The objective of the government's saving certificates was to create scope for lower income people to invest, to have an alternative source of income while contributing to the national economy at the same time.
This initiative was taken up for small investors only and the investment ceiling was also fixed. The ceiling for general investors was Tk 3 million, while the limit for women and disabled was Tk 4.5 million. But in reality, it is big investors who are buying up the savings certificates.
Many candidates in the last parliamentary election showed savings certificates as their source of income. Many wealthy people have bought large numbers of saving certificates under various names to avoid tax. As a result, the key purpose of saving certificates is lost.
The national saving certificates scheme not only benefits small investors but the government as well. In the national budget every year, expenditure is much higher than income. The government meets this deficit through loans. The loans are procured from the banking sector and saving certificates.
The funds generated through saving certificates are spent on development again. When the government takes loans from the banks, the bank owners benefit. But saving certificates benefit small investors, especially women, retired government officials and senior citizens for whom these certificates are the only source of income.
The interest rate of the banks cannot be the same as that of saving certificates. People from various sectors including businesspersons have long been appealing to the government to reduce the interest rate on saving certificates. The government so long paid no heed to this demand. In the budget of this financial year, the government increase tax at source from 5 per cent to 10 per cent.
However, it has been confirmed that tax at source will not apply to pensioners, freedom fighters and the disabled. The government's decision is valid. But at the same time, it would be justified to keep the tax of source for genuine small investors at 5 per cent.
The small investors will benefit further if the government restricts large investors from buying saving certificates. This will also curb the scope for tax evasion.
Many wealthy people invest large sums of money in saving certificates though this is unethical and illegal. Another reason for the rich to invest in saving certificates is that there is not scope for alternative investment. The stock market could have been an option, but that is collapsing due to manipulations by vested quarters.
The government policy for tax at source is unacceptable and misleading. The budget stated that a 10 per cent source tax will be levied from 1 July. This sent large numbers of people rushing to the banks and the saving certificate offices before 30 June. Some waited till late at night to withdraw their profits.
But why should those who failed to withdraw their profits by 30 June suffer? The provision that the government announced for July, cannot be implemented in retrospect.
In no way should the tax at source be deducted on profits made before 1 July. The finance ministry and and the National Board of Revenue must explain the matter clearly. There is no scope to deduct more than 5 per cent tax at source before 1 July.