The rich to feel the pinch

People with big bank balances are going to see up to a 60 percent hike in excise duty rates the next fiscal year, as the government aims to collect higher taxes from relatively well-offs to attain the target of increased revenue collection for next fiscal year, according to the budget proposed by Finance Minister AHM Mustafa Kamal.

Any account holder who has a bank balance containing an amount between Tk 10 lakh and Tk 1.0 crore at any time of the year, irrespective of debit or credit, will have to pay Tk 3,000 in excise duty from the fiscal 2020-21, up 20 percent from Tk 2,500 in the outgoing fiscal year, said finance ministry officials.

A proposal has been made to increase excise duty rates for bank balances with more than Tk 1 crore but less than Tk 5 crore by 25 percent to Tk 15,000 per account for the next fiscal year from Tk 12,000 per account for the current fiscal year.

In case debit or credit balances in the account exceeds Tk 5 crore at any point of the year, the excise duty rate is going to increase by 60 percent to Tk 40,000 the next fiscal year from Tk 25,000 per account this fiscal year.

However, holders of accounts with debit or credit balances up to Tk 10 lakh will not need to pay higher excise duty rates the next fiscal year, according to Kamal's budget speech. At present, mall ticket account holders, who have up to Tk 1 lakh balance at any time during a year, are exempted from excise duty. Account holders with a balance between Tk 1 lakh and Tk 5 lakh have to pay Tk 150 for excise duty a year.

Meanwhile, bankers will deduct Tk 500 as excise tax from accounts with debit or credit balances above Tk 5 lakh to Tk 10 lakh.

NBR data showed that it collected Tk 1,285 crore as excise tax from bank balances in the fiscal 2017-18, down from Tk 1,295 crore a year earlier. A fresh hike came three years after the government increased excise duty rates on bank balances to achieve higher revenue goal.

Initially, the government wanted to hike the duty rate on bank balances containing Tk 1 lakh or above.

However, following public outcry, it stepped back from increasing the tax on account balances of up to Tk 10 lakh, thus averting burdening people from the lower-income group with higher taxes and discouraging savings in banking channels. Until December 31, last year, there were 10.65 crore bank accounts and Tk 12.14 lakh crore in balance.

Only one percent of the account holders had more than Tk 10 lakh deposited in their accounts. In terms of balances, these accounts accounted for 71 percent of the total deposits, according to data from the Bangladesh Bank.