KARACHI: At least 79 per cent of private hospitals in the country do not pay taxes on profits earned as they are not formally registered under the country’s taxation system, it emerged on Sunday.

A situation analysis report for future Sindh health strategy, conducted by reputed consultants of the Health Sector Sindh, giving the 2010 estimates of the Federal Board of Revenue said some 1,176 private hospitals were registered under the respective regional tax officers, but 936 of them had not obtained national tax numbers (NTNs) and had been operating out of the tax net.

The report submitted to the provincial government last year is still pending to be utilised for future health strategy in Sindh.

The officials concerned in Islamabad corroborated the fact and said the situation had not changed from what it had been three years ago. In fact, an official said, the ratio of untaxed hospitals had increased.

According to the report, in Karachi there are 85pc untaxed hospitals and in Lahore 86pc. Overall more than 82pc untaxed hospitals are working in Sindh, similar to those in Khyber Pakhtunkhwa. The percentage in Punjab is 77 while in Balochistan seven of the 11 hospitals in Quetta were duly registered showing the most improved percentage of 36 untaxed hospitals.

The report said that only an estimated 50pc of these hospitals produced formal financial statements and got them audited by chartered accountant firms. There was an overall reluctance on the part of owners to share financial data presenting profits earned, their cash movements as well as their financial statements with regards to capital invested, business assets, annual revenue, income and expenses.

“Estimates show that about 59pc for-profit hospitals earn less than Rs10 million and about 35pc earn a revenue of Rs10 million to Rs50m per annum,” it said.

The worsening quality of care at the public sector hospitals has forced the people belonging to lower middle income groups to pay heavily to the private sector hospitals, tempting the for-profit entities to establish more hospitals in poor neighbourhoods to hunt for greater fortune overwhelmingly unexplored as yet.

The report said the private sector despite high tariffs was making inroads into lower income neighbourhoods.

It said the for-profit private hospitals due to their high tariff rates mainly catered to the middle-class population and were strategically situated in the elite areas of large cities. However, due to low quality of care at the public sector hospitals, there had been an increasing trend of lower middle income groups to utilise private sector hospitals despite high costs.

It said the private sector practices of general practitioners (GPs) were the main recourse to primary healthcare for the general population, including the poor, due to lack of a functional primary healthcare system.

The report gave the break-up of 360 for-profit hospitals in the city area-wise, which showed Nazimabad as the neighbourhood with the most private hospitals (100), followed by 80 in Gulshan-i-Iqbal, 60 at Tariq Road and in Bahadurabad and 50 each in DHA, Saddar, Gulistan-i-Jauhar and Korangi. Surprisingly, upmarket Clifton was shown with just 20 hospitals.

The report said for-profit hospitals were registered as small-medium enterprises (SMEs) towards profit-making and patient volumes.

“For-profit hospitals are owned and run as business like any other SME. However, unlike charities, they are not tax exempt and the taxes paid by these hospitals are eventually recovered via the patients’ bills,” it said.

It said those hospitals market their services and products in private and semi-private organisations that provided health benefits to their employees who were on the panels of health insurance companies and were paid on a reimbursement basis for costs incurred on the treatment of their employees. For walk-in customers for-profit hospitals operate on a cash payment basis.

As Sindh has the largest concentration of the for-profit sector in the country (59pc) the province has the highest concentration of non-profit sector as well.

The non-profit sector is a mix of philanthropic medical sector, NGOs involved in primary healthcare and population-related emergency services and advocacy, capacity building entities.

The report said the philanthropic medical sector was the most well-established in Sindh with more than 20 medium to large entities offering medical or specialty services and having large patient volumes.

The NGO sector targeting primary healthcare and population-related development work has 11 established entities.

“The emergency network has fewer entities but probably the largest network with outreach across most areas of Sindh and Pakistan,” it said.