10 per cent tax on saving schemes

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A 10 per cent tax that was slapped under the fiscal measure for the current financial year, on the yields of government operated saving schemes is hard hitting the small savers or relatively the people of modest means.
The savers include pensioners, housewives, small job holders, operators of small businesses and others. They cannot be considered as rich people. They may have an existence above the poverty level but they cannot be counted as affluent ones either.
Thus, the fiscal measure relating to tax on interest earnings on various kinds of national savings certificates has come down hard on these middle class savers. The government may also not gain from this decision as it requires large scale borrowing to meet its budget deficit.
It should be noted that this step will ultimately affect adversely the entire volume of national savings because the small savers are the greatest in number and the national savings effort and the mobilisation of resources from the same for different applications, is so linked to the behaviour of the small savers. It should cause no surprise now if many of them should decide to encash their savings certificates and refrain from putting their monies in these schemes for a period. This is already taking place and will rather accelerate in the earning months. If this trend undermines the volume of national savings in the process, this will have detrimental effects on the mobilisation of these savings for credit expansion in different sectors.
Thus, considering all of these factors particularly the worse pressures to be created on people of modest means as a consequence of this action, it certainly merits a rethink leading to its withdrawal. The sooner, the better.

Zillur Rahim
DOHS, Dhaka