KARACHI: The targets set for customs duty and other levies are not ‘chasable’ due to unwarranted ‘blanket tax exemptions’ to particular sectors, senior custom and Federal Board of Revenue officers conveyed to the government in different communications and meetings.

According to details, FBR officers were disturbed by a sharp decline in collection of customs duty, sales tax and income tax in comparison to figures/collected levies in corresponding period of Financial Year (FY) 2014-15. According to them, a blanket exemption to Aviation sector alone resulted in a negative trend of 87 per cent costing Rs44.71 million.

The government granted tax exemption on import of aircraft, spare parts and maintenance kits through the Finance Bill 2015-16.The step evinced immediate criticism as critics maintained that tax exemption on aircraft would benefit the rich as well as influential political class of the country who are now rampantly using planes to undertake visits to different parts of the country.

Under National Aviation Policy 2015, the federal government exempted the goods including aircraft, spare parts, maintenance kits, machinery, equipment & tools, machinery, equipment, operational tools, furniture & fixture and aviation simulators.

The FBR maintains that the government introduced these incentives to provide relief to the national flag carrier, which was going to import planes in future. It is in line with the national aviation policy to boost this sector.This exemption has been proposed with certain conditions under which it binds those who avail themselves of this facility shall certify that the imported goods/items are the company’s bona-fide requirement.

The second condition make its mandatory upon importer that all relevant information shall be provided online to Pakistan Customs Computerized System against a specific user ID and password obtained under section 155D of the Customs Act, 1969 (IV of 1969). The exemption shall be admissible on production of certificate by the Aviation Division, Government of Pakistan to the effect that the intending importer is operating in the country or intends to operate in the county in the airline sector. It was also decided that the list of imported items is duly approved by the Aviation Division, Government of Pakistan in line with Policy Framework approved by the Government of Pakistan.

Lastly, the Chief Executive or Head of the importing company shall furnish an undertaking to the customs authority at the time of import that the goods imported shall be used for the purpose as defined/notified by the Aviation Division, Government of Pakistan under the Aviation Policy.

According to the sources in FBR immediately after the blanket exemption is allowed, the taxable import value registered a fall of 94.37 per cent with a cumulative effect of Rs174.11 million. The same is true for the levy of income tax hence the total cumulative decrease in collection of all federal levies runs into billions of rupees and is yet to be calculated.

The private airlines are the substantial beneficiary with their imports surging to unprecedented quantity. Airlines like Air Blue owned by federal minister and a close associate of Prime Minister Nawaz Sharif is said to be a major beneficiary.

The aviation industry experts dismissed the government stance that exemption granted was aimed at improving the financial position of PIA as according to them PIA either obtains aircraft on lease or purchases them. PIA already has simulators etc for all types of aircraft in its use and hence another leg of arguments by the government in defense of the decision of exempting the aviation sectors becomes non-plausible, they said.

Likewise, the FBR officials making a pointed reference to exemption allowed to aviation sector conveyed to the Chairman FBR and government import trend after implementation of the Finance Act 2015 has drastically effected the duty and taxes collection owing to the reduction in the dutiable import value. It was also conveyed to the government that target set after increasing the previous year’s collection would not be realistic when a substantial amount from imports by aviation sector was not available.

It is pertinent to mention here that FBR over the previous few years done away with concessionary rates and under a gradual increase policy enhanced custom duty and other federal levies but the particular concession to a commercial sector like aviation has zeroed the entire efforts by FBR.