Stockbrokers for money whitening facility

The Dhaka Stock Exchange Brokers’ Association of Bangladesh (DBA) has made a set of recommendations to the government, including offering the money whitening facility for stock business without any question to increase cash flow in the capital market. 

It made the recommendations in a letter sent to the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) last week. The FBCCI will forward it to the National Board of Revenue (NBR).

In the recommendations, the DBA also sought to increase investors’ tax-free dividend income limit to Tk 2 lakh from the existing Tk 50,000.

DBA President Richard D’ Rozario said in the letter the capital market would be strengthened next year if the black money whitening scheme was available in FY23.

“The initiative will increase liquidity in the capital market. The dynamics of the stock market will then increase. Industrial and economic development will take place,” he said.

Richard, also the managing director of Global Securities Limited, said preventing money laundering and investing in the country would help the government’s revenue grow. 

The Bangladesh Economic Association in May 2018 estimated that around Tk 5-7 lakh crore of black money was used in the economy.

Firstly, in FY12, the government allowed a 10 per cent tax provision for investing undisclosed money in the stock market. That initiative required a lock-in period of two years.

In the FY21 budget, Finance Minister AHM Mustafa Kamal also allowed investment in the stock market from unidentified sources on the condition that the investment was made with a 10 per cent tax and a one-year lock-in period.

In that fiscal year, 11,839 people earned about Tk 20,500 crore, which was the highest in the country’s history in a single year.

After that, in the current fiscal year’s budget, the government had to withdraw the scope to whiten money. In the existing law, there is no wholesale scope for whitening undisclosed money in any sector.

Transparency International Bangladesh Executive Director Dr Iftekharuzzaman told The Business Post the money whitening scope would be completely opposite to zero tolerance against corruption declared by the prime minister and thus could not be accepted in any way.

The opportunity was not initially included in the budget to avoid controversy and criticism, although the issue was under active consideration by the government from the beginning, he added. 

According to Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, such flexibility would not yield long-term results.

He also said unquestioned amnesty for whitening black money would only benefit a certain group of people and honest taxpayers might be demotivated and demoralised by this.

Earlier, in January this year, the Bangladesh Securities and Exchange Commission sent a letter to the NBR about this matter.  

The stock market regulator said it is in favour of the facility to whiten money through stock market investment by paying only a flat 5 per cent tax.

It also said it does not want black money owners to face any questions about their sources of income.