­­­­­­­Return filing a must for hotels, restaurants and clinics

Nearly five lakh additional establishments are expected to come under the tax net as the government is going to make proof of submission of return (PSR) mandatory for hotels, restaurants, clinics, and diagnostic centres.

From the next fiscal year, owners of such establishments will have to show proof that they have paid taxes when applying for a new licence or renewing the existing ones.

If business establishments are unable to produce PSR, they will have to pay a fine of up to Tk 50,000.

Finance Minister Abul Hassan Mahmood Ali proposed the provision in the Finance Bill 2024 while unveiling the budget for fiscal year 2024-25 last Thursday.

The government has opted for the move to increase tax-GDP ratio, which is among the main economic headaches for the country.

In fact, Bangladesh has one of the lowest tax-to-GDP ratios in the world.

Raising this ratio was one of the key conditions for the IMF's loan of $4.7 billion, but so far, collecting higher taxes has been a challenge.

However, the National Board of Revenue (NBR) hopes such an initiative will give a "big push" to revenue collection.

In line with the plan, individuals who avail the services of community centres, convention halls, or similar establishments, will also have to show their PSR.

By including these two untapped sectors, the total number of sectors that need to show PSR will increase to 45 from 43 at present, officials said.

"The NBR wants to expand the tax net and bring in all potential taxpayers across the country. It also wants to reduce tax evasion," a senior official of the NBR said, seeking anonymity.

"The economy has expanded fast. So many people who are involved in high-cost events and transactions are still out of the tax net," added the official.

For instance, many small and large restaurants have sprouted up in the country over the past decade to cater to the growing demand for hygienic food.

Currently, there are 4.36 lakh hotels and restaurants in Bangladesh, employing 20.71 lakh people, according to a Bangladesh Bureau of Statistics survey.

"There are many restaurant owners in the country who do not pay VAT and taxes properly. It is not right to deceive the state," said Imran Hassan, secretary general of the Bangladesh Restaurant Owners' Association, welcoming the move.

However, because of this decision, the NBR should keep an eye on restaurant owners who are real taxpayers and ensure they are not harassed, he added.

There are a total of 15,247 private hospitals, clinics, diagnostic centres and blood banks in the country that are licensed to run operations, according to Directorate General of Health Services data.

Of them, 5,029 are hospitals and clinics while 10,021 are diagnostics centres, it said.

Dr Moniruzzaman Bhuiyan, president of the Bangladesh Private Clinic and Diagnostic Owners Association, said the government made a good decision.

Those who do business must come under the tax net, he opined.

AM Shamim, managing director of Labaid Group, one of the biggest private sector healthcare providers in Bangladesh, said the decision was not business-friendly.

"Because all documents are not always available from government offices on time. At that time, a lot of logic must be given," he said.

"It is not possible to say whether I will be able to show a PSR when I need to take a licence or renew one," he added.

"The government needs to understand how our business works. If this rule is finalised, it will be a terrible thing for our industry," he said.

Joseph Gomes, general manager of Palace Luxury Resort, said: "Since it is being done for everyone, we are looking at it positively. As part of this move, we want the government to collect taxes from every hotel business. Those who are still not paying VAT or taxes properly should be brought under the net."

The number of tax-return submissions has been on a sharp rise after the introduction of PSR.

Currently, there are over one crore taxpayer identification number (TIN) holders in Bangladesh. Of them, some 41.45 lakh submit tax returns, according to the NBR.