PIA’s Restructuring in Doubt as FBR Refuses to Write Off Tax Liabilities

The Federal Board of Revenue (FBR) has refused to write off tax liabilities of Pakistan International Airlines (PIA), a national daily reported.

PIA posted losses of around Rs. 35 billion last year. The newspaper quoted experts familiar with the matter that the FBR also said reconciliation is a prerequisite to the proposed restructuring of the airline.

The national airline owes FBR Rs. 14 billion in dues from multiple years. This amount is apart from the late payment penalty that is payable as federal excise duty (FED). If the penalty amount is added, the total payable dues would soar to five-time as much, the report added.

However, the PIA said that the tax department had raised the demand of Rs. 14.4 billion till 2019, which already included the penalty amount. According to a statement by PIA, the demands were raised on the issue of late payment of FED, collection of FED at an incorrect rate, incorrect apportionment of input tax, and failure to collect FED on the carriage of goods/mail of Pakistan Post.

PIA’s financial report said, “The company has paid an amount of Rs. 25 million in this regard, which is considered fully recoverable,” adding, “The company filed appeals and Appellate Tribunal Inland Revenue remanded back the appeals, which was still pending. Based on the consultation with the legal advisor, the management believes the case will be decided in the favor of the company.”

PIA has been posting losses for the past several years. The FED amount is not part of PIA’s revenue, as it is collected from passengers on behalf of the FBR.

The Economic Coordination Committee (ECC) of the cabinet has approved the restructuring of the airline to turn it into a profit-making entity. However, for that to happen, its liabilities with the FBR need to be reconciled first. PIA requested the tax authority to write off the payables keeping in view the massive losses, but FBR said that there was no such provision allowed under which the tax liabilities may be written off.

The PIA reported financial results for the year ended December 31, 2020, on Monday, showing Rs. 34.6 billion in after-tax losses. This is better than last year’s results when PIA posted an after-tax loss of Rs. 52.6 billion.

Despite this, the national carrier has been defaulting on the tax payment for the past several years.