Bangladesh government's recent move to whiten black money has sparked a debate with financial think tanks calling it an "injustice to honest taxpayers".
The government budget for 2009-2010 fiscal presented by Finance Minister AMA Muhith proposed that black money could be whitened by paying 10 per cent tax if invested in infrastructure, special industries and share market.
A regular tax payer pays 20 per cent tax on Taka 3.74 lakh, while a black money holder will now pay only 10 per cent according to the scheme which proposed for three years.
This has sparked criticism from across board, the Berlin-based corruption watchdog Transparency International in a statement published here today said that the proposal was "unethical" and "incompatible with good governance".
While leading economic think tank Centre for Policy Dialogue (CPD) said "it was an injustice to honest tax payers".
Dhaka-based Metropolitan Chamber of Commerce and Industries (MCCI) said the provision would discourage taxpayers from paying taxes.
"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 said in a statement, suggesting that the concession, if allowed, must be limited to income from legal sources.
In a crowded post-budget press conference yesterday, Muhith, however, said political reasons forced him to incorporate the provision "despite the fact that" the premier and he himself were opposed to such steps on moral grounds.
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"(But) Politics is the highest form of art of compromise . . . Politics deals with all kinds of people and all kinds of interests (and) we have to satisfy everyone," he said without identifying the pressure groups.
The finance minister, however, said the government would go for tough action if the black money holders continued the practice of evading taxes after being offered the incentive.
"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," he said.
The earlier Bangladesh Nationalist Party (BNP)-led four-party alliance government had allowed whitening of black money for a flat tax of 7.5 per cent in 2005-2006.