Govt shifts ground on air travel duty

ISLAMABAD: The prime minister came out all guns blazing on Saturday against a five-fold increase in federal excise duty (FED) on rich air travel passengers, something the federal cabinet — chaired by the premier himself — had earlier approved to add Rs3 billion to the kitty.

Confusion over the imposition of the duty on first, business and club class air travel prevailed on Saturday after some enraged passengers complained that airlines were charging Rs50,000 FED for the three classes.

The situation was only compounded by a lack of coordination between the chief executive of the government and his subordinate departments, including the Federal Board of Revenue (FBR), which said budgetary measures approved by parliament were already in place after the beginning of the new fiscal year from July 1.

However, Prime Minister Shehbaz Sharif personally took stern notice of the matter. A statement issued by Prime Minister Office (PMO) on Saturday said the premier had expressed displeasure over complaints from passengers that the amount was being collected from them at the airports.

Ordering an immediate suspension of the duty, he said the harassment of passengers at airports should be stopped. He also ordered an inquiry into the decision to levy the duty, as it was not approved by the federal cabinet.

The prime minister has directed the finance ministry to investigate the matter and take strict action against those responsible and refund the amount collected from passengers.

He also directed the authorities concerned to immediately implement his directives.

Interestingly, Finance Minister Miftah Ismail had declared in his budget speech on June 10 that the rich would be taxed in the fiscal year 2022-23 and an additional FED had been imposed on air travel for the club, business and first classes.

The government has since announced several other measures to extract money from the wealthy, including a 10 per cent “super tax” on 13 large industries to raise an additional Rs465bn in revenue, in an attempt to trim the budget deficit to revive the stalled International Monetary Fund loan programme.

Soon after the PM Office statement, the FBR also issued a clarification late on Saturday highlighting that the federal budget 2022-23 had been implemented from July 1.

The FBR statement, titled ‘Clarification on Rate of Federal Excise Duty on Air Travel’, said the duty was chargeable and collectable on the club-, business- and first-class international air tickets under the Federal Excise Act, 2005, at the time of issuing of the international air ticket.

The FBR has said that FED had been increased to Rs50,000 from Rs10,000, but it was not applicable to the club-, business- and first-class air tickets already issued before July 1.

The letter has been issued to all airlines and FBR offices.

Published in Dawn, July 3rd, 2022