CAA looking to resolve Rs50 billion tax dispute through court
The Civil Aviation Authority (CAA) has escalated its tax dispute, valued at over Rs50 billion, to the Supreme Court of Pakistan. This move follows the Sindh High Court's recommendation to settle the dispute through the Alternate Dispute Resolution Committee (ADRC) or the federal cabinet.
The Supreme Court is scheduled to hear the CAA’s petition on Wednesday, just as the Federal Board of Revenue (FBR) awaits a crucial Rs9.5 billion advance tax payment from the CAA. This payment is needed to help the FBR meet its monthly revenue target of Rs1.2 trillion. As of Monday, the FBR had collected Rs368 billion, with Rs828 billion still required by month-end—an average of Rs60 billion per day.
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The CAA’s legal challenge underscores the growing friction between government departments. The FBR maintains that under the Income Tax Ordinance, the CAA is obligated to pay taxes, with an annual liability estimated between Rs50 billion and Rs60 billion. The CAA, however, contends that it should not be classified as a government entity for tax purposes.
Earlier this year, Parliament bifurcated the CAA into two new entities: the Pakistan Airports Authority (PAA) and the Pakistan Civil Aviation Authority (PCAA), in response to safety concerns raised by the European Union that led to a ban on Pakistan International Airlines flights. This restructuring aimed to address these concerns and exempt PAA and CAA from taxes—a move that conflicts with commitments made to the International Monetary Fund (IMF).
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The CAA claims tax exemption under Section 34 of the Civil Aviation Act, 2023, and Section 38 of the Pakistan Airports Authority Act, 2023. These sections explicitly state the tax exemption for these entities. However, the FBR disputes these exemptions, arguing they contravene the Income Tax Ordinance of 2001, which should govern taxation matters. The Ministry of Law has supported the CAA’s exemption claim, while the FBR and Ministry of Finance oppose it, citing that the Income Tax Ordinance is the only applicable tax law. Earlier this year, the FBR recovered approximately Rs29 billion from the CAA.
Source: Express Tribune