Depositors now easy targets of govt, banks

The government is now milking the bank depositors to the maximum possible extent to extract tax revenues, at times, going beyond logic and norms.
The depositors are being made to pay tax revenue in addition to fees and service charges levied by the banks on them on a regular basis.
Depositors find little incentive to keep money with the banks after all the deductions from their interest income, if there is any.
The recent decline in interest rates on deposits has put them in a further disadvantageous position. That is why there has been a rush for investment in the government's savings tools instead of going to the banks for the last couple of years, a banking industry insider said.

The National Board of Revenue (NBR) now levies value added tax (VAT) on all services offered by banks, excise duty on bank deposits above Tk.0.1 million once in a year and advance income tax (AIT) at two different rates on interest income round the year.
In 2016-17, the income tax wing of the NBR collected Tk 55.93 billion in AIT from bank deposits. The target for the current fiscal year is even higher, Tk. 75 billion. Depositors having regular taxpayers' identification number (TIN) pay AIT at the rate of 10 per cent and non-TIN holders at 15 per cent.
However, a large number of bank depositors, who pay AIT at a rate of 15 per cent, are not in the tax net. Their inclusion in the tax net would have helped the NBR raise the number of taxpayers.
But the NBR, according to sources, is unwilling to do that, for such inclusion would make them liable to refund a substantial volume of money to these depositors.
"This is not fair on the part of the government since small savers who do not have taxable income are deprived of the refund they are entitled to", said Sheuli Begum, a housewife residing at Rayer Bazaar of the capital city.
Anis A Khan, Chief Executive Officer and Managing Director of the Mutual Trust Bank, said the banks only deduct 10 per cent from TIN holders and 15 per cent from accountholders with no-TINs as per NBR's instruction.
"We don't have any mechanism to verify whether a TIN is fake or not," he said.
A senior tax official said the issue can be verified by the concerned tax zone of the NBR.
"Once all bank depositors come under the tax net and start filing tax returns, we will have to refund a large amount collected as AIT," he said.
Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI) found the system anomalous since some people with higher income continue to remain outside the tax net and get away by paying 5.0 per cent more on their bank interest income.
"Some people are paying income tax at a rate as high as 30 per cent on their income while some other well-off bank depositors do pay 15 per cent by remaining outside the tax net, deliberately," he said.
Genuine taxpayers would be discouraged to be tax complaint if such loopholes continue, he said.
Rowshon Ara Mili, a housewife having bank deposits, said she does not have taxable income but have to pay tax on the bank interest income.
There should be a system for refunding the money paid as AIT to people like me, she added.
Excise duty is seen by the bank depositors as another tool to torture them, financially.
"Levying of excise duty on bank deposits is against all norms. Excise duty is considered an indirect tax, meaning that a producer or seller who pays the levy (excise duty) to the government is expected to try to recover their loss by raising the price paid by the eventual buyer of the goods", Mr. Hasmat Ali, a bank depositor, said quoting Wikipedia, the free encyclopedia. A deposit with any bank is neither an individual's product nor a professional activity. So, it should not attract anything called excise duty or tax, he said emphatically.
In the budget for the FY 2017-18, the NBR increased the amount of excise duty on bank deposits.
Bank deposits above Tk 1.0 million to 10 million are now liable to pay Tk 2500 in a year, instead of earlier rate of Tk 1500, as excise duty annually.
Excise duty has been increased to Tk 12,000 from Tk 7,500 if the balance exceeds Tk 10 million but remains below Tk 50 million. If balance exceeds Tk 50 million, the banks would deduct Tk 25,000 as excise duty.
In the previous fiscal year, the highest amount of excise duty was Tk 15,000.
The excise duty collection from 17 large commercial banks went up in the first seven months of the current FY, according to the Large Taxpayers Unit (LTU) VAT data.
Until January, the NBR collected Tk 6.0 billion in excise duty from depositors of 17 large commercial banks.
Excise duty collection by those large banks was almost steady in the last two FYs, Tk 8.47 billion in 2016-17 and Tk 8.02 billion in 2015-16.
The NBR collects excise duty under Excise and Salt Act-1944 though there was a promise to repeal the law after the enactment of VAT law in 1991.
The NBR has been enforcing both the laws simultaneously as a couple of provisions of the Excise act could not be replaced by the VAT law-1991 despite several attempts, said a senior VAT member.
"Two provisions of the excise on bank deposits and airline tickets could not be replaced by the VAT law as it goes against the very principles of VAT imposition," he said.
Abdul Kafi, former tax commissioner, who is currently working as VAT consultant, said it would be against the principle of VAT law to impose a certain amount of duty on bank deposits and air tickets.
There was discussion in 1991 over scraping the excise act but the government continued it fearing loss of revenue from these two sectors, he added.
"The name of our cadre is 'customs, and excise and VAT'. So there is valid reason to continue the excise duty," he added.
Bank depositors also have to pay VAT on all types banking services.
According to data available with 17 commercial banks, the NBR collected Tk 6.08 billion in VAT from bank depositors in the first seven months of the current FY against its target for Tk 7.15 billion.
Bankers and experts said depositors are showing less interest to deposit money with the banking system because of different types of taxes and service charges. In some cases, the actual rate of return from deposits turns out to be negative, they said.
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