Tax Relief

Authorities rejects tax relief plan


The government has rejected a plan to give the new authorities a five-year tax break to deal with airport and air transport issues as part of the outsourcing of the country’s major airports.

The government plans to separate the Pakistani Civil Aviation Authority (PCAA) through the establishment of two separate agencies, namely the Pakistani Civil Aviation Authority (PCARA) and the Pakistani Airport Authority (PAA).

The Aviation Division had submitted a plan to the cabinet to grant tax exemptions for two new agencies for five years. However, the Federal Finance Authority (FBR) had spoken out against this tax relief.

The Aviation Division told Cabinet in a recent meeting that it had previously ratified two bills, namely the Pakistan Civil Aviation Authority Act 2021 and the Pakistan Airports Authority Act 2021, based on recommendations from the Cabinet Committee on the Elimination of Legal Cases (CCLC).

However, it was subsequently ordered that the two bills be treated as ordinances.

When examining the two draft ordinances, the Law and Justice Division advised the Aviation Division to generally obtain the approval of the Federal Cabinet within the meaning of Rule 16 (1) (a) in conjunction with Rule 27, Rules of Procedure, 1973.

Since the content of the two draft ordinances had already been clarified by the CCLC in the form of draft laws, an application was made to the Prime Minister for an exemption from submitting the draft ordinances again to the CCLC.

It was informed that necessary consultations had taken place with the relevant departments and that their comments / opinions were attached to the summary.

The two main comments were those of the Department of Defense / Pakistan Air Force (PAF) for adding new words to the end of Section 1 (3) of the Pakistan Airport Authority Ordinance (PAAO), 2021, for further elaboration / clarity and that the FBR opposed tax exemptions (Section 36 of the Pakistani Civil Aviation Authority (PCAAO), 2021, and Section 45 of the PA 2021).

The Aviation Division / PCAA approved the existing provisions already approved by the CCLC / Cabinet.

Two prepositions based on different points of view of the relevant departments that required a determination of the Cabinet were; whether or not to add the words in either Section 1 (3) of Independent or Shared User Capacity after the words “Defense Forces in Pakistan Airports Authority Ordinance (PAAO), 2021”, whether or not to keep two sections (Section 36 in PAAO, 2021 and Section 45 in the Pakistan Civil Aviation Authority Ordinance (PCAAO), 2021), which gives tax exemptions to the new authorities for five years.

The aviation department had requested a decision on these two clauses as well as the general approval of the federal cabinet for the promulgation of the two ordinances.

The Cabinet has examined the executive summary submitted by the Aviation Department and rejected these two proposals. However, it has approved the proposal to promulgate the Ordinance of the Pakistani Civil Aviation Authority 2021 and the Ordinance of the Pakistani Airport Authority 2021 of the Executive Summary.

Previously, in August 2020, the aviation department had informed the cabinet about the outsourcing of the country’s major airports. It had announced that under the restructuring plan, the Pakistani Civil Aviation Regulatory Authority (PCARA) would be entrusted with regulatory functions, while the Pakistani Airport Authority (PAA) would be responsible for the commercial and operational assets of the airports.

It had also announced that the incorporation of two authorities should take place synchronously to ensure a smooth transaction and minimal impact on operations.

As planned, it was announced that airports and air traffic control systems will be transferred by law from the existing Pakistani civil aviation authority to the newly established Pakistani airport authority. The airport carve-out process will be in two phases.

The property remains with the state and is only leased, air traffic control and flight operations also remain with the state.

The Aviation Division completed some of the tasks assigned by the Cabinet on time, while two bills were prepared and approved by the CCLC.

The authorities concerned continue to work on proposed organizational charts, separate plans for staffing, budget allocation and asset allocation for both units.

Posted in The Express Tribune, July 25, 2021.

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