Six more services to need proof of tax return

Highlights

• Six more services to come under mandatory proof of submission of return (PSR)
• They include- registration of document writers, stamps and court fee vendors
• Opening bank accounts of cooperative, trust, NGO etc
• Selling and leasing land worth more than Tk10 lakh in municipalities
• Registration of leasing land, buildings, apartments
• Products supply and providing services for certain entities
• Renting and leasing houses in city corporation areas to these entities
• Entities may include the government offices, corporations etc authorised by laws

The National Board of Revenue (NBR) has planned to broaden tax coverage by mandating the proof of submission of return (PSR) for six additional sectors or services.

According to NBR sources, this provision is expected to be incorporated either through the new income tax law or the finance bill to be announced in the next budget.

Currently, the provision of mandatory PSR is applicable for 38 services.

According to the NBR plan, it has proposed making PSR mandatory for suppliers or service providers when they offer goods or services to specific individuals or entities.

According to sources, these entities may include the government, any authority, corporations, whose activities are authorised by laws, acts, orders, or instruments in Bangladesh. Additionally, projects or activities in which the government has financial or operational involvement, as well as joint ventures or consortia, will also fall under these entities.

Proof of submission of return will also be mandatory for house owners who rent or lease properties to these entities within city corporation areas.

In addition, the provisions will also encompass the registration of document writers, stamps and court fee vendors, as well as the opening of bank accounts for societies, cooperatives, trusts, funds, NGOs, and microcredit organisations. The registration of leasing land, buildings, and apartments will also fall under these provisions.

Furthermore, it may also be mandatory to submit proof of return for the sale and lease of land worth more than Tk10 lakh in municipality areas.

Experts argue that including new sectors in the tax return requirement would compel individuals without taxable income to file returns, contradicting the fundamental principle of taxation.

Former official of the income tax department of NBR, told The Business Standard on condition of anonymity, that there are concerns regarding the recent expansion of sectors that may bring additional individuals with lower incomes into the obligation of filing tax returns.

The official also mentioned potential challenges in implementing these changes at the field level, indicating possible complications.

Alamgir Hossain, former member of the income tax policy in NBR, said, "Last year 38 sectors were required to file tax returns when availing services. The objective behind this was to promote return filing. It would be reasonable to evaluate the progress made in those sectors before introducing new initiatives."

He further added that based on the available information, there hasn't been significant advancement in terms of filing tax returns.

NBR is facing pressure to boost tax collection by expanding tax coverage. In recent years, NBR has made efforts to increase the number of individuals and organisations registering for Tax Identification Number (TIN). Unfortunately, these initiatives did not yield the desired response.

As a result, 38 sectors were made subject to mandatory Provisional Salary Return (PSR) requirements. However, despite these measures, there hasn't been significant progress in terms of filing tax returns.

According to NBR, there are approximately 90 lakh Tax Identification Number (TIN) holders in the country. However, it was reported that only one-third of these TIN holders filed their tax returns in the previous year.

Snehasish Barua, tax expert and partner at Snehasish Mahmud and Company Limited, holds a positive view regarding such initiatives. He said that if the plan is implemented, it will lead to an expansion of tax coverage and contribute to improved tax compliance.

He also acknowledges that individuals without taxable income may also be included in the tax regime as a result of these measures. 

"Specifically, individuals involved in land sales without taxable income and those associated with institutions like co-operative societies will be required to submit tax returns," he added.