Savings tools sales fall by 75pc this month
Drop blamed on new tax steps

Munima Sultana

Investment in the state-run savings instruments marked a drastic fall against the backdrop of new tax measures, announced by the government in the budget for 2010-11.

The overall sales of savings instruments, according to provisional figures, declined by around 75 per cent in July, 2010 over the previous month.

Savings certificates amounting to Tk 3.16 billion were sold until Thursday, the last working day of this month compared to Tk 8.34 billion in June this year, the figures showed.

Officials attributed such a drastic fall in the sales of savings certificates to imposition of new tax measures on state-owned savings certificates.

They also indicated that the current declining trend in the sales of savings tools might persist in the months ahead.

The government first imposed a 10 per cent advance tax on the savings schemes that matured before July 1, 2010 and cut the interest rate from 1.5 per cent to 2.0 per cent in the current fiscal.

After the tax measures sparked strong resentment among small investors blaming the government for 'breaching contract' with them, the government withdrew tax at source from pensioners' and family savings certificates in the current fiscal with effect from July 1.

"But its impact could not be reflected in the investment scenario," said the official adding that sale of Bangladesh Savings Certificates has been shifted to mostly 'family certificates'.

In the past, similar tax measures were introduced for the government savings tools twice. Five per cent tax at source was imposed in 2003 back-dated from June 6, 1999. But it was withdrawn on December 30, 2003 following strong criticism and protest.

The National Board of Revenue once more imposed a 10 per cent tax at source from July 1, 2007 on minimum Tk 25000 in interest to be gained from the government's savings certificates and other investment bonds which was also withdrawn amidst protest.

Observers said the World Bank and International Monetary Fund had long been prescribing the government to cut the interest rates of savings certificates to divert the credit flow from the government's saving instruments to normal banking channels for improving flow of fund of the commercial banks.

With the interest cut in the current month, investors of all savings certificates will get lowest Tk 928 monthly interest and Tk 9,200 highest against their investment from Tk 10,000 to Tk 1.0 million for different time-stretches.