A recent study report of the finance ministry has warned that ongoing accumulation of substantial volume of wealth in the hands of operators of 'black economy' could create 'asset bubble, leaving a negative impact on the country's economy.
The report strongly suggested taking measures to bring the underground economy within the fold of formal economic activities.
According to the people involved in the study, the size of the country's underground economy in 2010 was 81 per cent of its gross domestic product (GDP) as the worst case scenario and 45 per cent on the basis of a moderate estimate.
The report, citing a research by Professor Friedrich Schneider, who is renowned globally for his outstanding analysis of the underground economy, said the size of underground economy of Bangladesh was 35.6 per cent of GDP in 2000, which increased to 37.70 per cent in 2003.
The report noted that accumulation of substantial volume of wealth by a group of individuals with the expansion of its 'underground economy' had resulted in an unequal living standard in society.
The report, titled 'The Size of Underground Economy of Bangladesh -- an Econometrics Analysis,' is the first of its kind in the history of Bangladesh.
The report has linked the soaring prices of land and the over-heated share market in the recent period with the growth of the 'shadow economy'.
'Unequal living standard is being evident in society following the accumulation of wealth in the hands of a group of people, thanks to the expansion of the underground economy in the country,' reads the report of MoF.
The summary of the report has recently been submitted to Prime Minister Sheikh Hasina by the ministry, a top official in the MoF said.
The report said the influence of 'black economy' on the country has been on the rise. Indicators like the country's velocity of illegal money, the velocity of legal money and the velocity of narrow money played significant role in finalising the analysis of the underground economy, a source said.
Officials involved in preparing the report said increased burden of taxation, unregistered economic activities, unreported income from the production of legal goods and services and illegal activities, intensity of regulation and restriction in the case of foreign workers are some of the factors that have long been playing critical role in breeding black money and nurturing the shadow economy in the country.
The projections made by the government every year in relation to economic indicators often do not portray the actual picture of the country's macro-economy, as the same do not take the size of the country's shadow economy into consideration while preparing budget estimates, the report said further.
"It is imperative that the underground economy is brought under the formal economic order to implement the government's 'Vision 2021' and taking the country on a 10 per cent growth trajectory in 2021,' the report mentioned.
It said higher tax and excessive institutional formalities lead to tax evasion. Taking into consideration the large size of black and untaxed money in the country, the government should try to bring the underground economy under the purview of taxation.
http://www.thefinancialexpress-bd.com/more.php?news_id=139888&date=2011-06-20
The report strongly suggested taking measures to bring the underground economy within the fold of formal economic activities.
According to the people involved in the study, the size of the country's underground economy in 2010 was 81 per cent of its gross domestic product (GDP) as the worst case scenario and 45 per cent on the basis of a moderate estimate.
The report, citing a research by Professor Friedrich Schneider, who is renowned globally for his outstanding analysis of the underground economy, said the size of underground economy of Bangladesh was 35.6 per cent of GDP in 2000, which increased to 37.70 per cent in 2003.
The report noted that accumulation of substantial volume of wealth by a group of individuals with the expansion of its 'underground economy' had resulted in an unequal living standard in society.
The report, titled 'The Size of Underground Economy of Bangladesh -- an Econometrics Analysis,' is the first of its kind in the history of Bangladesh.
The report has linked the soaring prices of land and the over-heated share market in the recent period with the growth of the 'shadow economy'.
'Unequal living standard is being evident in society following the accumulation of wealth in the hands of a group of people, thanks to the expansion of the underground economy in the country,' reads the report of MoF.
The summary of the report has recently been submitted to Prime Minister Sheikh Hasina by the ministry, a top official in the MoF said.
The report said the influence of 'black economy' on the country has been on the rise. Indicators like the country's velocity of illegal money, the velocity of legal money and the velocity of narrow money played significant role in finalising the analysis of the underground economy, a source said.
Officials involved in preparing the report said increased burden of taxation, unregistered economic activities, unreported income from the production of legal goods and services and illegal activities, intensity of regulation and restriction in the case of foreign workers are some of the factors that have long been playing critical role in breeding black money and nurturing the shadow economy in the country.
The projections made by the government every year in relation to economic indicators often do not portray the actual picture of the country's macro-economy, as the same do not take the size of the country's shadow economy into consideration while preparing budget estimates, the report said further.
"It is imperative that the underground economy is brought under the formal economic order to implement the government's 'Vision 2021' and taking the country on a 10 per cent growth trajectory in 2021,' the report mentioned.
It said higher tax and excessive institutional formalities lead to tax evasion. Taking into consideration the large size of black and untaxed money in the country, the government should try to bring the underground economy under the purview of taxation.
http://www.thefinancialexpress-bd.com/more.php?news_id=139888&date=2011-06-20
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