Excise duty on savings: How ethical is it?

The government is finding new ways to increase its revenue every year as the economy is getting bigger. But the latest one of these ways is making people question its methods. For instance, the government has been 'silently' deducting Tk 500 for every one lakh we are saving in the banks. This went on almost unnoticed for years. But depositors suddenly took notice when the new budget proposed to increase this rate to Tk 800 per lakh savings for up to Tk 10 lakh savings. Higher rates have been proposed for savings beyond Tk 10 lakh.

This means, if your savings have exceeded one lakh taka, and the bank is offering you 5 percent interest (which in reality is below 5% and can be as low as 2%)—you may expect to get Tk 1250 every three months as interest. But at the end of the three months, just because you saved Tk one lakh, the government would deduct Tk 800. Then from the remaining Tk 450, the government will deduct another Tk 187 as income tax and the bank will deduct Tk 300 as service charge. You would eventually pay the bank and the government an additional Tk 37 from your own pocket for keeping one lakh taka.

How logical is this kind of taxation? Is it actually legal? Is it ethical? Nobody has so far debated this matter.

What is excise duty? It is a form of tax that is imposed on local production or sale of local products; or a fixed tax on the revenue of a company; or a tax imposed on certain professions in the form of license fee. How does savings fit into the purview of excise duty?

I have paid income tax and I am saving some of my money that I legally earn. As I am not a public servant, I shall not get any pension when I retire. I shall have to fall back on my savings. I have saved that money after I have paid my income tax. How can the government ask for another tax on my tax-paid money? How can the government collect tax on the same money twice?

The government needs money to run the county. The government has enormous powers. The government can use this power to punish the big time bank loan swindlers. But do they exercise any such power to punish the swindlers who have robbed various banks of thousands of crores of taka? Did the government recover the swindled money from them?

According to Global Financial Integrity, a Washington-based research organisation, between 2005 and 2015, capital has illicitly flowed out from Bangladesh to the tune of US $63 billion. How does anyone smuggle out so much money when there is an all-powerful government that needs money for national development? Who are these culprits? Has anyone been caught? Has any of this money been recovered and put to use for building the country?

The government has so many development projects that see annual cost escalation to a ridiculous proportion. For instance, the Dhaka-Chittagong four-lane project was supposed to cost slightly above Tk 1600 crore. But after years of delay in its implantation, its cost escalated to Tk 3900 crore. Has anyone been punished for such overpricing? Has anyone been made accountable for the consequences of such cost hike? Look at any large project, it's the same story everywhere.

What is the consequence of project cost escalation? The common people are being burdened with this out of control cost—not the ones who smuggle out billions of dollars, not the ones who rob banks in the name of taking loans or not the ones who milked government projects like there is no tomorrow.

The government does not act against these white-collar criminals—because they are powerful and influential. The government is targeting simple hard-working people trying to make a living because they are easy to target. It is eyeing that retired man whose only source of living is his lifelong savings. It is reaching for the likes of the old mother's savings—because, in the end, what can she do to stop the all powerful government?

People keep money in banks for two reasons: security and interest rate. The interest rates used to be higher than inflation and thus the real value of the money that we used to save would not erode. But now the interest rate is below 5 percent, below the level of inflation. Every year, our saved money is losing its value.

Many of us pay the income tax. But the number of tax payers is far too low in comparison to the country's population—it's just 8 to 9 lakh. Surely there are many times more than just 8-9 lakh people who can pay income tax. It's the job of the government to find these people and broaden its source of revenue. It is not the job of the government to punish existing tax payers by finding more ways to squeeze them.

Instead of forcibly collecting tax from the peoples' savings, the government should look at stopping or reducing corruption and money laundering and make sure the projects, which are being funded by tax payers, do not see cost escalation. These would be enough to optimise the use of the government's revenue.