Plea to withdraw 10 per cent tax on savings certificates
Wednesday, 11 May 2011
decision,
Kamal Ahmed The government from the current fiscal year imposed a 10 per cent tax at source on interest earnings from the government-issued saving certificates. There is hardly the need to mention that the decision has not been a prudent one. The savers of small means who invest their funds in such schemes include pensioners, housewives, small job holders and operators of small businesses. The poor are at a subsistence level. They hardly save or rely on the same. Only the middle-class people are found to be keen to save and their saved amounts not only create funds for their own use but also cater to the needs of borrowing by the government. But this decision seemed to have come down hard on them. And new investments in government saving certificates also have been declining after such a decision. The government is also not gaining from this decision as it is now required to take recourse to domestic borrowing outside the banks to a substantial extent, to meet its budget deficit. Small savers like retired government officers and others are usually found investing their life savings and accumulated monetary benefits obtained after retirement from services in the risk-free government saving schemes. They are dependent on this income and thus have been most affected by the government decision. An amount of Tk 0.5 or 0.6 million deposited by one such person in a saving scheme annually fetches an income of about Tk 55,000 to Tk 65,000. From this amount, a retired person has to meet his living expenses which are rising faster than the interest he earns from the saving. Furthermore, he has to meet other major expenses in many cases like meeting the education costs of grown-up children, expenses on marriage of daughters, on health care, etc. Thus, the interest receipts from savings certificates for most such categories of people are modest compared to need. But if they are now forced to surrender 10 per cent of their interest receipts as advanced income tax, then what remains in contrast to the heavy expenditures they have to incur from limited interest income? The tax, therefore, only deepened the miseries of such categories of people and the fixed-income earners. The government has progressively gone on reducing both the number of saving schemes and also the higher interest rates on them in the present decade. This policy has already hard hit the small investors. The government, all concerned would expect, would be showing consideration and prudence by not keeping the provision for 10 per cent advanced income tax on earnings on government-issued savings instruments in the upcoming budget. In all fairness, it should also increase the rate of interest in the savings certificates as a realistic hedge against the notably higher rate of inflation.
Kamal Ahmed The government from the current fiscal year imposed a 10 per cent tax at source on interest earnings from the government-issued saving certificates. There is hardly the need to mention that the decision has not been a prudent one. The savers of small means who invest their funds in such schemes include pensioners, housewives, small job holders and operators of small businesses. The poor are at a subsistence level. They hardly save or rely on the same. Only the middle-class people are found to be keen to save and their saved amounts not only create funds for their own use but also cater to the needs of borrowing by the government. But this decision seemed to have come down hard on them. And new investments in government saving certificates also have been declining after such a decision. The government is also not gaining from this decision as it is now required to take recourse to domestic borrowing outside the banks to a substantial extent, to meet its budget deficit. Small savers like retired government officers and others are usually found investing their life savings and accumulated monetary benefits obtained after retirement from services in the risk-free government saving schemes. They are dependent on this income and thus have been most affected by the government decision. An amount of Tk 0.5 or 0.6 million deposited by one such person in a saving scheme annually fetches an income of about Tk 55,000 to Tk 65,000. From this amount, a retired person has to meet his living expenses which are rising faster than the interest he earns from the saving. Furthermore, he has to meet other major expenses in many cases like meeting the education costs of grown-up children, expenses on marriage of daughters, on health care, etc. Thus, the interest receipts from savings certificates for most such categories of people are modest compared to need. But if they are now forced to surrender 10 per cent of their interest receipts as advanced income tax, then what remains in contrast to the heavy expenditures they have to incur from limited interest income? The tax, therefore, only deepened the miseries of such categories of people and the fixed-income earners. The government has progressively gone on reducing both the number of saving schemes and also the higher interest rates on them in the present decade. This policy has already hard hit the small investors. The government, all concerned would expect, would be showing consideration and prudence by not keeping the provision for 10 per cent advanced income tax on earnings on government-issued savings instruments in the upcoming budget. In all fairness, it should also increase the rate of interest in the savings certificates as a realistic hedge against the notably higher rate of inflation.