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Allow taka-whitening after tax plus penalty

CPD suggests govt buck up dismal investment scenario

Staff Correspondent
The government may allow whitening of undisclosed income only after imposing tax plus a penalty, not at a flat tax rate that goes against honest taxpayers, said the Centre for Policy Dialogue (CPD) yesterday.
"The proposal may be considered in light of the stagnated investment environment and to attract new investments," said the CPD in its budget recommenda-
tions forfiscal 2012-13.
The civil society think-tank made the suggestion after the government expressed its intention to allow whitening of undisclosed money in the next budget at a 10 percent flat tax rate. "This runs counter to the principle of rewarding conscientious taxpayers and punishing tax evaders and people with undisclosed income," said the CPD. Such initiatives (allowing money whitening at a flat tax rate) make little impact on mobilising additional revenues and investments, it said.
If the government wants to take any step in this regard at all, it should make a provision for an additional tax as a penalty, said the CPD in consideration of the present investment scenario.
The organisation also wants a clear-cut announcement — a cut off point — on how long the amnesty would be given.
Distinguished fellow of the CPD Debapriya Bhattacharya, Executive Director Prof Mustafizur Rahman and Head of Research Fahmida Khatun spoke yesterday at a press conference on the budget proposal at the CPD office in the capital.
The CPD put forward a set of proposals for the upcoming budget forfiscal 2012-13.
It said the next national budget would be the penultimate budget of the present government. In the back-drop of the current macro-economic scenario and political realities, the design of the forthcoming budget is under the spotlight.
The government is at the stage where it may have to find a number of alternatives that include restoration of macroeconomic stability at the cost of growth, promotion of structural reforms to make a qualitative difference in economic governance or even populist measures in the growing adverse circumstances.
"Regrettably, at present the government has very little policy space to consoli-date these alternative choices," said the CPD.
It in the budget proposal speculated that the size of the budget would be about Tk 190,000 crore, 16.1 percent higher than the previous year's budget. The allocation for annual development programmes would be around Tk 54,300 crore and the budget deficit would be within 5 percent, as per the proposal.
The CPD also suggested that the government should make project-wise action plans for timely completion of all ongoing projects. The think-tank also advised the government to reduce dependency on bank borrowing and pursue foreign aid.
It emphasised the need for coordination among relevant parts of the government led by the finance ministry for effective macro-economic management and implementation of economy-wide policies.
Replying to queries on legalising undisclosed money, Debapriya said the CPD never supported the move as it discouraged honest taxpayers and did not bring a lot of money into the formal economy.
Undisclosed money may be allowed only with the due tax rate and a penalty, but it has to be ensured that this money will not be used in financing the next parliamentary election and sponsoring new banks, he added.