her disappointment with the budget, highlighting its failure to meet expectations amid the current economic crisis. She called for stability over rapid growth, emphasizing the need for realistic targets and prudent fiscal management. Prof. Sayema Haque warned that borrowing from the domestic sector to meet the budget deficit could exacerbate inflation, calling for more stringent measures to curb the deficit.

DU Vice Chancellor Dr. ASM Maksud Kamal stressed the importance of addressing waste and inefficiency across various sectors. He also highlighted the critical need to prioritize agricultural production in light of climate change, warning of significant risks to food security if the agriculture sector is neglected.

The proposed budget has sparked a critical discourse on fiscal policies, economic justice, and the broader implications for Bangladesh’s economy. To move forward, several key considerations must be addressed:

Balancing Tax Policies: The government must strive to create a fair and equitable tax system that does not disproportionately burden honest taxpayers. Reducing the tax disparity between legal earners and black money holders is crucial to maintaining public trust in the tax system.

Combating Corruption: Institutional measures to curb corruption and illicit financial activities are essential. This includes enhancing the capabilities of regulatory bodies, improving transparency, and enforcing stringent penalties for financial crimes.

Economic Stability: Amid economic instability and rising inflation, the government must prioritize measures that ensure affordability for the general populace. This includes stabilizing the exchange rate, reducing the budget deficit, and implementing reforms to address structural issues in the financial sector.

Agricultural and Industrial Development: The budget should allocate sufficient resources to critical sectors such as agriculture and SMEs, ensuring sustainable growth and food security. Emphasizing skill development and efficient resource utilization can drive industrialization and economic diversification.

Public Engagement and Accountability: Continuous dialogue with stakeholders, including economic experts, civil society, and the general public, is vital. Transparent policymaking and accountability mechanisms can help align budgetary provisions with the broader goals of economic justice and sustainable development.

The debate over the fiscal year 2024-25 budget underscores the complex challenges of balancing fiscal policies with economic justice. While the provision to whiten black money aims to bring undisclosed income into the formal economy, its potential to discourage honest taxpayers and foster corruption cannot be overlooked. Moving forward, a holistic approach that addresses tax fairness, combats corruption, and ensures economic stability is essential for fostering a just and prosperous society in Bangladesh.

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