As published on tbsnews.net, Wednesday 29 June, 2022.
The government is considering making some changes in the next Finance Bill by adding a provision of penalty for individuals who conceal information about their offshore assets.
The move comes on the heels of the proposed Finance Bill offering amnesty to money launderers for repatriating offshore funds. The amnesty offer ran into severe criticism from economists and civil society members.
Under the proposed changes, if the offshore assets of an individual taxpayer are not disclosed and are later discovered, the government might slap a fine tantamount to the value of the concealed assets.
In such a case, any local assets of the taxpayer concerned might also be confiscated and auctioned by the government.
Economists and experts, however, have dismissed the move as nothing but an eyewash.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI), told The Business Standard (TBS), "In reality, it is not possible for tax officials to find out offshore assets and penalise someone in this process. Besides, the benefits provided by the National Board of Revenue (NBR) regarding a whitening of black money will not be very effective either."
"However, it may be possible if any initiative is taken institutionally and comprehensively under the Anti-Corruption Commission (ACC), Bangladesh Financial Intelligence Unit (BFIU), and the Money Laundering Prevention Act," he added.
The proposed Finance Bill of the NBR is likely to be passed in parliament on Wednesday (29 June), while the proposed budget for the 2022-23 fiscal year is expected to be passed on 30 June.
Sources in the finance ministry said the government will add a provision to the Finance Bill that will enable tax officials to impose penalties on taxpayers for not revealing their offshore assets.
Money laundering is a subject of widespread conversation in Bangladesh. There are allegations that huge amounts of money have been laundered out of Bangladesh over the past few decades.
In the FY23 budget, the government has proposed providing the scope to money launderers for bringing back their offshore funds to the country by paying a certain amount of tax.
According to the budget proposal, any assessee will have to pay 15% tax for disclosing immovable assets abroad, 10% for movable assets, and 7% tax for bringing movable assets to the country. No government organisation will question the origin of the assets. This facility will be available for a year starting from July.
This amnesty proposal has drawn widespread criticism from almost every segment of society, including economists and businessmen.
Critics said such amnesty will backfire and more resources will be smuggled out of the country instead of coming in. That is because the maximum income tax rate for an individual in the country is 25%, but the taxpayer has to pay only 7% tax if he/she smuggles assets out of the country and then brings them back. Besides, it will not be possible to know the source of the assets.
According to finance ministry sources, a new section, Section 19 (G), could be proposed for addition to the Income Tax Ordinance regarding an imposition of fines on undisclosed assets abroad.
As per the proposal, where any person being a resident Bangladeshi is found to be the owner of any offshore assets not disclosed in the returns and the assessee offers no explanation about the nature and source thereof or the explanation offered is not satisfactory, the deputy commissioner of taxes (DCT) shall, after ensuring reasonable opportunity of being heard, proceed to recover from such person the amount of penalty equal to the fair value of such offshore assets. DCT shall have the authority to recover the penalty by confiscating or selling any assets held by or on behalf of the assessee.
On condition of anonymity, a senior official of the Income Tax Department of the NBR told TBS, "The current law also requires an assessee to show offshore assets. However, there is no mention of the punishment if assets are not shown. The proposal calls for specifying the fines."
Towfiqul Islam Khan, a senior research fellow at the Center for Policy Dialogue (CPD) told TBS, "With this provision, there is little chance of bringing back offshore assets to the country. It is nothing but consolation to people amid widespread criticism of the amnesty offer."
Snehasish Barua, a prominent chartered accountant and founding partner at Snehasish Mahmud & Co, told TBS, "The penalty provision must be a welcome move, especially when someone launders money abroad and does not bring it back despite having the scope to do so."
It is possible to get information about a person's assets through a government-to-government agreement, he added.