ISLAMABAD: Pakistani lawmakers this week questioned a proposed 15-year sales tax exemption for the recently privatized Pakistan International Airlines (PIA), warning that granting the concession exclusively to the national carrier could create an uneven playing field in the country’s aviation sector.
The discussion, which emerged during a meeting of the National Assembly Standing Committee on Finance and Revenue, which is conducting a clause-by-clause review of the Finance Bill 2026, comes months after Pakistan completed the long-awaited privatization of PIA, selling a 75 percent stake in the loss-making airline for Rs135 billion ($482 million) to a consortium led by Arif Habib Corporation. The sale marked one of the country’s most significant privatization transactions in years and formed part of broader efforts to reduce the burden of state-owned enterprises on public finances and attract private investment.
The privatization of PIA has been one of Pakistan’s most closely watched economic reforms, with successive governments struggling to sell loss-making state-owned enterprises that have drained public finances. Islamabad has been under pressure to reduce losses in public companies as part of broader economic reforms linked to a $7 billion International Monetary Fund bailout program.
“The Chairman observed that tax policy should remain sector-neutral and should not create market distortions or confer undue competitive advantage on any single entity,” the National Assembly Standing Committee on Finance and Revenue said in a statement after reviewing the meeting.
The exemption under discussion would allow PIA to import or lease aircraft and related parts without paying the standard 18 percent sales tax for 15 years. Government officials told lawmakers the concession formed part of the package negotiated with investors during the privatization process and was intended to support the airline’s fleet expansion and long-term viability.
According to the statement, members expressed “serious concern” that granting a tax concession exclusively to one airline would create an uneven competitive environment for the aviation sector.
The Secretary Aviation told the committee the concession formed part of the Share Purchase Agreement (SPA) negotiated with prospective investors during the privatization process. The committee subsequently recommended that the government reconsider the broader sectoral implications of the proposal and explore extending similar concessions across the aviation sector to ensure a level playing field.
PIA has long been one of Pakistan’s most troubled state-owned enterprises, accumulating heavy losses over the years due to high operating costs, debt obligations, management challenges and intense competition from private carriers. Successive governments attempted to privatize the airline but struggled to attract investors willing to assume its financial liabilities.
The eventual sale of a majority stake was viewed as a key milestone in Pakistan’s economic reform agenda, particularly as the government seeks to reduce losses at state-owned enterprises and improve fiscal sustainability.
