Question

Scenario 1: suppose savers either buy bonds or make deposits in savings accounts at banks. initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. now suppose there is an increase in the tax rate on interest income, from 20% to 25%.

Answer 1

Changes in the tax treatment of interest income from savings cause the equilibrium level in the market for lending funds to expand and hence the level of investment spending to decrease. If the interest increases, the expenditure will decrease.

Further Explanation

15% (fifteen percent) for domestic taxpayers and permanent establishments. 20% (twenty percent) or according to the rate in accordance with the approval of double taxation avoidance for foreign tax payments from the permanent establishment, from the gross amount of interest in accordance with the period of ownership of the bonds.

The purpose of this interest tax reduction is to be agreed on the level playing field by considering a complete investment instrument. In addition, the tariff reduction was carried out to increase financial market deepening. Financial instruments determine the compilation of monetary crises.

A time deposit is a bank product in the form of deposits with a certain period of high interest. The period of deposit is usually 1 month, 3 months, 6 months and 12 months.

As with savings, what is often a consideration for choosing a deposit product is the interest offered by deposits is higher than ordinary savings. In a sense, deposits are savings products in banks where deposits or withdrawals can only be done at certain times.

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Tax Treatment  brainly.com/question/10602387

Deposit  brainly.com/question/10602387

Details

Grade: College

Subject: Business

Keyword: tax, treatment, deposit

Answer 2

The change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to increase and the level of investment spending to decrease.  If the interest increase, it follows that the spending would decrease.