Newspaper reports indicate that the government and the chambers of trade and industry are extremely worried about the fast declining trend in domestic savings thus putting a heavy strain on means for financing productive activities. Some of the measures thoughtlessly introduced by the previous government are greatly responsible for the decline in private savings. In the budget for 1990-91, the then Finance Minister imposed 8% tax at source on profit earned from Fixed Deposits (FD® and Savings Deposits invested by private individuals in banks. This measure was not withdrawn, despite severe criticism in the national media and by the public in general including the chambers of trade & commerce. As was thought, this measure proved counterproductive. A good number of persons withdrew their savings investments from the banks, and diverted that to purchase of gold and real estate, on which direct tax Is non-existent or minimal. Besides, such persons found that, while value of money erodes through rising inflation and cost of living, value of investments in gold and real estate appreciates.

It is advisable to remember that, if those, who can afford do not Invent their savings in banks to avoid the irritant measure of direct taxation, even normal banking operations would get greatly squeezed, which in turn would cause myriad problems for trade, commerce and industries, for lack of ready cash to finance transactions. It is also to be noted that bank deposits are utilised for purposes which open up new and additional sources for increasing government revenue. In that sense, private investors in banks also contribute to government revenuefund and to national development.

If the 8% tax on profits from Bank Deposits Is withdrawn, It will surely encourage

the private cash Investors to save in banks again and thus help growth of domestic savings for utilisation in the productive field.

In the national budget for 1990-91, some more harsh Income-Tax measures were imposed, which have been widely resented by honest taxpayers. The earlier-exemption of income from bank deposits Upto Tk 15,000, from Income-Tax, was withdrawn. This worked as a set-back for cash investors in banks. Besides, a surcharge of 15% on income-Tax, otherwise payable, was imposed — thus further increasing the tax-burden. These measures were considered very unreasonably harsh by those who do not resort to taxevasion. At the same time, these provisions might have encouraged the habitual taxevaders to work out new ways and means to avoid the additional tax burden. Such steps on the part of the government would be self-defeating in the long run?

The present democratic government would be will advised to allow the earlier exemption of upto Tk. 15,000/-or perhaps a higher amount, of Bank Deposit Income from Income-Tax and also withdraw the surcharge of 15% with a view to bo6sting up savings In bank deposits.

A good Finance Minister would not resort to increasing direct tax burden on the citizens. Rather, he would try to augment revenue from hitherto untapped indirect sources and from luxuries and non-essential items, both imported and indigenous.

One would hope that, In the national budget for 1991-92, to be presented by the new democratically elected government, people of Bangladesh would find a return to reason and pragmatism, and a farewell to the egoistic shortsighted policies of past nine years.

Abdul Hye Khan Dhaka