A letter sent by an Asian airline to the chief of the Federal Board of Revenue (FBR) has accused the Karachi's Large Taxpayers Unit (LTU) for charging the Federal Excise Duty (FED) only from that airline and sparing other foreign and local carriers, Business Recorder learnt Wednesday.
According to the letter, Karachi's LTU is charging the FED only from that airline (requesting anonymity), and has spared other carriers which is a clear discrimination and a violation of the rules and laws. But Karachi's LTU, without providing an opportunity to the airline of clarifying their stance, has issued a show cause notice to the airline for not collecting the FED as per the tax rules and laws of Pakistan and has also directed authorities to recovery all the dues from that airline, the letter said
The airline, in response to the show cause notice, has said the matter is under discussion and has asked for some time to resolve it. When contacted, a senior official of tax department, dispelled the allegations levelled by the airline, saying the exercise initiated by the Karachi LTU to collect the FED from passengers visiting Pakistan is in accordance with the law.
Moreover, he said the taxmen have been empowered by the section 41(A) of the FED rule 2007 to charge excise duty on all international air tickets issued directly by the airlines or through their agents for international journeys starting from any where in Pakistan or ending anywhere in Pakistan, whether such tickets are issued in Pakistan or outside the country.
He further said the excise duty under these rules would be charged and collected by the airline itself or through its authorised sales or travel agents at the time of the issuance of tickets or at the time of chartering of flights. And if, due to some unavoidable reasons, the excise duty could not collected at the time of issuance of the tickets, it would be charged before the passenger boards the aircraft.
However he termed these rules as ominous for the airline industry, as they are not only putting an adverse affect on the local airlines' business but also restraining foreign airlines to expand their business activities in Pakistan. He also urged the concerned authorities to modify these rules in accordance with the best international practices to facilitate the airline industry.
On investigations by this scribe it is learnt that foreign carriers (mostly airlines of the GCC) have adopted a move to avoid paying the heavy excise duty to the FBR, as those airlines have started issuing tickets from Pakistan only upto their base stations, thus collecting the FED only for this travel. The tickets for the remaining part of the travels to the final destinations of the passengers are then issued from outside Pakistan. Therefore, these tickets are much cheaper than the tickets of domestic air carriers involving the FED for the full journey.
This practice of foreign airlines is not only depriving the government of Pakistan of its revenues but is also placing the local airlines on a slippery pitch as they are being outpaced by their competitors who tend to run away with the lion's share of passengers by offering cheaper fares.
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