The government is going to make submission of tax returns mandatory for global digital service providers like Facebook, Google, Twitter, and Amazon in Bangladesh.
In his budget speech at the parliament yesterday, Finance Minister AHM Mustafa Kamal proposed to withdraw the provision that exempts the nonresident establishments in Bangladesh from submission of income tax return.
These companies are currently regularly submitting their VAT returns through their representatives.
According to the Income Tax Ordinance, these companies do not have any scope of taking a Tax Identification Number (TIN) as they are not registered in the country.
So, first legal changes have to be made in this regard. Then, these companies will have to be given the opportunity to file tax returns with a TIN number, said an official of an organisation working as a representative of several non-residential digital service providers in Bangladesh.
Yesterday, the finance minister said, "One of the major challenges in tapping revenue in this era of globalised economic activities is to collect taxes properly from non-resident taxpayers and digital service providers, and to make them follow the rules and regulations strictly."
"With a view to collecting expected revenue from non-residents in Bangladesh, I propose to withdraw the provision of exemption from submission of income tax return for those not having any permanent establishment in Bangladesh," said the finance minister.
He proposed that the National Board of Revenue (NBR) formulate proper rules defining the scope and areas of income and exemption of non-residents to ensure proper collection of revenue from them.
"These proposals were necessary for bringing these companies under the tax net. The NBR has already started preparing the rules in this regard. Those companies will be able to register in Bangladesh from abroad," said Snehasish Barua, a partner at Snehasish Mahmud and Co, Chartered Accountants
The finance minister also proposed a number of measures that will bring more people and organisations under the tax net.
One of the most notable of these measures is mandatory presentation of proof of submission of return (PSR) for schools with English version under Monthly Payment Order (MPO), and for all funds except recognised provident fund, approved gratuity fund, pension fund, approved superannuation fund and workers' profit participation fund.
The finance minister also proposed that the NBR expand the provision of spot assessment at all levels beyond the growth centres and introduce the provision of realising undisputed arrear tax demand from the directors of a company if the operation of such company remains suspended for three consecutive years or more.
Meanwhile, VAT officials, along with the service-providing authorities from the next fiscal year will work to disconnect the electricity, gas and water connection of tax defaulting business entities to retain the dues.
The finance minister said, "We need to expand the tax net by bringing all eligible citizens of the country within it, which in turn will enhance our capacity to tap more revenue and expand the size of the formal economy."
"I propose legal provisions for submitting income tax returns with a view to expanding the existing tax net," he added.