Taxing times: CAA imposes new airport taxes for 2012

Airlines resist the move, say it will hurt aviation industry.

KARACHI: The Civil Aviation Authority (CAA) and the Sindh government will impose new taxes on the aviation industry at the start of the new year, sparking concern among air carriers, many of which did good business in 2011.

The CAA and the Sindh government have sent notices to airlines informing them about the upcoming levies.

The Civil Aviation Authority (CAA) has doubled the airport tax for international and domestic passengers with effect from January 1, 2012.  In specific terms, the tax for the economy class passengers has been increased from Rs500 to Rs1,000 per head whereas for the business class passengers the tax has been spiked from Rs1,000 to Rs2,000 per person. The CAA has also imposed Rs540 and Rs180 per person as Infrastructure Development Tax and Security Tax. However, it has not been decided whether the two taxes would be included in tickets or received from passengers in cash at airports.

The airlines are of the view that both these taxes will increase their cost of operations. Another concern of airlines is the levy of taxes on airport services in Sindh province through the Sindh Sales Tax on Services (Amendment) Ordinance 2011 issued by SBR.

Chairman Board of Investment (BoI) Saleem H Mandviwalla also wrote a letter to Federal Minister for Defence Chaudhry Ahmed Mukhtar on December 20, 2011 in which he pleaded the case of airlines.

When contacted, the spokesperson of CAA Pervez George said that ‘meetings between the stakeholders are under way’ and that this was all he had to say on this matter.

International Air Transport Association (IATA), on December 3, 2011, wrote a letter to DG CAA, Air Marshal (retd) Khalid Choudhry saying that such ‘revisions should not have been implemented without prior consultation with the airlines’.

CAA officials say that Pakistan is already three to four times cheaper than regional airports and that the new taxes on airlines will not even cover half of the annual rate of return on CAA’s equity.

Airline officials and travel agents believe that the taxes will divert air traffic to other provinces. “Pakistan is going through difficult times. Instead of welcoming new airlines we are levying new taxes which is not helpful for the industry’s growth,” said Travel Agents Association of Pakistan (TAAP) Chairman Muhammad Yahya Polani.

Replying to a query, Polani said that Nasair, a newly launched Saudi Arabian airline has already reduced its flights while Malaysian Airlines is considering ending its operations from Pakistan from January 12, 2011.

Published in The Express Tribune, December 31^st, 2011.