Pakistan is among the countries that have low savings rate. One of the reasons is over-taxation. At present, the government is charging up to 30 per cent tax on the profits given by the banks and National Savings; 15pc is withholding tax which is charged on the spot.
At present, the inflation rate is over 25pc, which means that even a person getting 13pc from the bank on deposits will lose 12pc on the principal amount annually. Then why is it being taxed?
It has been seen that mostly savings with banks are kept by people who cannot physically invest in business. They can, and do, invest in property or purchase dollars or gold.
All such investments are basically dead investments for the country because they do not create jobs etc., whereas the money deposited in banks and National Savings is invested by the government or private industrialists to create proper economic activity.
Speculative trading in dollar is actually harmful to the country as we have seen in recent times. This creates inflation in the country.
The relevant authorities should look into the matter and eliminate all taxes on profits on deposits to encourage the national savings ratio.
It is also suggested that the limit of investment be enhanced to Rs10 million in Behbood Certificates and pensioners’ accounts in National Savings, which has not been enhanced for at least the last five years. These steps will curb inflation and increase productivity.
HUMAYUN IQBAL SHAMI
ISLAMABAD
