Federal Board of Revenue (FBR) has reportedly accused a cash-strapped national carrier Pakistan International Airlines (PIA) of not depositing current tax amount deducted on tickets, well-informed sources told Business Recorder. This was revealed at a recent meeting of Economic Coordination Committee (ECC) of the Cabinet when a proposal regarding GoP support of Rs 20 billion for PIA came under consideration. According to sources, Aviation Division stated that PIACL was going through a difficult period due to continuous losses and its severe cash flow crisis was hampering operations.
Cash flow situation was further deteriorating owing to major overhaul needs of a number of aircraft engines during 2018. The matter was discussed during a meeting on strategic business plan presented by PIACL before the Prime Minister on December 30, 2017, which included an additional guarantee of Rs.20 billion to cater to the engine repair and maintenance needs.
The sources said it was decided that PIA management would coordinate with the Finance Division to work out availability of an additional sovereign guarantee of restructuring. For capital expenditure, PIACL would borrow additional funds against its own assets and without GoP support. This would form part of the overall plan of PIA loss reduction during 2018 along with debt restructuring. PIA would be monitored by PIACL Board of Directors on a quarterly basis to ensure loss reduction and revival.
ECC in its meeting held on October 20, 2017 approved a limit of Rs 175.085 billion on the total GoP guarantees for PIA of which guarantee limit utilized was Rs.174.294 billion as on January 31, 2018
The Aviation Division further stated that to meet the expenditure of engine overhaul during the current year and as per business plan, PIACL has requested support of the Government towards an expenditure of Rs 20 billion; and requested the ECC to approve a Rs 20 billion additional guarantee. The guarantee limit would be enhanced from Rs 175.085 to Rs 195.085 billion. Finance Division endorsed the proposal with the conditions that it be ensured that the funds are strictly utilized for the proposed purpose; the expenditure be spread over the next 10 to 12 months; and the PIACL management be tasked to reduce expenditure by 10% to 20% during the current year.
During ensuing discussion, the Chairman, FBR, pointed out that besides arrears, PIACL was not depositing the current tax amount deducted on tickets during the month of April, 2018 despite repeated instructions.
The Minister for Law & Justice termed it a serious violation of law. He stated that the ECC may direct PIACL to deposit all due tax amount into the Government Treasury.
The CEO, PIACL stated that it had deposited current tax amount upto Mach, 2018. However, due to some financial constraints, tax amount collected from the travelers during the month of April, 2018 has not yet been deposited. He requested the ECC for some time to deposit tax amount.
Prime Minister Shahid Khaqan Abbasi observed that PIACL should have deposited at least current tax amount to the government treasury, in time. He further observed that the demand for Rs. 20 billion by the PIACL for overhauling of engines is quite a substantial amount. He termed it another loss to PIACL. He further stated that PIACL did not prepare the business plan even after a lapse of considerable time.
After a detailed discussion, the ECC approved GoP guarantee of Rs 20 billion to PIACL.
The ECC directed PIACL to deposit tax amount collected during the month of April, 2018 immediately and make necessary arrangement for depositing arrears of all tax amount into the Government Treasury. PIACL was also directed to prepare its Business Plan on priority. The ECC further directed the Finance Division and Aviation Division to monitor the utilization of funds, ensuring no diversion to other expenditures.
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