Tax on fixed deposits to discourage savings
People will be discouraged to deposit their money with the banks as the government has imposed tax at source on profits and interests.
This will decrease the amount of deposits, which will ultimately lower investment in the country, affecting the country’s overall economy negatively, experts said.
Moreover, it is also not clear to the people whether the government will charge 15 percent tax on all fixed deposit accounts.
Economists opine, the government has imposed tax on deposits as it can be collected easily. What the government should do is to find out the persons who are able to pay tax. This kind of decision is not justified for all citizens, they said.
While placing the Finance Bill in the parliament for passage on June 27, the finance minister made a proposal to deduct 10 percent tax on profit and interests at source for depositors bearing TIN certificates and 15 percent for those who do not have the TIN.
The National Board of Revenue (NBR) has already taken initiative to deduct tax at source as per the provision. The NBR has issued circular to the banks about executing the provision from July 2012, which the banks have started informing their clients through letters.
The finance minister while placing the Finance Bill at the House said, “Those who have more than Tk 100,000 deposit but does not have any tax identifying number (TIN) will have to pay 15 percent tax at source. The clients having TIN will have to pay 10 percent tax.
Earlier in his budget proposal, the finance minister proposed to impose tax on all deposit accounts whatever the deposit amount was. Later, in face of criticism, Prime Minister Sheikh Hasina proposed to impose tax on clients who have at least Tk 100,000 deposit.
HSBC’s retail banking and wealth management chief Md Shafkat Hossain told banglanews24.com: “We are informing our clients about the government decision through letters, e-mails and SMSs. Using all kinds of communication system we have requested our clients to submit their TINs.”
Former Bangladesh Bank Governor Saleh Uddin Ahmed said, “According to my consideration, this kind of tax collection is not right and injustice to general clients.General people will be discouraged to deposit money in the banks. On the other hand, it is contradictory to another section of tax collection that states free income limit as two lakhs.”
The former BB governor observed that the government should reconsider the decision.
Non-government research organisation Centre for Policy Dialogue (CPD) Executive Director Dr Mostafizur Rahman said, “The decision will discourage small investors to keep money in the banks. Those who deposit pension money in the banks will be affected.”
“Due to this decision, those who are not under tax limit will also have to pay tax, creating discrimination among the people.”
The Daily Sun/Bangladesh/ 18th July 2012