Shooting at a moving target

But this approach has had only limited success. In the past three years only Tk 1,800 crore was brought into the formal economy using these channels, a drop in the bucket compared to the total amount of money in the black economy today, estimates of which range from Tk 50,000 to as much as Tk 175,000 crore (or between roughly one fifth and one half of GDP). Most black money thus still remains outside the scope of the formal economy either in foreign bank accounts or in fixed deposit accounts here.

The other problem with "turning a blind eye" or the amnesty approach to whitening black money is that it sends all the wrong signals to honest businesspeople who play by the rules and pay their taxes. The message is that if you are able to accumulate money unlawfully, then the government will try to accommodate you and that you have nothing to fear from the authorities.

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A better approach, we feel, would be to initiate an aggressive policy of sealing up the routes though which money enters the black economy. The first step is administrative. A financial intelligence unit and strike force to check crimes in the financial sector has been on the table since 2002. The sooner this idea is implemented the better.

Some steps that the government can take to halt the accumulation of black money are to take a firmer stand against tender manipulation and over and under-invoicing. Most importantly, the government must take measures to eliminate the corruption and collusion in the administration which are key to the accumulation of black money. The government might also think about tightening the rules on fixed deposit accounts suspected to be a receptacle for black money that can currently be opened without any photographic identification.

Tightening up the enforcement regime, not granting amnesty which, in any case, few take advantage of, is the best approach to addressing the problem of black money.