Published: Sunday, June 2, 2013

Black money for real estate

Black money for real estateThe government is again considering giving scope for whitening money in the housing sector to earn more revenue in the next fiscal year and boost the ailing sector.
It is, however, mulling to annul the provision for whitening money by investing in the sharemarket, since the scope did not yield much dividend.
The government may also adopt different strategy for the existing provision for whitening money by paying a fine, as this scope too failed to draw satisfactory response.
At present, to purchase a house or flat one needs to explain the source of investment. The tax rates for per square metre range between Tk 800 and Tk 2,000 subject to the location.
Now the government is planning to allow purchase and construction of a house or flat without raising any question about the source of the money.
An NBR official said this would make ineffective the provision that money earned by illegal or criminal activities cannot be whitened through this scope.
However, as per the government planning, the tax for a house or flat measuring less than 200 square metres may range between Tk 2,000 and Tk 5,000 per square metre.
If a house or flat is located in Gulshan, Banani, Baridhara or Motijheel areas of the capital the tax may be fixed at Tk 5,000 per square metre. In other areas of Dhaka and in Chittagong it may be Tk 4,000 while for areas other than in Dhaka and Chittagong Tk 3,000.
In case of a house or flat of the size above 200 square metres, the tax may be between Tk 3,000 and Tk 7,000.
Moreover, if anyone wants to construct or purchase more than one house, he may have to pay an additional 20 percent tax.
The government has also been considering fixing tax on the purchase value of a plot at 10 percent.
An NBR official said they had held discussions with the government on the issues on several occasions, but could not reach a decision.
The current government in its first budget gave scope for whitening money in four broad categories. A total of 1,923 persons then whitened around Tk 923 crore. Of them, 1,320 people whitened around Tk 500 crore for purchasing flat and land.
The NBR official said the government had been considering giving the scope again in view of such a response.
In FY 2010-11, the scope for whitening money was given through investment in the stockmarket. Around Tk 382 crore was whitened then.
But both the scopes were made void from the next FY.
In the current FY, the scopes were brought back, but they did not elicit much response. As a result, the government is considering withdrawal of the money whitening facility in the stockmarket.
In this FY, a new article was incorporated in the Income Tax Act that undisclosed income of a year would have to be whitened by paying 10 percent fine.
The NBR official said the opportunity had been given on a permanent basis but none had taken it so far.
Adviser of a former caretaker government ABM Mirza Azizul Islam yesterday told The Daily Star that he had always been against the scope for whitening black money.
He said it was ethically unjust and from economic point of view it does not bring much benefit.
When his attention was drawn to the fact that the scope for whitening money had indeed been given, the former adviser said that at the time no scope was given for whitening illegally earned money; rather it was given for those who could not pay tax for some reasons.
Over the post-1975 dispensations, every government provided the scope for whitening money. Of them, the immediate past caretaker government had the most amount of money whitened.