The government rethinks the continuation of tax rebate facility against investment in savings tools as a section of people are allegedly misusing such opportunity, officials said.
The National Board of Revenue (NBR) has been asked to review the impact of tax rebate facility, taking into consideration the government's cash management risk, they added.
"Some people invest in savings tools in the month of June and encash those after submission of tax returns to avail of tax rebate facility," a recent meeting of the cash and debt management committee (CDMC) was told.
Finance secretary in-charge Mohammad Muslim Chowdhury chaired the meeting at the ministry of finance which termed it a "bad practice" and asked the NBR to take steps for making it rational.
The meeting was told that the return from investment in savings tools is almost 5-6 per cent higher than the interest rate offered on money deposited with commercial banks. As a result, people tend to invest in savings tools and thus the government's borrowing from non-bank sources is increasing day by day.
An official of the NBR said the actual return from investment in savings tools is much higher than the rate fixed since they enjoy tax rebate facility from it.
The meeting also termed sale of an increased volume of savings tools unusual which is actually raising government's fiscal burden due to high rate of interest.
Statistics show that during the July-November period of the current fiscal year, the government borrowed Tk 211.72 billion from national saving schemes which is 70 per cent of the annual target.
During the period, the government had to pay Tk 83.49 billion as interest on savings tools, some 92 per cent higher than that of the corresponding period of the previous fiscal year.
On several occasions, Finance Minister AMA Muhith months back told newsmen that the rate of interest on savings tools will be cut down as the rate is much higher than the interest on deposits in banks.
However, no tangible progress has so far been seen in slashing the interest rate of savings tools.
Meanwhile, a committee headed by an additional secretary of the ministry of finance has prepared a concept note on reform of savings tools management. The concept paper has suggested various short, medium and long-term measures for modernisation of savings tools management.
As part of short-term reform, setting up of a national identification (NID)-linked database of investors in savings tools is now underway.
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