Stop allowing black money whitening: Farashuddin

Former governor of the Bangladesh Bank Mohammed Farashuddin has said if the government keeps providing the scope in the budget for whitening undisclosed wealth, regular taxpayers will be greatly disappointed.

Calling for suspending this scope at a webinar organised by the Bangladesh Economic Association on Saturday, Dr Farashuddin added, "The government should also take back money from intentional loan defaulters.

"People who defaulted on their loans, and then defaulted again after rescheduling the same loans three consecutive times, should be marked as intentional defaulters."

"The current situation in Bangladesh will not be resolved without political reform. It is not possible for the government to launch the reform process on its own; they need a strong opposition party too," he said.

On the incentive package to counter the impacts of the Covid-19 pandemic, Dr Farashuddin said, "Only the wealthy benefited from it. Those tasked with implementing the package for small, medium, and cottage industries are mostly indifferent.

"I recommend creating a venture capital for small entrepreneurs with support from the Bangladesh Small and Cottage Industries Corporation (BSCIC), the SME Foundation, or the Palli Karma-Sahayak Foundation (PKSF), for distributing the incentive packages," he added.

The webinar is the 13th in a series, where speakers discussed various topics featured in the book "Society-Economy-State on big screen: In search of a decent Bangladesh from the virus catastrophe" written by Dr Abul Barkat.

Issues such as undisclosed wealth, money laundering, and taxes were discussed at Saturday's event, moderated by Bangladesh Economic Association's Vice-President, Prof AZM Saleh.

It should be noted that the cottage, micro, small and medium enterprise (CMSME) sector only received Tk14,000 crore in loan disbursements from the Tk20,000 crore incentive package introduced last year.

The Bangladesh Bank also launched a credit guarantee scheme of Tk2,000 crore for small entrepreneurs who lacked collateral to secure bank loans, but only Tk29 crore in guarantees have been issued as of April this year.

Addressing the issue, Dr Farashuddin said, "The incentive package's implementation clearly indicates that the inequality of opportunity in Bangladesh is increasing. Inequality of opportunity leads to income disparity, which in turn leads to wealth inequality.

"There are 25 lakh cottage, micro, small and medium entrepreneurs in Bangladesh. The inequality of opportunity will decline if these entrepreneurs get easy access to the incentive packages."

Quoting data from the Boston Consulting Group, he continued, "In Bangladesh, around 2.5 crore people have an average income per capita of $4,500-$5,000 per year, but only 25 lakh of them pay taxes. Automation is crucial to curb tax evasion in the country.

"Around 5,000 people in Bangladesh are becoming wealthy every year. We must make a serious effort to bring down income inequality. This type of change cannot be achieved overnight, so we must gradually work towards this transformation under the existing circumstances."

Dr Farashuddin recommended reforms and increasing investments in the education and health sectors to help reduce inequality.

Participating in the discussion, Professor of economics at Jahangirnagar University, Dr Anu Muhammad said, "Inequality is hiding right under the government's current development philosophy.

"Many projects implemented by the government in the last 10 years have expenditures that exceeded what many other countries have spent on similar projects. There is rampant corruption behind these high costs. Irregularities in the name of implementing projects are going on unabated due to the collapse of accountability and organizational structure."

Dr Anu Muhammad, who is also member secretary of the National Committee to Protect Oil, Gas, Mineral Resources, Power and Ports, added, "The rich in Bangladesh accumulated their wealth more aggressively and in a much shorter time compared to the 22 families in the Pakistan period.

"The continued corruption and irregularities has facilitated the rise of a new wealthy community, and this is the reason behind the inequality of income and wealth in Bangladesh. The increasing amount of black money is the result of rising inequality and lack of good governance."

Most of the undisclosed wealth has been accumulated through corruption, he added.

Professor of finance, Dr AKM Matiur Rahman said, "Those who have accumulated black money do not deem it safe to keep their wealth in Bangladesh. So, they launder the money abroad using their political clout.

"I recommend increasing the wealth tax to curb the accumulation of undisclosed wealth. However, the tax should not be made too high overnight. It must be raised gradually. A sudden increase in taxes might escalate the practice of money laundering."

Adding that the authorities should scrutinise the wealth of well known rich people in the country, Dr Matiur said, "If someone has more debt than wealth, then they became rich with someone else's money."