The government is going to review the existing yield rates on savings certificates after the next national budget, Finance Minister AMA Muhith said Saturday.
"Ideally, the yield rates on savings certificate should be just a bit higher than the market rates. But now, those have become too high", he said.
"So we are going to review the yield rates after this budget", Muhith said.
His announcement came at a pre-budget discussion organised by the Dhaka Chamber of Commerce & Industry (DCCI) in the city.
However, the latest stance of the Finance Minister is opposite to that he had taken during his meeting with members of Economic Reporters Forum (ERF) on May 09 last.
The minister's comments came after a top academic as well as a top corporate executive said that the increased popularity of saving certificates is working against the development of bond market in the country.
"The growing popularity of savings certificate is harming the banking sector while it is also detrimental to the development of the bond market", said Arif Khan, Chief Executive Officer of IDLC Finance.
"Savings certificates should be made available to certain groups of people while the rest should be diverted to the bond market", said Khondaker Golam Moazzem, Research Director of the Center for Policy Dialogue (CPD), the Dhaka-based private think-tank.
In Bangladesh, the rate of yield is the highest on government savings certificates among other deposit schemes. As a result, the sale of these certificates has increased significantly in recent times.
In the last fiscal year alone, savings certificates sale reached over Tk. 750 billion, while the gross sale of such savings tools stood at Tk 550 billion during the first eight months against the total sale target of Tk 600 billion for the fiscal year 2017-18.
Economists, however, have long suggested reducing the rates of yield on savings instruments, but the government, so far, has not made such a decision, considering the interests of small savers.
At the meeting, the finance minister said that the yield rate on savings certificates would come under the scanner after the presentation of the budget in June.
Speaking at the meeting, chairman of National Board of Revenue Mosharraf Hossain Bhuiyan, however, blamed the sorry state of the banking sector for the increased public interest in savings certificates.
"Given the current scenario in the banking sector, small savers do not at all feel safe with the banks", the NBR chairman said.
"However, we are planning for the automation of this savings certificate scheme so that large investors cannot come under this scheme", Mr Bhuiyan added.
Speakers at the meeting argued that wealth and investment are becoming concentrated in the hands of a few, which is affecting fair market competition and the effective integration of small and medium entrepreneurs into the supply chain.
"We do have a competition act but it is greatly under-utilised", Muhith said, adding, "We need to activate this law to bring some order in this regard.
DCCI members in the meeting also called for progressive reduction in corporate tax rates over the next three years at 5.0 per cent, 7.0 per cent and 10 per cent.
In response to the issue of corporate tax cut, both the finance minister and the NBR chairman said that the rate of corporate tax will see a reduction in the next budget.
"However, considering the low tax-GDP ratio of the country, we will have to expand our economic activities at the same time to make up for this tax rate cut", Mr Bhuiyan said.
Speakers during the discussion noted that multilayer tax on dividend is harming the private sector investment in the country.
In response, the finance minister said that the problem caused by multilayer tax on dividend would be taken into account by the government.
Speakers at the meeting also called for formulating a policy for automobile manufacturing in the country.
Noting that having such policies and incentives have helped flourish motorcycle manufacturing in the country, speakers said this would help the country bring more foreign investments in the automobile industry.
Referring to such suggestion, the finance minister said that the government would look into formulating a policy for vehicle manufacturing in the country.
"In addition, there would be some incentives for local value addition in automobiles in the upcoming budget", said the NBR chairman.
"In addition, incentives would be provided to light engineering, capital machinery, export oriented industries, liquefied natural gas as well as 4G mobile data services", he added.
Speaking at the programme, former finance adviser A B Mirza Azizul Islam called for improving the governance of banks and enhancing the skills of the banking sector employees to address the high percentage of classified loans in the country.
He noted that apart from time and cost overrun, ensuring the quality is a major challenge for the infrastructure sector in the country.
Executive director of the think-tank Policy Research Institute of Bangladesh Ahsan H Mansur said that although the uniform VAT rate will not be implemented before 2019, the country should get ready for this scheme from now.
Citing the example of India, which has managed to raise its tax-GDP ratio in recent times, Mr Mansur said that like India, moving towards a cashless society can be helpful in generating more tax revenue.