by Md Mazadul Hoque in Dhaka ,
A large part of unlawful capital, transferred by Bangladeshis abroad, is now flooding different parts of the world. Nearly, half a dozen developed economies are consuming the fund in broad day light.
As a Least Developed Country, Bangladesh is frequently experiencing capital flight since long. The watchdog has been trying to grill the money-launderers and their close associates under existing money-laundering act and law. But, their efforts have been nipped in the bud. The people, who are engaged in money laundering give a damn to such laws and are in a race to damage the country’s image worldwide. The question comes to me –- “are they patriot” ?
The months from July to June is called fiscal year (FY) in Bangladesh. The fiscal year begins with budget drafted by state level. Whenever the decision of drafting the budget is taken, the state has to think deeply in what way the country’s citizens are to be kept in comfort zones. The budget frequently seems to be a bolt from the blue. The budget is presented in the parliament with huge deficit.
Usually, expenditure side becomes bigger than earnings side. Gradually, the difference between earrings and expenditure in the budget is on the rise. Amid coronavirus pandemic, GDP growth rate target was set at 8.2 percent in the budget that came for FY2020-21.
Due to crisis moment of Covid-19, the country’s revenue earnings fell sharply in the twinkling of an eye. Economic activity across the country was asked to shut down in order to curb the spread of coronavirus. Besides, duties on medical equipment were reduced for national interest. National Board of Revenue (NBR) has rushed to the finance ministry seeking the slash of revenue target set by the concerned ministry. Following NBR request, the finance ministry revised tax revenue collection target for 2019-20 in view of impact of pandemic on the economy.
The tax revenue collection for NBR has been set at Tk 3.0 trillion, down from the original goal of Tk 3.25 trillion for 2019-20 FY. Three wings of NBR- income tax, customs and VAT availed of the facility. Besides, NBR faced a shortfall of Tk 454.08 billion against its tax collection target in the first eight months of 2019-20 FY. So, it can be said that Covid-19 had been the key barrier of collecting tax revenue. The Covid-19 has brought economic activity to a standstill resulting in collapse of revenue collection.
Tax revenue collection target was again set in the proposed budget for FY 2020-21. In the budget a total of Tk 3,82013 crore revenue collection was proposed while it was Tk 3,51,523 crore in the revised target of FY 2019-20 budget. Of this NBR will provide Tk 3,30,000 crore which represents 58.1 percent of the total target. The budget deficit in FY2020-21 stands at Tk 1.9 trillion or 6 percent of Gross Domestic Product (GDP). To cover the budget gap, the government will take help from banks and donor agencies. How is it possible without generating tax revenue to a great extent? Only tax revenue can help to cover budget deficit if collection methods and tax management become so smart.
In view of tax collection target in the budget, the economists expressed concern and saying that “never be possible to achieve”. A tax reform already was adopted by NBR to achieve ambitious target by the end of 2020-21 FY. An opportunity has been given to the people, who deal with black money, to legalize undisclosed money. The opportunity could be availed by paying taxes at a rate of 10 percent on the value of declaration from July 01, 2020 to June 30, 2021. Individual tax payers will also be allowed to disclose any type of undisclosed house property like land, building, flat and apartment by paying tax at a particular rate of per square meter of said assets. “Extraordinary time demands extraordinary measures” – said the finance minister.
Similar opportunity was given in the past many time but did not bring much fiscal benefits for the government. My say is that whitening the black money in Bangladesh remains a dream. The government has so far given 16 times opportunity to whiten undisclosed money. What is worrying that a total of Tk 16,000 crore had so far been disclosed as white money in 45 years. Of this amount, a total of Tk 1,500 crore earned as revenue. So, there is no need to dream by day. Though reforms in many times were done by NBR, no fruitful outcome was noticed. Moreover, corporate and individual tax payers have welcomed this budget as tax limit was relaxed for them. I think there is no alternative avenues but to recover black money from home and abroad.
The country lost a staggering $7.53 billion on an average per year between 2008 and 2017 to trade mis-invoicing during foreign commerce with its 135 trading partners- Global Financial Integrity Report (GFI) sources said. The loss accounted for 17.95 percent of Bangladesh’s International trade with all trading partners during the period – GFI said. The last LDC report released by the United Nations Conference on Trade Development (UNCTAD) says that Bangladesh lost a significant amount of tax owing to the illicit outflow of funds that accounted for 36 percent of its total tax in 2015. In fiscal year 2014-15 , the tax authority of the country collected Tk 1,357 billion and UNCTAD estimate showed Tk 488.52 billion had flown out from the country illegally through various channels. What is worrying that $ 6.0 billion to $ 9.0 billion flies out of the country every year. As a result of the scenario, tax-GDP ratio is not increasing as expected level.
The Swiss National Bank (SNB) – the central bank of Switzerland- recently revealed the current status of laundered money kept in Swiss bank that was sent from Bangladesh illegally. The annual report of SNB also said around $426 crores in 2005, $ 337 crores in 2006, $409 crores in 2007, $644 crores in 2008, $ 510 crores in 2009, $ 540 crores in 2010, $592 crores in 2011, $722 crores in 2012 was deposited to Swiss bank received from Bangladeshi-origin people. In 2019, total amount in Swiss bank now Stands at Tk 5,427 crores belonging to people of Bangladesh. “On an average around Tk 60,000 crore is being illegally flown to abroad yearly from Bangladesh”- US based Global Financial Integrity Report said. It is important to say that Bangladesh placed second just after India among South Asian countries in terms of sending Bangladeshi currency in Switzerland through unlawful channels.
Nearly a year ago, the government body planned to assign civil servants as ‘tax detectives’ in Bangladesh missions abroad. The recommendations were placed to bring laundered money back in the country. National Board of Revenue (NBR), the Anti-Corruption Commission (ACC), the foreign ministry and Bangladesh Financial Intelligence Unit (BFIU), embassy abroad were scheduled to take part in the move for discovering laundered money sent from Bangladesh. The development regarding the move has yet to be noticed. If the drive is launched soon from Bangladesh missions abroad, the tax administration might get a good amount of money as tax. I will request NBR to begin the program with the help of foreign ministry to catch tax dodgers red handed. if needed money laundering related act and law might have been amended considering the gravity of current need on Bangladesh economy. The relevant law, especially the 2012 Anti-Money Laundering Act (AMLA) has remained a paper tiger only.
A wide-ranging tax reforms are required through hiring experts from home and abroad right now. For sake of economy, the current situation demands tax reform. Otherwise, the state would not be able to address the need of the time as required. Budget deficit in the national budget for 2020-21 has already crossed red line. So, a speedy move from government is expected. As a nation, we are fortunate because our economy runs ahead with more or less 30 percent loans-GDP ratio.
If loans from foreign sources and banking sector are taken more to cover deficit budget, it will completely be a wrong decision in the long-run. A prudential guideline has to be prepared to net tax dodgers at any cost.
Immediate punishment for tax dodgers might be put in place immediately to net the financial criminals. Let us go to Second Home of Malaysia, Begum Para of Canada, Singapore Bangalee Para of UK and USA if we wish to recover laundered money ti make our country “Sonar Bangla.”