Income tax collection from bank depositors' interest income increased by 26.31 per cent in the last fiscal year (FY) mainly because of a large volume of excess liquidity in the banking system, sources said.
Barren private sector investment situation in other sectors caused the increase in idle liquidity that boosted tax collection from bank depositors' profits, officials said.
According to the central bank sources, excess liquidity worth some Tk 1.0 trillion has remained idle in the banking system.
The National Board of Revenue (NBR) collected Tk 48.50 billion advance income tax (AIT) in FY 2013-14 from the profits of bank deposits surpassing its target by Tk 4.50 billion.
Although aggregate income tax collection faced around Tk 14 billion shortfall against its target, AIT collection from the bank depositors' profits exceeded its target.
Intensive monitoring of proper deposit of the AIT by the commercial banks has been cited as a major reason for boosting tax revenue collection from this sector.
However, tax officials said trend of bank depositors in shifting a significant amount of deposits to government savings tools for higher profits has slowed the growth rate of AIT collection from bank depositors.
In 2012-13, tax collection from bank deposits posted the highest 46 per cent growth.
Officials said the tax collection growth from this sector faced some challenges last year due to cut in bank interest rates and shifting of bank deposits to the government savings tools.
Average growth of AIT collection on bank interest was 16.77 per cent from 2010 to 2012, the three consecutive years. A senior tax official said the AIT collection by Tax Zone-1 achieved remarkable growth for higher AIT collection from bank depositors despite sluggish economic activity for political turmoil last year.
"The taxmen conducted auditing and monitoring of the deposits of AIT closely to ensure tax collection from the head," he said.
He said bank interest rate dropped to 9.0 per cent last year from double digit that ate up a significant amount of AIT this year.
Banks deduct 10 per cent AIT from the bank depositors' profits, having above Tk 0.1 million deposits if they have Taxpayers Identification Number (TIN). In case of not having TIN, the bank depositors have to pay additional 5.0 per cent tax on their profits from bank deposits.
Tax officials observed a sizeable number of bank depositors paid 5.0 per cent additional tax on profit of their deposits instead of furnishing TIN.
The tax measure on collection of additional 5.0 per cent tax has been incorporated in the budget for FY 2012-13. It worked as boon for the income tax wing as many of the money holders from informal economy paid 15 per cent tax to avoid taxmen.
With the tax measure, the government has been able to collect taxes from those people who are intentionally avoiding the tax authorities by not obtaining TIN or submitting tax returns, they added.
They said none of the opportunities for collection of taxes from the informal economy proved successful earlier.
Both economists and experts predict existence of billions of taka in the informal economy in the country. Almost every year, the government devises some measures to bring the economy to the formal channel.
There are some well-off people with taxable income who are ready to pay even higher tax on their bank profits instead of entering the tax net.
They, however, also acknowledged that many of the bank depositors including housewives and senior citizens, were forced to pay the AIT despite the fact that they did not have taxable income.
Some bank depositors alleged some of the commercial banks are indiscriminately deducting 15 per cent AIT from the depositors without requesting them to furnish TIN. Also, bank depositors, not having taxable income, also expressed their reservation over the measure due to absence of effective refund system of their paid tax.
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