Dhaka today is a veritable island in the wake of severe flooding. Low lying areas around the capital have already gone under floodwater and hundreds of thousands have been forced to flee their houses. Dishonest traders have been seizing this opportunity and cashing in on runaway prices. The wholesalers have been manipulating the situation to reap higher profits for themselves instead of acting as stabilisers of prices between the retailers and the consumers. Hoarding and profiteering have become the order of the day.

Unfortunately, this chaotic situation has not been helped by the introduction of certain new financial measures.

The Finance Ministry in its wisdom, probably on external advice, has decided to reduce interest rates on savings accounts and also on various kinds of Savings instruments. This has meant reduction of income particularly for those who have retired and others from the middle class who tend to rely on income mostly from interest. I will not got into the economics of such a move. I will, like many others, only point out that this step will be a sort of disincentive towards savings. This has not been a popular step.

Another debatable financial decision has been to repeat and maintain through 'Artha Ain, 2004' of 30 June, 2004, which came into effect from 1 July, 2004, the provisions of 'Artha Ain, 2003' of 30 June, 2003 associated with 'The Provisional Collection of Taxes Act, 1931 (XVI of 1931).' Apparently, it has been retained in public interest. It would appear that earlier reservations about applying this provision last year has been re-considered. Accordingly, the very fact that such a provision which was not enforced last year, is now being repeated in 2004, denotes menacing prospects for savings account holders in general.

According to this re-stated law, certain changes have been brought in the First Schedule, Section-3, Part-II Services related to Services rendered by banks. This Section-3 is part of 'The Central Excises and Salt Act, 1944.'

It may be recalled here that provisions of this Act had earlier also been amended on 10 November, 1992. In the law of 1992, it was decided by the government that for 'services rendered by the bank' under Service Code S032.00, the rate of duty would be Taka two hundred per deposit account per year. Here 'Services rendered by bank' would mean the services rendered by a scheduled bank as defined in the Bangladesh Bank Order, 1972 (PO No 127 of 1972) by way of maintaining deposit account.

This charge was unjustifiably enhanced to Taka 10,000 in 2003 but its implementation was shelved. It was considered impractical. However, the new Finance Act, 2004, displaying poor political wisdom, instead of cancelling it, has re-initiated this statutory rate on the same Service Code as of 1 July, 2004.

I have found it difficult to understand this step. I would have understood a possible increase in the statutory rate if it was rational. This does not make any sense. Then too, no distinction has been made in terms of amount of deposit and the servicing of such a deposit account. A graded approach might have been undertaken where those below Taka one lakh would have paid a certain amount which could have been increased with the amounts of deposits in slabs of Taka five lakh each. Then, there would be variance and some justice and fair play. What does a poor person do who is maintaining a savings account with only Taka ten thousand in it? Does he then end up losing all his savings paying the yearly statutory fee of Taka ten thousand? What happens if a person has only Taka eight thousand? This is absurd. Banks are impersonal institutions and are guided by existing laws and rules. They will have to implement these laws. The only net loser in this exercise will be those who maintain savings accounts of any description.

Let us also see another facet. What this law denotes is that if a person has Taka two lakh in a savings account, then at the end of the year, after reduction of income tax at source on the annual interest, the bank will still deduct the statutory service charge of Taka ten thousand. This means that the saver in question is left without any income and will probably be in negative territory. In other words, he is being indirectly advised to keep his money in a Current Account. I guess the other option that is being hinted at is investment in the totally uncertain and unregulated stock market.

This step is controversy at its best. One can only hope that better sense will prevail and the Finance Ministry will revise this latest amendment and withdraw the statutory charges.

The other new initiative that has drawn the ire of the people of Dhaka relates to self-assessment of holding taxes in the capital city. The Mayor has tried to explain this new arrangement by claiming that this will bring thousands of new holding tax payers into the tax-net (owners of the new housing units built over the last decade). He has also claimed that this will 'eliminate corruption and injustice.' The general public have however not bought this line.

Every day, newspaper reports have highlighted clashes between police and house owners over the new format of assessing holding taxes. Recently, chase and counter-chase between the police and the demonstrators virtually turned the Lalbagh crossing and its nearby areas into a mini battlefield. Such pro-active protests have also led to many arrests and injuries both for law enforcement officials as well as the common population. This is fast turning into a political issue with front-ranking Awami League leadership also lending their support to the protests. The High Court has also stepped in a few days ago, and on a writ petition, with a returnable rule, stayed the entire process of DCC for realising holding-tax on a self assessment basis. The petitioner has claimed that the Municipal Corporation (Taxation) Rules 1986 has no provision for self-assessment.

Dhaka City Corporation would have done well to have had consultation with citizen groups before promulgating such an exercise. There are reports that the Dhaka City Corporation is hoping to reduce tension by extending the illogical time frame for submitting self assessment returns and deleting some of the irrelevant entries in the questionnaire. The authorities in the DCC seem to have totally misread the current attitude of the citizens of Dhaka. This will not soothe frayed tempers.

The public, in general, have for some time in the recent past, been very critical of the gradual slide of city governance in Dhaka. Various seminars, workshops and television news reports have highlighted the terrible state of affairs with regard to the sewerage system, maintenance of roads (persistent and unplanned digging of roads), garbage collection and the lighting of streets. They have also read results of international surveys which have been very critical of Dhaka as a city to live in due to potential health hazards from its toxic air quality (percentage of lead in the air) and untreated areas which are breeding grounds for mosquitoes. We have already seen how dengue has returned to the city. Numerous civil societies have also remarked on the absence of parks and play grounds for children. In effect, there is consensus that the quality of life in this city has deteriorated sharply. This is partially due to massive urbanisation but is also largely due to poor planning and zoning by the DCC Authorities.

It would be pertinent here to point out that Dhakaites would not have hesitated to pay additional holding taxes, if they found that they were getting their value for money. Unfortunately that is not happening in terms of services or amenities.

The DCC has to understand that this questionnaire that has been circulated should have been preceded by community consultative meetings. Similarly, instead of trying out such a step, the DCC might have tried to increase holding taxes by a certain percentage. As the last fixation had been undertaken more than a decade ago, it might have proposed an increase of twenty per cent as a flat rate. It could have also suggested pro rata increases of an additional ten per cent every three years in the future.

Yes, the DCC needs additional resources. However, it is equally important to be seen as people friendly and not a measure thrust from the top.

It is time that the DCC seriously set up a Consultative Committee, apolitical in nature and composition. This Committee should then be entrusted to see how other mega-cities like Bangkok, New Delhi, Bombay, Calcutta, Karachi. London, Tokyo and New York resolve their problems. It should also consider creating a Coordinating Body to establish better city governance with all the involved stakeholders -- WASA, DESA, Titas Gas and RAJUK. This might lead to improved infrastructural facilities.

Muhammad Zamir is a former Secretary and Ambassador.