Jehangir Hussain :
When the economy is stable and growing unless the government reforms the archaic system of collection of taxes and duties it would discourage savings with banks and also businesses.
The government should also reconsider its decision to increase taxes on Mobile Financial Services (MFSs) since they have helped financial inclusion of common folks.
There is a lack of initiative for the overdue structural reform of the outdated system of tax collection of taxes and duties.
The system is increasing the cost of doing business and discouraging savings with banks.
The system even subjects people with little or no incomes to regressive duty and tax.
Proposed increase in tax on Mobile Financial Services would create greater pressure on common folks and could hamper their financial inclusion.
For savings accounts the existing rate of interest is 2 per cent, the rate varies between 4 and 5 per cent for time deposits. But negative returns from savings or deposits with banks due to deduction of taxes and duties is discouraging people to keep their money with banks. The tax and duty structure also discourage people to opt for fixed deposits as the low of rate interest and inflation virtually leave nothing to them.
The National Board of Revenue deducts source tax on bank interests, Value Added Tax and Excise Duty. NBR’s statutory regulatory order requires banks to deduct excise duty from each account holders’ savings and even from money taken as loans from banks and kept in their accounts for doing business.
Often excise duty is levied twice from the borrowed money kept in banks by businesses for doing business which they alleged increased the cost of doing business. Excise duty is also levied from air tickets with no value addition. The government levies excise duty only to augment its revenue collection. Savings account holders having no money in their accounts are also subjected to excise duty.
People have to pay excise duty twice for saving in the government’s savings tools, fir while buying them and again at the time of encashment. Such regressive excise duty collection, say common folks with little or no income, hurts them and discourage savings.
Excise duty, collected two to four times on borrowed money kept with banks, also pushed up the cost of doing business. The budget for the coming fiscal proposed no changes in the system.
Besides, 15 per cent Value Added Tax is collected as account maintenance fee, loan processing, rescheduling fee and for solvency certificate. The budget proposed expenditure of Tk 6,03,681 crore, a 6.28 per cent increase from the previous fiscal year and Tk 2,25,324 crore for the Annual Development Programme.
It projected total revenue collection of Tk 3,92,490 crore of which Tk 3,30,078 crore would be collected by the National Board of Revenue , Tk 16,000 crore would be collected d from non-NBR sources and Tk 43,000 crore would come from non-tax sources.
It proposed an allocation of Tk 71,592 crore to education, an 11.9 per cent increase, Tk 32,731 crore to health, a 3.8 per cent increase, Tk 34,842 crore to education, an 8 per cent increase, Tk 25,124.98 crore to climate change, a 9.53 per cent increase.
The total budget outlay is about a 17.4 per cent of the Gross Domestic Product, and about 12 per cent higher than the revised budget of the current fiscal with an overall deficit of Tk 214,681 crore, which is 6.2 per cent of the GDP. The government will continue to borrow from the domestic banks to meet the deficit. Bangladesh, according to budget documents achieved 5.27 per cent GDP growth, the highest in Asia.
Finance Minister AHM Mustafa Kamal presented the budget in Parliament on June 3, seeking its approval. The next fiscal begins on July 1.
(Jehangir Alam is a journalist. Emal: [email protected]).
