Finance minister hints at reviving option to legalise untaxed money

AHM Mustafa Kamal has hinted that the government may retain the provision to legalise undisclosed income by paying taxes at certain rates later because now it lacks data on the outcome of the option kept in the budget for the outgoing fiscal year ending Jun 30.

The finance minister faced questions about the issue at a virtual post-budget news conference for the fiscal 2021-22 on Friday after he unveiled the outlay a day earlier without the option.

He said the government would review the option after gathering the data.

When the government presented a number of ways in the budget for 2020-21 fiscal to legalise undisclosed income by paying certain amounts of tax amidst the COVID-19 crisis, many feared they would encourage corruption and frustrate taxpayers.

Analysts and activists have welcomed Kamal's decision to drop the provision in the new budget for the financial year starting on Jul 1. But they expressed concerns over possibilities that the government may reintroduce the option in a separate order later.

Hinting that the government may continue with the provision, Kamal said many also support the option because it can be profitable if the undisclosed income is taxed and invested.

“Many others say it won’t ensure equity in society if the option continues. So we'll wait one month (until the end of the current fiscal year) to have a look at it and discuss.”

The minister had said last month that the option would continue until all the undisclosed incomes are added to the financial system.

“We didn't have enough data when I had said it (the option would continue) two weeks ago. We need to see how profitable the option would be if we want to have a discussion about whether to continue it,” he said on Friday.

He does not think undisclosed income should be called “black money” - a term he believes should be used for money earned through corruption.    

“Black money is created through corruption. And undisclosed income is created due to systems loss when we fix tax rates at as high as 50 to 60 percent. The people, especially the businesses, had been wronged,” Kamal said, explaining deep tax cuts announced in the budget.

“There was a system called ‘square income tax’, under which people who earned more had to pay more taxes, but it should be the opposite. Those who can earn more money by exploiting limited resources should be given more opportunities.”