Islamabad, Sep8: Potential local purchasers of Pakistan International Airlines (PIA) have requested total exemption from taxes pertaining to aviation, fuel, and aircraft leasing, as well as the protection that is presently granted to international investors under a parliamentary act.
Some of the selected bidders made demands to the government during the ongoing PIA due diligence process, according to sources close to the Privatization Commission who spoke with The Express Tribune. They said that the demands and their rejection of performance standards were making it more difficult to move the privatization deal through without incident.
The bidders’ requests go counter to an agreement made with the International Monetary Fund (IMF) that prohibits Islamabad from providing any kind of preferential treatment to any group of investors. For the privatization of PIA, the government has shortlisted the following companies: Airblue, Arif Habib Corporation, Blue World City, Fly Jinnah, Pak Ethanol (Pvt) Consortium, and YB Holdings Consortium. According to sources, the pre-qualified bidders requested that, in accordance with Section 2 of the Foreign Investment Promotion and Protection Act 2022, the federal government notify them as investors.
The investment is given a unique legal standing and insulation from the application of certain taxes by the legislation. Nevertheless, none of the six selected parties are foreign, and no foreign bidder has expressed interest in purchasing PIA.
When asked if the shortlisted parties requested protection under the Foreign Investment Promotion and Protection Act, Privatization Commission Secretary Usman Bajwa did not reply. To guarantee openness in the privatization process, the Privatization Commission has received explicit directives from Prime Minister Shehbaz Sharif.
The bidders also demanded that the government change the tax code to remove the sales tax from aircraft purchases and leases.Although the bidders have declined to accept any targets about adding a specific number of aircraft, the buyer will still need to grow the current fleet in order to make the airline commercially viable.
The prospective purchasers have requested guarantees that PIA and its associated businesses won’t face additional taxes from the government for a minimum of ten years. Furthermore, the Foreign Investment Protection Act ought to include a universal tax exemption.
According to sources, the bidders declined to assume liability for the Rs. 56 billion in overdue tax payments to the FBR. 62 billion in outstanding tax claims. As of the end of April 2024, there were Rs 30 billion in contingent liabilities and Rs 26 billion in delayed payments to the FBR.
Before the takeover date, several investors claimed that the government ought to pay for and resolve all tax obligations, fines, charges, and claims. Some bidders made an additional demand, stating that prior to privatization, there should be broad exemption from any potential negative outcome of any tax case or liability relating to the federal or provincial taxes.
