New framework: Aviation policy expected on December 7

PM’s aviation adviser says FBR has expressed concern over change in tax measures

KARACHI:

The National Aviation Policy 2014, focusing on greater private sector participation and tax breaks for start-up airlines, is expected to be unveiled on December 7 to coincide with the International Civil Aviation Day, a top government official said on Monday.

“The policy had been awaiting cabinet’s approval. Finance officials had raised certain objections, which are currently being addressed,” said Prime Minister’s Aviation Adviser Shujaat Azeem.

“I have individually briefed some ministers and the only thing left now is a meeting with  the Prime Minister;  we are almost there,” he said, adding that the Federal Board of Revenue (FBR) has expressed concern over the proposed change in tax measures.



Changes in policy

The policy framework, the first to be implemented in 14 years, also foresees outsourcing of major airports. It allows Aviation Division control over various agencies operating at the airports to facilitate quick passage of passengers.

It seeks to exempt import of aircraft from duties and taxes to encourage airlines to increase their fleet.

“I have been saying all along that we should tax the revenue instead of investment. Let the airlines make money first,” said Azeem.

“Right now, the government collects 28% under various heads of taxes and that discourages investment.”

In the financial year 2013-14, the government collected Rs1 billion from 19 aircraft, which were leased by Pakistani airlines. The policy would also propose waiving tax on import of equipment and machinery for start-up operations at green-field airports.

But despite the fact that Pakistan’s aviation sector is struggling and does not contribute any significant amount to national exchequer, the FBR has expressed its reservations.

While it has proposed tax breaks, the policy has made it harder for financially weak businessmen to enter. Paid-up capital for the airlines has been raised to Rs500 million from the current Rs100 million.

Airlines will be allowed to operate aircraft on wet lease for 180 days, an increase from current limit of three months.

But new airlines will be required to have at least five jets before starting operations. Right now CAA allows airlines to operate with a minimum of three aircraft.

Under the new policy, airlines won’t be allowed to induct planes, which are over 12 years old.

A new structure, supervised by Chief Operating Officers, will be introduced at important airports. All agencies like customs, Anti-Narcotics Force, Airport Security Force and Immigration will report to the COOs.

Published in The Express Tribune, December 2^nd, 2014.

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