Unable to run itself: FBR unfreezes PIA accounts after partial tax payment
Airline deposits Rs85m against outstanding FED of Rs3.5b collected from passengers.
“Freezing of bank accounts of PIA is not something new as the airline management always drags its feet after making promises to deposit due taxes,” says FBR Chairman. DESIGN: ESSA MALIK
ISLAMABAD:
Tax authorities, after blocking bank accounts of Pakistan International Airlines for a few hours on Tuesday over delay in depositing taxes, unfroze the accounts later in a bid to avoid disruption of flights, but the resolution of the dispute was far from over.
The FBR had frozen almost half a dozen bank accounts of the national flag carrier after PIA defaulted on Rs3.5 billion tax payments. The drama ended when PIA deposited Rs85 million and pleaded that the freezing of accounts had started affecting the airline’s operations, said a senior official of the Large Taxpayer Unit Karachi while talking to The Express Tribune.
PIA has assured the FBR that it will clear the outstanding amount after receiving cash from the finance ministry.
Earlier this month, the FBR had given a final warning to PIA and on Tuesday it froze all declared accounts of the air carrier.
“Freezing of bank accounts of PIA is not something new as the airline management always drags its feet after making promises to deposit due taxes,” said FBR Chairman Ali Arshad Hakeem while talking to The Express Tribune.
He said Rs3.5 billion was outstanding against the air carrier on account of federal excise duty. PIA collects the tax on air tickets sold to passengers, but often withholds most of the amount to bridge the yawning income and expenditure gap.
The national flag carrier is posting losses and its financial health has deteriorated instead of showing any improvement in the past five years. Last month, the Economic Coordination Committee of the cabinet approved a Rs100.5 billion bailout package, aimed at providing a temporary cushion to the airline. The FBR had not been collecting any income tax from PIA since the airline started suffering heavy losses.
PIA General Manager Public Relations Mashhood Tajwar confirmed that the management had received the account closure notice issued by the FBR, but insisted that no disruption in the flight schedule was noticed due to financial reasons. However, he said some flights were delayed because of other reasons.
“Operational and reconciliation issues caused the delay in timely payment of taxes,” Tajwar said.
This was the second time in less than three months when the FBR had to resort to the drastic step.
FBR spokesman Asrar Raouf said PIA’s accounts were also frozen in December last year, but were unblocked on the intervention of the finance ministry. The PIA management had promised to make payments, but did not honour its commitment.
Raouf said PIA often argued that the closure of accounts would disrupt its flight operations, but the tax machinery also was facing serious problems in revenue generation.
Against the annual target of Rs2.381 trillion, the FBR could collect only Rs1.162 trillion in first eight months of the current fiscal year, which is hardly 49% of the annual target.
Any shortfall in collection will widen the budget deficit besides adversely affecting the fiscal position of provinces due to less-than-promised release of their share in taxes under the seventh National Finance Commission (NFC) award.
An FBR official revealed the tax authorities were also considering freezing bank accounts of National Bank of Pakistan as the state-owned bank had defaulted on payment of roughly Rs1.75 billion. The amount was due on account of income against services provided for tax collection to the State Bank of Pakistan.
The official added NBP had taken the plea that the bank was acting as tax agent on behalf of the SBP and it was the responsibility of the central bank to discharge the liability.
Published in The Express Tribune, March 20th, 2013.
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Tax authorities, after blocking bank accounts of Pakistan International Airlines for a few hours on Tuesday over delay in depositing taxes, unfroze the accounts later in a bid to avoid disruption of flights, but the resolution of the dispute was far from over.
The FBR had frozen almost half a dozen bank accounts of the national flag carrier after PIA defaulted on Rs3.5 billion tax payments. The drama ended when PIA deposited Rs85 million and pleaded that the freezing of accounts had started affecting the airline’s operations, said a senior official of the Large Taxpayer Unit Karachi while talking to The Express Tribune.
PIA has assured the FBR that it will clear the outstanding amount after receiving cash from the finance ministry.
Earlier this month, the FBR had given a final warning to PIA and on Tuesday it froze all declared accounts of the air carrier.
“Freezing of bank accounts of PIA is not something new as the airline management always drags its feet after making promises to deposit due taxes,” said FBR Chairman Ali Arshad Hakeem while talking to The Express Tribune.
He said Rs3.5 billion was outstanding against the air carrier on account of federal excise duty. PIA collects the tax on air tickets sold to passengers, but often withholds most of the amount to bridge the yawning income and expenditure gap.
The national flag carrier is posting losses and its financial health has deteriorated instead of showing any improvement in the past five years. Last month, the Economic Coordination Committee of the cabinet approved a Rs100.5 billion bailout package, aimed at providing a temporary cushion to the airline. The FBR had not been collecting any income tax from PIA since the airline started suffering heavy losses.
PIA General Manager Public Relations Mashhood Tajwar confirmed that the management had received the account closure notice issued by the FBR, but insisted that no disruption in the flight schedule was noticed due to financial reasons. However, he said some flights were delayed because of other reasons.
“Operational and reconciliation issues caused the delay in timely payment of taxes,” Tajwar said.
This was the second time in less than three months when the FBR had to resort to the drastic step.
FBR spokesman Asrar Raouf said PIA’s accounts were also frozen in December last year, but were unblocked on the intervention of the finance ministry. The PIA management had promised to make payments, but did not honour its commitment.
Raouf said PIA often argued that the closure of accounts would disrupt its flight operations, but the tax machinery also was facing serious problems in revenue generation.
Against the annual target of Rs2.381 trillion, the FBR could collect only Rs1.162 trillion in first eight months of the current fiscal year, which is hardly 49% of the annual target.
Any shortfall in collection will widen the budget deficit besides adversely affecting the fiscal position of provinces due to less-than-promised release of their share in taxes under the seventh National Finance Commission (NFC) award.
An FBR official revealed the tax authorities were also considering freezing bank accounts of National Bank of Pakistan as the state-owned bank had defaulted on payment of roughly Rs1.75 billion. The amount was due on account of income against services provided for tax collection to the State Bank of Pakistan.
The official added NBP had taken the plea that the bank was acting as tax agent on behalf of the SBP and it was the responsibility of the central bank to discharge the liability.
Published in The Express Tribune, March 20th, 2013.
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