Tax from bank deposit profits grows 53pc in three quarters of FY \\\'14

Doulot Akter Mala | Published: April 13, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

Tax collection from the profits on bank deposits marked a record 53 per cent growth in the first three quarters of the current fiscal year (FY) 2013-2014 thanks to excess liquidity with higher rate of interests in the banking system.
The National Board of Revenue (NBR) has collected Tk 31 billion until March on account of tax at source from the profits derived from bank deposits by individuals and corporate taxpayers.
However, the aggregate collection of tax at source from the profits of bank deposits was Tk 39 billion in FY 2012-13.
According to the available data, it has been found that tax collection from profits of bank deposits grew by 19.14 per cent, 16.59 per cent and 14.60 per cent in fiscal years (FYs) 2008-09, 2009-10 and 2010-11 respectively.
The growth rates of tax collection have been showing a steep rise since 2011-12 and 2012-13 at 34 per cent and 46 per cent respectively.
Economists and tax officials acknowledged the tax collection growth as being a contribution coming from the effective tax measure that mopped up a part of undisclosed money from the economy.
In FY 2012-13, the NBR has imposed additional 5.0 per cent additional tax on bank depositors' profits, having deposits above Tk 0.1 million, in case of not having Taxpayers Identification Number (TIN). However, the rate of withholding tax or tax at source was kept unchanged at 10 per cent for those having TIN.
A senior tax official said the ratio of payment of additional 5.0 per cent tax among the bank depositors is relatively higher, and many of the people prefer it instead of entering the tax net.
"The measure worked effectively to bring some amount of the black money to the government exchequer," he added.
Dr Ahsan H Mansur, Executive Director of private think-tank Policy Research Institute (PRI), said the growth in tax coming from bank deposits is contributed by the 5.0 per cent additional tax on depositors without TIN.
"Withholding tax collection is working effectively, but the government must ensure the refund system of the paid tax along with the system," he added.
The potential of tax collection is higher from the sector as many of the people are evading tax, those who fall under the 25 per cent tax slab, he added.
Some people, having higher income, are disappearing from the scene after paying 15 per cent tax on bank deposits, he said.
"There has been no effective mechanism yet to trace the taxpayers. Weak administration and lack of modernisation is responsible for this," he added.
Dr Mansur said the increase in tax at source with bank deposits depends on the rate of interests in the banks, not on excess or idle liquidity.
Tax officials at the field offices said so far they had been happy with the tax collection growth from bank deposits, but feared for its sustainability as some banks were cutting their rate of interest on bank deposits. Bankers said the commercial banks were not gearing up efforts on bank deposits as a large amount of idle and excess liquidity was lying with banks due to the dull investment scenario. Both local and foreign investors were now following a wait-n-see approach due to the political situation and the energy supply situation.
According to a Bangladesh Bank (BB) data, net profits of some of the large commercial banks had declined in 2013.
Tax officials said many of the small depositors also had switched over to savings certificates due to the higher rate of profits which may reduce the tax collection from the source.
Tax on savings certificates varies from 5.0 to 10 per cent depending on the nature and terms of savings tools, where the condition of having TIN has not been imposed.Â