‘No questions asked’ investment facility in capital market withdrawn

The proposed budget for FY23 – placed on Thursday – withdrew the “no questions asked” facility for whitening black money through investments in the capital market.

However, anyone seeking to wash black money through such investments will be able to do so after responding to questions from the National Board of Revenue (NBR) and Anti-Corruption Commission (ACC), and paying the specified taxes.

The related provision 19AAAA – under the Income tax ordinance, 1984 – has been removed from the finance bill, which was placed in Parliament on Thursday.

Responding to the move, a number of people involved with the capital market pointed out that a game of hide and seek is played centring on this particular provision every year, and they are somewhat disappointed over the government’s recent decision in this regard.

Insiders added that the move could cause investments in the capital market to fall.

Shakil Rizvi, director of the Dhaka Stock Exchange (DSE), told Business Post that there was always an ambiguity in the budget about investing black money in the capital market. The provision is needed for ensuring more flow of money in the capital market.

Giving his immediate reaction, Bangladesh Securities and Exchange Commission Chairman Shibli Rubaiyat-ul-Islam said, “We received everything we had proposed before the budget, except the facility for investing black money.

“If the government continues to provide a facility for investing black money, the flow of cash in the capital market will increase.”

In the budget for FY21, the government had introduced a “special” facility – which means no questions from the NBR and ACC – for investing black money in the capital market, along with a 10 per cent tax for that financial year, under the provision of 19AAAA of the Income tax ordinance.

Initially reluctant, the government later kept this “no questions asked” facility in the budget for FY22, but raised the tax rate from 10 per cent to 25 per cent, along with an additional 5 per cent tax on the total tax amount.

It should be noted that under the provision 19E, the facility for investing undisclosed wealth in the stock market has remained along with four other sectors. However, this is not a “no questions asked” facility.

The other sectors are – any industry undertaking expansion, BMRE (balancing, modernisation, renovation and extension) of existing industry, building apartment or purchase land, and any trade, commercial or industrial venture engaged in production of goods or services.