Legalizing black money will remain in place
Size of parallel economy is a true disgrace.
A treatment plant far away from mainland
May make the economy sound and grand.
A news report dated May 20 says that government is predetermined to retain the scope of legalizing black money for the next budget (FY2021-22), which will be presented before the parliament on June 03. The Finance Minister went a step farther, as claimed by the report, saying " The provision will be continued as long as there is undocumented money in the country1.
Government's action to tackle black money has met unwelcoming reaction from various groups. But the sheer size of the undocumented money and capital flight left little choice for the government.
While answering to a question of a Member of Parliament in 2017, then Finance Minister AMA Muhit disclosed in the parliament that Tk 13,372 crore had been whitened since 1971 and government had earned Tk 1454 crore as taxes. Tk 2.25 crore had been legalized in the period 1971-75, Tk 50.76 crore had been whitened in 1976-80, Tk 45.89 crore had been documented in the span of 1981-90, Tk 150.79 crore had been legalized in the period of 1991-96, Tk 950.41 crore had been whitened in the years of 1997-2000, Tk 827.74 crore had been whitened in the period of 2001-06, Tk 9682.99 crore had been documented in the years of 2007-09, Tk1805.01 crore had been legalized in the period of 2009-2013, TK 856.3 had been documented in the years of 2013-20172.In the ongoing fiscal year, Tk 140 billion had been whitened , according to NBR. Till to date, this is the highest amount that legally came into government coffer.
The striking surprise was the period 2007-09. Second highest amount of undocumented money was legalized under the auspices of caretaker government. Did it bring any good? Corruption is more rampant than ever before, banks and stock market were literally plundered. Where is the positive change of that anti-corruption drive?
Last year, I wrote a piece titled "As Shadow Eclipses The Mainstream" where I analyzed relations between legalized black money and underground economy. Since 2004, the amount of legalized black increased manifold. But in many periods such money as percentage of GDP did not even cross the 1 percentage point. Meanwhile illicit financial flows from Bangladesh as percentage of GDP were 32.8%, 41.64% and 32.86% in 2001-06, in 2007-09 and in 2009-13 respectively. Such provision did not stop capital flight and as there have already been functioning alleys in the economy. So clandestine wealth is finding safe sanctuaries abroad3.
In the ongoing fiscal year, owners of black money have legalized their wealth through flat purchase, investment in stock market and deposit in banks by paying a retributive tax of 10%. Real estate sector has been a preferred destination of this black money. There are rumors that whitening black money through flat purchase may be discontinued from next fiscal year.
A highly criminalized society is one of the obvious signs of presence of clandestine wealth. Gang culture across the country has turned worst at all time. Many sources of clandestine wealth are territorial in nature. These gangs are spreading across the country to protect the territory. Ramifications are beyond conceivable. Property and political feuds now become more violent as such territorial armies offer manpower and arms in this kind of feuds to farther consolidate their position and power in the territory.
Allowing black money entering mainstream has disastrous consequences. It is just like allowing sewer water to pollute the supply water. Such contamination is a perennial source of maladies. One can see the symptoms if he/she heeds what is happening around. Overpriced kitchen commodities, which are mostly perishable, are making dent in the spending of wage-earners. Import of cheap manufactured goods-- a mean to launder money abroad-- and dumping them into local market hinder the prospect of local manufacturing companies. Flat prices remain out-of-reach to typical lower-middle income families. Deception and malpractices deteriorate governance situation in business. Vernacular advertisements that run on TV aptly capture the corrupt and degenerated mood of the society by spreading messages like "Tumi Dekhba Nodir Epar/ Ar Tumi Nodir Opar (You will look after this side of the river and you the other side)"4, " Jodi Hate Thake Gear/ Nei Kono Fear (As long as you have gear, / There is no fear)"5, "Amra Amrai To(Let's keep this between us)"6.
The point is allowing such clandestine wealth without any treatment has corrosive effect on economy and society.
An alternative way to accommodate this wealth is to create an alternative environment for it. So that stigma-free money can enter economy. We need a special place where these pollutants will end and go through a treatment process and then the processed money will reenter economy. Think of a specially administered region that has its own financial institutions and own rules to govern them. Undocumented money of all hues could meet here. People in possession of such wealth should not be banned from channelling funds to such administered region. Special kind of financial institutions could be formed in this region and depositors will be allowed transfer, reinvest or open bank account in the mainland with the interest they earn and part of their money one year or a fixed-time later. Bank statements from these institutions vouch for whitening black money. Moreover, fund of these specialized institutions will be reinvested in mainstream economy and in research activities. At the same time, undesired leverages of black money owners in decision making and governance could be eschewed. Remember problems often creep up when such untreated money are invested in the economy strings are attached to them.
We have special economic zones , cantonment boards where special laws regulate conducts of individuals and business entities. By the same token, we can set up special administered region in a remote corner with restricted entry. In the island of Moheshkhali where a deep sea port is being built, such region could be set up as there is no short of land . Access to the island is not easy. At the same time, accountability of administered region will have to be ensured. And all the state organs that are still not accountable to parliament and judiciary should be held accountable to such institutions, or else culture of no-accountability will jeopardize all the good initiatives. This is another reason for the presence of clandestine wealth in our society.
As we do not draw water from sewer for consumption, we should not allow untreated black money in our economy. It is better to allow sin-city in the remotest part of the country so that mainstream economy is left unperturbed. Many regional countries have such cities and they are just a plane-ticket away. A specially administered city will reduce the incidence of capital flight as well bring black money from other transnational owners offsetting to some extent laundering of money. To address the maladies in our society and economy,stemming from parallel economy, there is no alternative to setting up a treatment plant.
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Notes And References:
1. Onirdishto kal dhore kalo taka shada kora jabe(Black money can be legalized for indeterminate period),May 20,2021, Daily Prothom Alo.
2. Daily Independent .
3. As Shadow Eclipses The Mainstream, https://rezaulhoque.wordpress.com/?s=As+The+Shadow+Eclipses+The+Mainstream .
4. TVC of an ice-cream. A gangster is seen giving instructions to two members of his clan.
5. TVC of an energy drink.
6. TVC of a leading telecom operator. Two pals are seen having some conversation before a tea stall.
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