Higher sales of savings tools don't affect bank deposits

l NBR chief waters down fear at MCCI talks
l Economists suggest addressing money mkt crisis

Chairman of the National Board of Revenue (NBR) Md. Mosharraf Hossain Bhuiyan on Thursday played down the fear that higher sales of national savings schemes were driving down bank deposits.
"This does not affect bank deposits," Mr Bhuiyan said.
He was replying to a query on the poor deposits growth in the banking system owing to higher yields of the saving instruments.
"The contribution of the fixed income instruments to the budgeting funding is merely Tk 300 billion a year," Mr Bhuiyan said.
The NBR chief made the remarks while addressing as the chief guest at a post-budget discussion in Dhaka.
The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) organised the discussion.
The NBR chief, also Senior Secretary of the Internal Resources Division, said there will be some rationalisation of the yield rates of the saving tools shortly.
The MCCI president, Nihad Kabir, was moderator at the discussion.
Executive director at the Policy Research Institute of Bangladesh (PRI) Dr Ahsan H Mansur presented the keynote paper titled "Budget FY2019: Macroeconomic setting, lessons from FY 2018 budget execution and implementation challenges."
Senior partner at the KPMG in Bangladesh, Adeeb H Khan presented another paper on the Finance Bill-2018.
On the proposal of reduction in corporate tax, the NBR chairman said that the banking sector got it "fortunately."
Mr Bhuiyan said this is a strategy to put pressure on the banks to reduce the rates of interest.
"You have already seen some reflections on the slashing of interest rates."
The NBR chief, however, said the cut on the deposits hit many savers -- individual and corporate ones.
He hinted that such type of "exercise" on the corporate taxes will be continuing in the future.
The NBR chief said the government backtracked from raising the minimum income threshold as the rise in the ceiling will help reduce the tax net.
"The young people are submitting returns at much higher rates. If we increase the threshold, the number of tax payers will decrease."
He said the tax authorities will enforce tight rules in relation to the non-residents who have been working with different orgnanisations in the country.
He stressed the need for strong implementation of Value Added Tax (VAT) law for revenue collection.
He said electronic funds transfer (EFT) devices will be made compulsory within one year so that the government receives the VAT paid by the consumers.
Terming the revenue target for the next fiscal year "very ambitious", the NBR chairman said if investment and business activities get boosted the revenue will grow.
He said the revenue growth will be between 17 and 20 per cent in the outgoing fiscal year.
He said the NBR will address the proposed tax on the petroleum jelly as there were many criticisms over it from a number of circles.
While presenting the keynote paper, Dr Mansur said the deposits growth in the banking sector is now at 9.5 per cent, which was 18-19 per cent in the past.
"How will the banking system provide 16 per cent credit growth to the private sector if they collect fund at a rate of 9.5 per cent?"
Dr Mansur said there is now a need for injecting foreign funds into the money market as the country's balance of payment is worsening day by day.
He suggested three options: issuing sovereign bonds, overseas borrowing by the private sector and the government's international borrowing to inject cash into the money market.
Dr Masnur said the tax-GDP ratio needs to be attained by at least 20 per cent for becoming a higher income country.
While addressing the discussion, PRI chairman Dr Zaidi Sattar said the existing protection policy is hurting the country's exports.
He said high tariff on the biscuits and similar products conflicts with the exports.
"Such type of protection actually does not care local infant industries; rather create obstruction to the export diversification," Dr Sattar added.
Chairman of ACI M Anis ud Dowla was critical of the higher tariffs on the superstores.
He said the VAT on the shopping has been increased by 1.0 percentage point to 5.0 per cent from existing 4.0 per cent on the sales along with the rise in the turnover taxes.
In her welcome address, MCCI president Nihad Kabir said the chamber body thinks that certain things such as policy reforms, simplification of taxation system, business-friendly policies, enabling business climate, policy continuation, ease of doing business, incentives, reduction of taxes and inclusive policy planning need to be prioritised.
She said in order to achieve the revenue target, the MCCI suggested tax-compliant enterprises not be excessively burdened.
"Instead, new avenues of tax collection should be identified and pursued," she added.
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