Tax on saving certificates hurts small savers most

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PENSIONERS, retired civil servants, housewives and others do largely depend on their investments into national savings certificates for some modest earnings. But they have been done much injustice from the recent decision of the government to slash the rate of return on such investments and to deduct, rather in a blanket manner, 10 per cent tax on earnings of interest from such savings. Despite pleading from the small savers, government has not changed its decision. There could not be a more unkind move when the prices of essential consumer commodities have gone up well over 10 per cent in the span of only several months. Thus, the yields from the saving schemes are now quite below the rate of inflation.
These people were already confronted with great difficulties in investing in the limited number of saving schemes and, more significantly, due to the interest rates in the remaining saving schemes getting substantially squeezed. Now, the 10 per cent tax on the interest accruals of operating saving schemes, rather in an unsparing way, has come like a further shattering blow to them.
Another unfairness is that even the ones who bought saving certificates in the past before the going into effect of the 10 per cent interest-cut order, they too are required to submit to it. But this is otherwise a sheer violation of universally practiced laws of contract. The law of contract universally says that any authority including the government will be obligated to fulfil its obligations to private parties to a contract fully for the stated duration of it. Subsequent rules or principles introduced after such contracts had been made would not apply to previous parties to such contracts. The new rules can apply only to ones who would enter into contracts under the new rules.
But in what ways is the government in Bangladesh upholding such basic principles of contract law by enforcing its decision of taxing interest income on savings instruments regardless of when these were bought ?
Shaila Azad
DOHS,
Dhaka