Savers to keep off banks
The country's business leaders and economists criticised the government heavily for hiking the excise duty on bank deposits in the proposed budget for next fiscal year.
The increased excise duty would discourage people to use formal financial channels, said Nihad Kabir, president of Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI).
The organisation claims the government always consults with the business leaders, but their proposals are not considered in the budget.
The observation came at a discussion on “Budget 2017-18: Instant Views of Business Community” held at La Vita Hall of Lakeshore Hotel in the cityyesterday.
In his proposed budget for fiscal 2017-18, Finance Minister AMA Muhith prescribed a 60 percent hike of excise duty on account balance between Tk 1 lakh and Tk 10 lakh -- a move that will leave some savers with even negative returns from their deposits.
The move drew huge criticism as the duty surged at the time when average interest rates on deposits came down at five percent and are mostly three to four percent.
“The increased excise duty on the bank accounts is unwarranted and is against the concept of financial inclusion,”Kabir observed.
She urged the government to revise the decision saying that such duty would discourage savings.
Ahsan H Mansur, executive director of the Policy Research Institute (PRI), termed the move a“secret attack” saying the increased excise duty would hurt the government's image.
He suggested that the government should not collect the tax at all.
He said the excise duty was imposed in 1991 and was supposed to be withdrawn then but continued anyhow. But now it was the time to reconsider such duty, he added.
However, he highly appreciated the government for introducing the new VAT law saying this is the only significant economic reform.
“It is a courageous decision the government has taken even before the election,”he noted.
Mohammed Farashuddin, former governor of Bangladesh Bank, said the increased excise duty had already drawn huge criticism and the government should withdraw it immediately.
He said the cost of doing business was very high, but the issue did not get attention in the budget.
Money is being laundered through mobile banking and the business community should give a proposal to the government as to how the issue can be resolved, he observed.
MA Mannan, state minister for Ministry of Finance, said the government gave some relief from excise duty in the new budget as it was on accounts with balance of Tk 20,000 but in the proposed budget accounts up to Tk 1 lakh was exempted.
He assured that the increased excise duty would be reconsidered as it was heavily opposed by the people.
However, Muhith in his post-budget press conference denied reconsidering the increased excise duty saying the people who keep Tk 1 lakh or more are rich.
“It is very difficult to give a definition of the rich. But I know the people who keep Tk 1 lakh or more into their bank accounts are capable of bearing the expenditure of the excise duty,” Muhith said at a post-budget press conference in the capital's Osmani Memorial Auditorium on Friday.
In the post-budget discussion the business leaders expressed their disappointment over the proposed budget.
All the business associations tabled their demands before the government, but those were hardly given any heed, said Kabir.
The MCCI is disappointed that no reform measures have been proposed for the much expected bond market, which could serve as a new source of borrowing for the government and the private sector.
There was no provision in the budget to bring discipline in the financial sector and the state-owned enterprises which was also disappointing, she said.
Syed Nasim Manzur, former president of MCCI, said job creation has declined, educated unemployment is the highest in Bangladesh compared to India and Pakistan, and investment situation is quite serious.
Amid this situation the proposed budget did not reflect the suggestions made by the business community, he said.
Zaidi Sattar, chairman of PRI, agreed that this was an “election budget” but it was useful to remind that all budgets formulated under the democratic system have an eye on elections.
He criticised the government for remaining silent on addressing the serious lack of governance in the banking sector.