Beijing will start taxing individuals a flat 20 per cent on their interest from yuan and foreign-currency deposits from November 1. From every 1,000 yuan (about HK$933) saved, individuals would earn 4.50 yuan less a year from their interest based on the prevailing one-year deposit rate of 2.25 per cent, it was revealed yesterday. The move is aimed at forcing mainland residents, who hold nearly six trillion yuan in personal savings, to spend and help boost the faltering economy. Analysts have long been doubtful of the effectiveness of such a move. Interest accrued before November 1 and interest from educational savings accounts and other special deposits endorsed by the government would not be excluded, Xinhua news agency said. Financial institutions would collect the tax on behalf of the government, it said. To pave the way for the levy, the National People's Congress amended in August the Personal Income Tax Law to remove interest earnings from exemption. Mainlanders say they will continue to save for a rainy day, although some may divert a portion of their savings to stocks and other investment instruments, according to a straw poll. A Shanghai-based chemical engineer, Zhou Jianhua, said: 'The interest rate is already not high and even with the 20 per cent tax, I will continue to save to buy an apartment or to help pay for my wedding. 'The interest on T-bonds is not so high and I have no time to play the markets.' In Guangzhou, a worker for a foreign-invested company said: 'I have been getting money out of the banks for some time because of the low interest rates, now at 2.25 per cent per annum.' A Beijing-based worker with a foreign-invested company said: 'I won't take out my banking deposits specifically because of the tax imposition, but the government is obviously moving to force savers to park their spare cash.' Economists said the levy would have little effect on consumption, as with previous rate cuts. HSBC China Services research manager Benny Chiu Ling-bun said: 'The magnitude of the levy - 0.45 per cent - is small, compared with a corporate income tax of 33 per cent.'