FBR mulls advance tax on international ticket of economy class

KARACHI: The Federal Board of Revenue (FBR) will put forward plans for a fixed advance tax on international airline ticket of economy class in the upcoming budget for the fiscal year 2017/18 to improve revenue collection, sources said on Saturday.

“The revenue body is likely to recommend a levy of Rs2,000 to Rs3,000 advance tax per economy class ticket for international travel,” a source said.

The source said the move is expected to raise substantial amount of tax revenue a year, starting next year.

The Federal Board of Revenue last year also tabled a similar proposal to bring air travelers of the economy class under the advance tax net, but the finance minister Ishaq Dar then refused to accept proposal.

The government is already charging Rs16,000/person tax on the first class international air ticket and Rs12,000 tax on air tickets of all other classes, excluding economy class.

“The inclusion of advance tax on economy class would result in substantial increase in revenue and help identify potential taxpayers,” the Federal Board of Revenue source said.

Under Section 236L of the Income Tax Ordinance, 2001, every airline, issuing ticket for journey originating from Pakistan is required to collect advance tax on the gross amount of international air tickets issued to passengers booking one-way or return, from Pakistan.

The advance tax; however, is adjustable against total liability of a taxpayer.

Pakistan is one of the world's fastest-growing
aviation markets, with
around 18 million domestic and international sold
annually and passenger numbers rising over 8 percent a year.

International Air Transport Association (ATA) in 2015 said that Pakistan domestic air travel would grow at least 9.5 percent per year, more than 2X faster than the world average annual growth rate
of 4.1 percent over the next 20.

Meanwhile, the Federal Board of Revenue may
propose changes to the existing immovable property
valuation in the Finance Bill 2017.

Officials said the revenue body is likely to propose an increase of 25 percent to the existing valuation tables to bring closer to the fair market values.

The revenue authority is also considering to propose 17 percent sales tax on kerosene after it received complaints from various quarters regarding mixing of kerosene with petrol and diesel.  

Currently, there is no sales tax on kerosene and profiteers are mixing kerosene with other petroleum products attracting higher sales tax rates, the sources added.