The successive governments of Bangladesh succumbed to the pressure of wrongdoers for the privilege of legalising black money over the past four decades. The present government has offered the disputed opportunity to the people again last year ( Mala, 2012 ; The Daily Star, 2012c ; 2012d ; 2012e ). This has been done despite the fact that the National Board of Revenue (NBR), apparently an advocate of such a privilege, has disclosed that no amount of black money has been invested in the securities market from July to October 2011 availing of the last year’s amnesty ( The Financial Express, 2011a ). Mysteriously, no information about how much black money has been whitened and by whom since July 2011 has been made publicly available to date. Recently, following persistent demonstrations of securities investors against a record fall of the market, the government has offered a package of stimuli to investors (for details see Islam, 2011 ; Chowdhury, 2011a ). One of those stimuli has widened the scope of amnesty to the people holding black money by providing a guarantee that no questions about the source of the money will be asked, if the money is investment in the securities market ( The Financial Express, 2011b ; Byron, 2011 ). Nonetheless, the market remains moribund ( The Financial Express, 2011c ; Bakht, 2011 ).
Successive governments since 1976 have been offering an “illegal and unethical” opportunity to “offenders” ( The Daily Janakantha, 2011a ) who are holders of huge amounts of undisclosed money accumulated generally by offensive means. The privilege allows legalisation of their ill-gotten money in exchange for a nominal tax and investment in potentially profitable sectors in the country. This opportunity has been harshly criticised by almost all politicians, economists, lawyers, business leaders, foreign donors, Transparency International Bangladesh (TIB), the National Human Rights Commission (NHRC) and the Anti-Corruption Commission (ACC) of the country alike in an identical tone (see The Daily Star, 2005b ; 2012d ; Haque, 2009 ; Byron, 2009 ). They describe this leniency as being an illegal and immoral act of the government, injustice and unfair treatment for honest taxpayers, encouragement and protection of corruption and ultimately harmful for the stability of the securities market and its bona fide investors. Paradoxically, the politicians, who are seriously critical of this forbearance when they are in opposition, make fresh offers of the same amnesty to the “offenders” when they are in power. Thus, all governments, regardless of their political ideologies and pre-election promises, have been allowing whitening of black money by investing in various sectors, including the securities market. They are therefore nurturing the “wrongdoers” apparently on the premise of improving the national economy of Bangladesh. However, empirical data suggest that only a small amount of black money is invested in securities every year and all the black money obtains legitimacy. Hence, this practice extensively contributes to encouraging corruption and discouraging honesty in the country. On the other hand, the inquiry into the latest share scam occurred early 2011 ( The Inquiry Report, 2011 ), which left the share market moribund (see Ahmed, 2011 ; The Daily Janakantha, 2011b ), suggests that the black money played a pivotal role in that boom and bust ( Chowdhury, 2011b ; Ahmed, 2011 ). This finding is reinforced by the unusual bullish trend of the market following this amnesty declared on 29 June 2011 ( The Daily Star, 2011a ). The market response to this amnesty is so unreasonable that the Finance Minister has publicly expressed his dismay over the hasty rise in share prices by stating that
[t]his surge in prices is not welcome. It is not a good sign. […] Some old players were sitting idle and now they are investing money in the market to raise the prices with an ill motive. […] no new investors have come to the market ( The Financial Express, 2011 ).
This article aims to critically examine the reasons for the adoption such a poor policy by the successive governments in Bangladesh and its implications for investment and corruption in the country. It concludes that corrupt politicians and government officials, rather than the economy, are benefited the most from this flawed policy. It provides specific suggestions on how to effectively deal with black money in Bangladesh, which can be guidelines for other countries facing the same problem.
2. Background of whitening black money in Bangladesh – history of double standards
“Black money is black and I wonder how could that be whitened? There’s no way to amass black money without corruption”, said the incumbent Prime Minister of Bangladesh, just a couple of months before taking oath of her current position for her second term ( The Daily Star, 2008a ). The longest serving Finance Minster of the country, an auditor by profession, who offered the whitening privilege on several occasions since 1976 when his party introduced this facility ( Byron, 2009f ), did later realise that it is virtually the protection of dishonesty and he overtly took a courageous position against the amnesty for black-money holders in a pre-budget meeting with the NBR in 2005. He unequivocally uttered that “we cannot allow legalisation of haram (illegal) money every year” ( Ahsan, 2005 ). Nonetheless, he did or perhaps had to do it.
The current Finance Minister, a renowned economist, said after having the so called whitening provision incorporated in his first budget in 2009 that from a moral point of view he still opposes the policy providing for the opportunity to legalise black money ( The Daily Star, 2009c ). This whitening provision starkly contradicts their crucial party election pledge being “to take effective action against corruption” ( Ahsan, 2009 ). Indeed, his party vehemently opposed such a facility when they were in opposition. His immediate predecessor, Finance Advisor to the erstwhile caretaker government, who continued this privilege even after declaring a crusade against corruption, said that “untaxed money is already in the market and there is hardly any possibility of bringing back the untaxed money already sent abroad” ( The Daily Star, 2009b ). The Centre for Policy Dialogue, a non-governmental organisation of distinguished scholars, plainly opposed the provision and argued that granting immunity to the dishonest “would be injustice to the honest taxpayers” ( The Daily Star, 2009b ).
The Managing Director of the country’s first private mutual funds Asset & Investment Management Services of Bangladesh Limited (AIMS) told the British Broadcasting Company (BBC) on 4 July 2011 that empirical statistics suggest whitening black money does not help securities market, instead this protects dishonesty and immorality. Despite the blatant opposition of this provision from almost all quarters as mentioned earlier, the opportunity for whitening black money has been given on several occasions since 1976 in different ways from which government earned only BDT 1,621 crore (approximately US$231.6 million) as tax in exchange for whitening BDT 19,263 crore (approximately US$2.8 billion). The persons who took advantage of this provision include, amongst others, high-profile politicians, professionals, businesspersons and public servants.
A question that begs to be answered is – if all people are against this facility, then who favours this government policy and who are benefited by it? Perhaps an answer can be found in an assertion of the longest serving Finance Minister, who reintroduced it in 1981 and repeatedly offered this amnesty to the black-money possessors, while he apparently opposed it by saying in a pre-budget meeting in 2006 that:
“[i]f the opportunity is still there, then I will add in the footnote of my budget speech that it was done due to pressure from the Prime Minister’s Office” ( Byron, 2006 ).
Unfortunately, he could not add this annotation to his budget speech, perhaps because of the pressure of the Prime Minister’s Office. In respect of the US economic crisis of the 1970s, the former US president Ronald Regan said in his first inaugural address, delivered on 20 January 1981, that “[i]n this present crisis, government is not the solution to our problem; the government is the problem” ( Kudlow, 2009 ). His words came true for the present situation in Bangladesh.
Initially, the NBR in 2011 itself proposed to the...