AOOA accuses foreign airlines of moving $2.4b out of Pakistan annually

Calls for five-year forensic tax audit of all airlines operating in Pakistan, restrictions on offshore ticket payments

KARACHI:

The Aircraft Owners and Operators Association (AOOA) accused foreign airlines operating in Pakistan of transferring between $2 billion and $2.4 billion abroad annually through ticket sales processed via offshore payment gateways, and called for a five-year forensic tax audit of all airlines operating in the country, it emerged on Thursday.

In a letter issued on Wednesday to Finance Minister Muhammad Aurangzeb, AOOA founder Imran Aslam Khan called for urgent government intervention, including a five-year forensic tax audit of all airlines operating in Pakistan and restrictions on ticket payments through foreign payment gateways.

"Billions of dollars in airline ticket revenues are quietly bypassing domestic financial channels — settled through offshore payment gateways and remaining largely invisible to local tax authorities," the letter stated.

The association estimated that annual airline ticket sales in Pakistan generated between $3.2 billion and $3.6 billion, but only a fraction of the revenue was being recorded through domestic financial channels.

It stated that Pakistan International Airlines (PIA) accounted for approximately $750 million of the revenue, while other domestic carriers generated a combined $65 million. Officially recorded foreign remittances stood between $80 million and $411 million.

"Combined, these documented streams with maximum amount remitted it totals to USD 1.226 billion — leaving an unaccounted gap of $2 to 2.4 billion every year," the letter said.

"Can financial authorities accurately track this missing capital?" the letter asked, adding: "Was this revenue processed through foreign payment gateways and retained offshore, bypassing Pakistan's banking system entirely even by the domestic airlines?"

It also questioned whether airlines operating in the country had fulfilled their statutory tax obligations and asked, "Why do even domestic airlines favour foreign payment gateways over local financial infrastructure?"

The association further argued that the estimated annual ticket revenue of $3.2 billion to $3.6 billion could be conservative, citing recent market analyses suggesting that Pakistan's broader flight market generated more than $6 billion annually.

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The letter said around 40 to 42 scheduled airlines operated through Pakistan's international and domestic airports, comprising four active domestic carriers and approximately 36 or 37 foreign airlines.

Foreign carriers alone accounted for nearly two-thirds of Pakistan's international ticket revenue, with leading international operators generating hundreds of millions of dollars each from routes serving the country, it added.

"Pakistan cannot afford to let billions of dollars in domestic economic activity vanish into offshore accounts while struggling to stabilise its foreign reserves," the letter stated.

The association proposed a four-point framework to address what it described as financial leakages and improve tax compliance in the aviation sector.

It called for all ticket sales for journeys originating in or destined for Pakistan to be processed exclusively through payment gateways regulated by the State Bank of Pakistan (SBP).

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It also proposed integrating Federal Board of Revenue (FBR) tax collection into the payment process, with the letter stating that ticket purchases should be routed through an FBR collection mechanism embedded directly within Pakistan's payment gateway, with "zero exemptions permitted".

The association further demanded that airlines submit verified passenger and sales manifests for every flight directly to the FBR through an automated electronic reporting system.

It also called on the government to appoint three leading international auditing firms to conduct separate forensic tax audits covering the previous five years.

"Any identified shortfalls must be recovered immediately to deter future evasion and establish an airtight tax regime," the letter stated.