NBR now considers ending black money investment in real estate

Facing public backlash over the partial withdrawal of the black money whitening scheme earlier this month, the National Board of Revenue (NBR) is now reportedly planning to remove the option to legalise black money through real estate (land or apartments) purchases.

According to NBR sources, the only facility likely to stay the same is for undisclosed money, which would be taxed at the standard rate (up to 25%) plus a 10% penalty.

Moreover, the NBR plans to remove the special provision that protects investors from inquiries about the source of their money, sources said.

This change would allow agencies, such as the Anti-Corruption Commission (ACC) and the Criminal Investigation Department (CID), to question the source of funds, thereby further limiting the opportunities for investing black money.

"After the removal of the 15% tax facility for legalising black money, many have expressed concerns about the remaining provisions. Therefore, we are considering scrapping the facility for legalising black money through the purchase of land and apartments," a senior NBR official told TBS on Tuesday.

"The NBR chairman will consult with the finance adviser of the interim government. Once we receive approval, we will proceed with issuing the necessary order," he added.

However, attempts to reach NBR Chairman Abdur Rahman Khan for comment were unsuccessful, as he did not answer the call.

In the FY25 budget approved in July, the recently ousted Awami League government permitted the legalisation of black money with a 15% tax. 

This decision faced intense public criticism, as legitimate taxpayers are subject to income tax rates of up to 30% plus an additional surcharge. 

At that time, critics argued that allowing black money to be whitened with a 15% tax could exacerbate financial sector irregularities.

For FY21, the former Awami League government also allowed black money legalisation with only a 10% tax. 

According to NBR sources, a total of 11,839 people legalised about Tk20,500 crore in FY21 — the highest in the country's history in a single year and NBR received Tk2,064 crore in revenue from those investments.

Over the past few years, there has been an option to legalise black money by paying taxes ranging from Tk300 to Tk4,000 per square metre for land and apartment purchases nationwide.

This fiscal year, an additional benefit was introduced by the former Awami League government, granting amnesty that prevented any organisation from questioning the source of these funds, a provision similar to the one offered in the 2020-21 fiscal year.

As a result, revenue collection from this sector has increased. According to the Directorate of Registration, government revenue from land and apartment investments in the 2023-24 fiscal year (July 2023 to March 2024) surpassed Tk17,400 crore.

Sector entrepreneurs believe the amnesty on the source of funds has driven significant investments. However, experts argue that instead of partial reforms, the black money legalisation scope should be entirely eradicated.

Snehasish Barua, managing partner of Snehasish Mahmud and Company Limited, told TBS, "If the government's aim is not to encourage black money, then the facility should be completely abolished, not just partially."

However, real estate sector entrepreneurs fear that cancelling the investment option for black money in this sector may lead to capital flight.

MA Awal, vice president of the Real Estate and Housing Association of Bangladesh (REHAB), said, "When black money is allowed to invest in land and apartments, it supports the growth of the sector and keeps the funds within the country. Without this option, there will be no avenue for investment, leading to money laundering."

"This opportunity [to invest black money] has revitalised the sector, but if it is revoked, the market will slump again," he added.

NBR officials noted that if the black money investment facility is withdrawn, a system must be developed to ensure taxes are collected based on the actual sale price of land and flats.