NBR is now considering ending real estate investment using black money

Facing a public backlash following the partial rollback of the black money whitening scheme earlier this month, the National Board of Revenue (NBR) is now reportedly planning to withdraw the facility of legalising black money through purchase of property (land or flats).

According to NBR sources, the only option that will remain unchanged is to pay undisclosed money, which will be taxed at the standard rate (up to 25%) plus a penalty of 10%.

In addition, the NBR plans to abolish special rules protecting investors from questions about the origin of their money, the sources said.

The change would enable agencies such as the Anti-Corruption Commission (ACC) and the Criminal Investigation Department (CID) to question the source of funds, further restricting the opportunities for black money to be invested.

“After removing the 15% tax break for legalisation of black money, many have raised concerns about the remaining provisions. Therefore, we are considering removing the break for legalisation of black money through purchase of land and flats,” a senior NBR official told TBS on Tuesday.

“The NBR chairman will consult with the financial advisor to the interim government. Once we receive the approval, we will proceed to issue the necessary order,” he added.

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

In the fiscal year 2025 budget approved in July, the recently ousted Awami League government legalised black money by levying a 15% tax on it.

The decision was met with heavy criticism from the public as legal taxpayers are subject to income tax of up to 30% plus an additional fee.

Critics argued at the time that enabling the whitening of black money through a 15 percent tax could deepen irregularities in the financial sector.

In fiscal 2021, the previous Awami League government also allowed legalisation of black money by imposing only 10 per cent tax.

According to NBR sources, in fiscal 2021, a total of 11,839 people legalised marijuana worth Tk 20,500 crore — the highest ever in the country in a single year, and the NBR earned Tk 2,064 crore in revenue from these investments.

In the last few years, it has become possible to legalize black money by paying taxes ranging from Taka 300 to Taka 4,000 per square meter on the purchase of land and apartments across the country.

This fiscal year, the previous Awami League government introduced an additional benefit by granting an amnesty that prevented organizations from questioning the source of these funds, a similar arrangement to the one in place for the 2020-21 fiscal year.

As a result, revenue from this sector has increased. According to the Directorate of Registration, government revenue from land and housing investments in fiscal 2023-24 (July 2023 to March 2024) has crossed Tk 17,400 crore.

Entrepreneurs in the sector believe that the amnesty regarding the source of funds has resulted in significant investments. However, experts say that instead of partial reforms, the scope of legalization of black money should be eliminated altogether.

Snehasish Barua, managing partner of Snehasish Mahmud and Company Limited, told TBS, “If the government’s aim is not to encourage black money, then this institution should be abolished completely and not just partially.”

However, real estate entrepreneurs fear that giving up the opportunity to invest in black money in this sector could lead to capital flight.

MA Awal, vice-president of Real Estate and Housing Association of Bangladesh (REHAB), said, “When black money is allowed to invest in land and housing, it helps the sector grow and keeps funds in the country. Without this option, there will be no avenue for investment, which leads to money laundering.”

“This opportunity (to invest black money) has revived the sector, but if it is withdrawn, the market will crash again,” he added.

NBR representatives noted that if the black money-based investment programme is withdrawn, it will be necessary to devise a system that ensures that taxes are collected based on the actual sale price of land and flats.