Small savers' case puts govt in dilemma

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Doulot Akter Mala
The government is in a dilemma over revising the rules of savings instruments, fearing any change "at this moment" will create resentment among small savers who have already en-cashed their investment.
Finance minister AMA Muhith recently sent back a proposal of the National Board of Revenue (NBR), terming the matter a complex one.
"Tax measures on saving certificate are complicated. It would be difficult to change rules now," Mr Muhith wrote responding to the proposal.
The government may conduct a study through state think tank Bangladesh Institute of Development Studies (BIDS) on saving tools tax, he said.
He said it is necessary to make tax-free saving tools familiar to the people through campaign.
The NBR has reviewed the tax measures imposed in the current fiscal for saving instruments as per instruction of the finance minister.
The NBR has sent a summary recently with two proposals--one is to keep the tax structure unchanged in the current fiscal and revise it in 2011 and another is to consider tax at source as finally paid tax on the profit earned after maturity of the saving instruments.
The NBR proposal also said the change will require obtaining approval from the parliament as it was imposed in the budget through finance bill.
A top income tax official said changing the tax measures will be tantamount to doing "injustice" to small savers, who have already withdrawn profit of saving certificates by paying 10 per cent tax at source.
Under the new tax measure, small savers are subject to the payment of 10 per cent tax on the profits of saving tools that matured before July 1, although the rules were effective from the current year.
It will be difficult to find out savers who have en-cashed saving tools and refunded the money as advance tax, he said.
The revenue board has found that investment in savings tools declined by Tk 5.80 billion in the first two months of the current fiscal, compared to the same period a year ago.
Small savers are facing difficulty as the new measure has forced them to count higher taxes, despite having no taxable income.
Small savers have to pay taxes while en-cashing the savings certificates, which are adjustable with the actual tax return. Under this rule, people who have income below the taxable limit have to pay taxes.
Officials said tax offices receive complaints everyday from small investors on the tax measure.