Interest tax hitting banks but helping the budget

A tax on interest earned from bank deposits, implemented in March, and falling interest rates are curtailing savings and redirecting investments, economists and politicians said last week. The number and value of individual saving deposits dropped slightly in the last quarter of 2001, when the Finance Ministry revealed plans for the new tax, and has been steadily falling since, according to the National Bank of Poland. Savings rates slowed 54% in March, when the 20% tax was introduced. "The last argument for saving has been lifted and we are returning to communist times, when savings were exchanged into dollars and kept under the bed," said Zyta Gilowska, a Civic Platform (PO) deputy and vice chairman of Sejm's Public Finance Committee. But ruling coalition politicians said the tax is accomplishing its goal - raising much-needed revenue for the budget. "I do not suppose that negative effects of this tax will be greater than expected revenues," said Mieczysław Jedoń, a Democratic Left Alliance (SLD) deputy and a member of the Public Finance Committee.

Economists said the falling savings rates in part reflect weaker bank offers and less money available for savings. Inflation, falling interest rates, bank fees and penalties for falling below a minimum balance combined to erode savings. Jacek Wiśniewski, an analyst with Bank Pekao, said assets withdrawn from bank accounts have been directed to three purposes: "The first one is consumption, as Poles want to sustain the level of their disposable income," he said. "The second one is exchanging for dollars or euro and keeping them at home. And the third one is investment funds." Economists said it is impossible to draw an exact correlation between falling savings and the tax. But from October 2001 to February, investment funds gained an estimated zł. 4 billion-zł. 5 billion ($1 billion-$1.25 billion), according to an SG Bank analysis. Profit generated from such investments are not subject to taxation. The Finance Ministry collected zł. 23.2 million ($5.8 million) in revenue from the tax on saving deposits in March and officials said the tax would meet revenue goals. Zofia Ogińska, from the ministry's press office, said total revenue would amount to zł. 1.3 billion ($325 million) for 2002, which was the initial goal.

No deposit, no return Month Growth of bank deposits 2001 November 13.7% 2001 December 11.7% 2002 January 9.6% 2002 February 7.6% 2002 March 3.5% 2002 April 2.2% Source: NBP