Govt mulling over eating the rich | The Daily Star
12:00 AM, June 03, 2020 / LAST MODIFIED: 03:22 AM, June 03, 2020

Govt mulling over eating the rich

Hike in excise duty on big account balances in the works

The government may increase excise duty on big-ticket account balances in banks in its bid to collect more taxes from relatively well-offs to attain increased revenue collection target for next fiscal year and take the economy on the path of recovery from the COVID-19-induced slowdown.

Account holders who have bank balances of more than Tk 10 lakh at any time of the year irrespective of debit or credit may see up to 20 per cent hike in excise duty from fiscal 2020-21, said officials of the finance ministry.

Currently, account holders with bank balances exceeding Tk 10 lakh but less than Tk 1 crore any time during a year face a Tk 2,500 deduction as excise duty by banks in line with the government rules.

The rate of excise duty goes up to Tk 12,000 per account per year for balances upwards of Tk 1 crore but less than Tk 5 crore.

The excise duty goes up to Tk 25,000 per account in case debit or credit balances in the account exceeds Tk 5 crore any moment, according to the NBR.

However, small 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 excise duty a year.

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

Officials said the excise tax rates for account balances of up to Tk 10 lakh are unlikely to change to give relief to lower-middle-income people, many of whom suffered income losses and salary cuts as economic activities nosedived in the face of the 65-day general shutdown to battle the deadly COVID-19 in Bangladesh.

The NBR data showed that it collected Tk 1,285 crore as excise tax from bank balances in fiscal 2017-18, down from Tk 1,295 crore a year earlier.

"We have seen that most of the excise duty comes from accounts with high bank balances," said an official of the finance ministry requesting anonymity as he is not authorised to speak with the media.

He expects that the measure to hike excise duty would bring in a couple of hundreds of crores in revenue next fiscal year.

The fresh hike is likely to come three years after the government increased excise duty on bank balances to achieve higher revenue goal.

Initially, the government wanted to hike the duty on bank balances of upwards of Tk 1 lakh.

But following public outcry, it stepped back from increasing the tax on account balances of up to Tk 10 lakh in any bank account, thus averting saddling the lower-income people with higher tax burden and discouraging savings in banking channel.

Until December 31, last year, there were 10.65 crore bank accounts and Tk 12.14 lakh crore in balance.

And only one per cent of the account holders had more than Tk 10 lakh in deposits in their accounts. And in terms of balances, these accounts accounted for 71 per cent of the total deposits, according to data from the Bangladesh Bank.

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