Tax amnesty schemes bring no results in 60 years: Rehman Sobhan

Tax amnesty schemes have miserably failed to bring out any outcomes for the welfare of the country’s economy over the last 60 years, economist Professor Rehman Sobhan said on Tuesday.

“I’ve been hearing about tax amnesty since the Ayub Khan regime. It is still going on periodically in the country. Now it has become an annual practice,” he said. 

Professor Sobhan, also the chairman of leading think tank Centre for Policy Dialogue (CPD), made the comments at a virtual event organised by the Citizen’s Platform for SDGs in Dhaka. 

He mentioned that the direct tax to GDP ratio in Bangladesh remains low and is perhaps the lowest in the world. 

“Obviously, there are some problems with the tax amnesty process that you are not getting any results. The central problem is we all, in a way, failed. Many initiatives have been taken, but much has not been gained,” he added.

Citing an example of how to dig out the black money, he said, “There was famous chief election commissioner TN Seshan. One of the actions he initiated to enforce the ceiling was the election expenditure, that he assigned income tax officers to each election constituency to find out what money was being spent and to compare it then with the tax returns of the candidates. That was a very positive effect at that moment.” 

He suggested the National Board of Revenue (NBR) investigate where the black money is located. 

In response to the comments, NBR Member (Tax Policy) Md Alamgir Hossain said, “The government has offered the black money whitening opportunity to the people who feel insecure at the end of the day and are willing to come to the formal economy.”

About the outcome of tax amnesty, he said, “No research has been done yet in this regard. However, we’re taking many initiatives to identify the black money. It is too early to evaluate.”

In the 2020-21 fiscal year, the NBR launched a tax amnesty scheme that allowed reluctant taxpayers to declare their wealth and income, pay a rate of tax and gain a reprieve.

The black money-holders have been able to whiten their assets by investing in residential buildings by paying a tax of 10 percent on the amount invested, which for regular taxpayers is between 15 and 25 percent, according to the scheme.

“New fund injection is needed to speed up the economy passing through a difficult time caused by the pandemic. Taking the issue into account, we have offered the opportunity,” said the NBR member.  

Former NBR Chairman Muhammad Abdul Mazid, in his keynote paper, said, “An honest and regular taxpayer will pay 15-25 percent and a black money holder will pay only 10 percent on whitening black money. “So, it is natural to question the accuracy of the policy.”

CPD distinguished fellows Professor Mustafizur Rahman, Debapriya Bhattacharya, and many others also spoke at the event.