Following the proposed Finance Bill 2020, Parliament passed the much-expected Finance Act 2020 yesterday by the full majority. The budget of BDT 5.68 trillion was passed during the pandemic with the contamination rate and the death toll up marching every day. This budget emphasized the post COVID economy keeping in mind the financial challenges that the nation is likely to go through. Moreover, the pandemic has exposed the poor infrastructure of the health sector among the other sectors and has led the country to enter into the fragile economy. In these circumstances, the government is taking few initiatives to ensure the investment-friendly environment. Among those, the establishment of Bangladesh Single Window which shall serve as a single electronic entry point and a platform for a person involved in export, import, warehousing, transit or transhipment of goods, adding new sectors for the newly established industrial undertakings to avail the tax exemption benefit under the existing laws, condition relaxed for whitening the black money etc.
The underlying conditions enacted by the previous Finance Act 2019 has been made heavily relaxed in the new Finance Act 2020. In the old Act, the special tax treatment in respect of investment was only limited to residential buildings and apartments, for which the assessee had to bear the burden to prove that the source of the fund is not derived from any criminal activities and not from an illegitimate source. Whereas, the new Act gives no right to any authority to question the source of the fund provided an investment of such money is made in securities within the first day of July 2020 and the thirtieth day of June 2021 (both days inclusive) subject to paying tax of 10% of the total sum and furnishing a declaration. The lock-in period of such investment has been reduced down from three years (as proposed in the initial Bill) to one year in the Act.
The Financial Act 2020 has also introduced special tax treatment in respect of the undisclosed property (including land and apartment), cash, etc. which goes on to establish that no question as to the source of any undisclosed movable and immovable property shall be raised by any authority if an individual assessee pays the before the submission of the return or revised return of income during the first day of July 2020 and the thirtieth day of June 2021 (both days inclusive) pay the tax as prescribed in the new Finance Act 2020.
According to Global Financial Integrity report, $5.9 billion was siphoned off from Bangladesh in 2015. On the other hand, Bangladeshi nationals’ deposits with various Swiss banks rose by 28.34% to 618 million Swiss Francs (about BDT 5347 crore) in 2018. According to the National Board of Revenue (NBR), between 1971 and 2017, a total of BDT 18,372.13 crore was whitened by several people. From the amount, the government received BDT 1,529.46 crore in taxes. Between 2007 and 2009, when a military-backed caretaker government was in power, BDT 9,683 crore of black money was whitened the highest amount under any government in the country’s history. US-based think tank Global Financial Integrity (GFI) revealed that BDT 5,30,000 crore have been laundered in the ten years between 2005 to 2015.
In conclusion, this special treatment can be seen as a catalyst to deal with the liquidity crisis and to lure the potential investors with the undisclosed idle money to invest in the looming security market, real estate sectors, etc. but the many economists and financial analysts are seeing this as a discouragement for the regular taxpayers who are paying higher taxes regularly.
Abdullah Rayhan Gofur,
Advocate, Supreme Court of Bangladesh
M M Mohshiur Rahman
Barrister-at-Law, Honourale Society of Lincoln’s Inn, England
Accredited Civil & Commercial Mediator, England
Advocate, Supreme Court of Bangladesh