Scope for legalising black money last fiscal year brought the government only Tk 38 crore in taxes, the lowest in four years.

"It is a very negligible figure. The collection of such an amount is just an hour's business for the National Board of Revenue (NBR)," said Ahsan H Mansur, the executive director of Policy Research Institute.

Only Tk 382 crore was legalised in fiscal 2011-12, and that too after a mere 82 people decided to do so by parking money in stocks.

"[The provision to legalise black money] creates moral hazard. Honest and regular taxpayers will be discouraged to comply with the law," said Mansur, a former economist of the International Monetary Fund.

"The whole thing is unjustified on the economic ground. It also has no revenue justification," he said, stressing the need for stricter governance.

The revenue authority incorporated a provision in the law, under which a person will be able to legalise undisclosed money by paying 10 percent penalty in addition to paying normal tax.

The provision has been added in the Income Tax Ordinance 1984, widening areas for investment for undeclared money-holders, said a senior official of NBR, requesting not to be named.

In the past the NBR used to give the scope through statutory regulatory orders.

The areas where black money can be legalised via investment include the stockmarket, real estate, industry and BMRE (Balancing, Modernisation, Rehabilitation and Expansion).

The rationale behind the inclusion of the clause, the official said, is that a provision in law would encourage more people to come forward to declare their undisclosed wealth.

"Stability of law gives confidence to people. Anyone can disclose undeclared income anytime," said the official.

Towfiqul Islam Khan, a senior research associate at the Centre for Policy Dialogue, however, is sceptical of the success of the NBR provision.

"It fails to have a special impact if the opportunity is given every year.”

He feels the past low responses suggest the inclusion of a permanent provision in the law would hardly lead to better outcomes.

In recent memory, the NBR logged in Tk 803 crore as taxes in fiscal 2007-08 after 16,664 people legalised a staggering Tk 8,895 crore fearing anti-corruption crackdown by the then caretaker government.

The number of people declaring their undisclosed incomes since then has been on the wane, with the figures being 14,258 and 1,923 in the successive fiscal years of 2008-09 and 2009-10.

The tax receipts registered for fiscal years 2008-09 and 2009-10 were Tk 108 crore and Tk 121 crore respectively.

"Rather, the NBR should improve its law enforcement and increase administrative reach to net more taxpayers," said Khan.

News: Daily Star/Bangladesh/28-Aug-12