Islamabad: The federal government has approved in principle a new centralized digital tax operating model that will introduce faceless audits and assessments, marking one of the most significant reforms in Pakistan’s tax administration system.
Prime Minister Shehbaz Sharif approved the New Tax Operating Model on Thursday and praised the officials responsible for developing the reform framework. The new system will be implemented in three phases beginning in October this year.
The initiative aims to reduce official discretion, eliminate unnecessary contact between taxpayers and tax officers, and curb corruption by shifting key tax functions to fully digital platforms.
Inspired by Global Best Practices
According to officials, the model is based on centralized and faceless tax systems successfully implemented in countries including the United Kingdom, Australia, the Netherlands, Singapore, and India.
The reform seeks to address long-standing concerns about corruption, collusion, taxpayer harassment, and weak enforcement linked to direct interactions between taxpayers and tax officials.
Large-Scale Tax Compliance Gaps Identified
The move follows extensive data analysis conducted by Pakistan Revenue Automation Limited (PRAL), which revealed significant under-reporting across multiple sectors.
Officials disclosed that 8,697 individuals holding bank deposits worth approximately Rs750 billion declared zero income in their tax returns.
Similarly, nearly 99 percent of high-deposit account holders in the financial sector were found to have substantially under-reported their banking transactions. In the real estate sector, around 80 percent of major property buyers were reportedly under-declaring transaction values despite maintaining active filer status.
New Three-Wing Structure
Currently, a single tax officer manages the entire tax cycle, including taxpayer identification, audits, assessments, and recoveries. Authorities believe this concentration of powers has contributed to under-assessment and inefficiencies.
To address these challenges, Inland Revenue operations will be divided into three independent wings with separate responsibilities.
National Faceless Audit Wing (NFAW)
The National Faceless Audit Wing will be established in Islamabad and will operate from a confidential location. It will conduct risk-based audits using data from a Central Data Hub.
Cases will be assigned through automated systems, and taxpayers will not be allowed to physically visit the wing or submit paper documents. The wing will focus solely on audits and monitoring compliance without authority to issue tax demands or recover dues.
National Assessment Wing (NAW)
The National Assessment Wing will perform quasi-judicial functions, including issuing assessment orders, show-cause notices, approving refunds, and processing tax exemptions.
All hearings will be conducted digitally, although dedicated hearing facilities will remain available at tax offices nationwide. The wing will have no role in audits or enforcement activities.
Field Operation Wing
The Field Operation Wing will serve as the enforcement arm of the tax system. Its responsibilities will include revenue recovery, taxpayer registration, field verification, prosecution, and efforts to broaden the tax base.
However, field officers will not be authorized to assess cases, decide disputes, or alter tax liabilities.
Merit-Based Appointments and Enhanced Oversight
The government plans to recruit approximately 200 officers for the audit and assessment wings on merit-based criteria. These officers will receive market-competitive salaries and operate under enhanced monitoring systems aimed at improving transparency and accountability.
Simplified Tax Filing for Citizens
A major feature of the new system is the introduction of pre-populated tax returns generated through the Central Data Hub.
The platform will automatically retrieve information related to salaries, banking transactions, property ownership, and vehicle records, significantly reducing the time required to file returns.
In addition, taxpayers will be provided with a unified digital account that consolidates income tax, sales tax, and federal excise obligations, refunds, and credits into a single IRIS interface.
Faster Processing and Future Reforms
The new framework will also introduce time-bound processing mechanisms and automatic escalation procedures to provide taxpayers with greater certainty regarding pending matters and liabilities.
Officials said all taxpayer interactions will be digitally recorded, helping create a more transparent and efficient system while reducing opportunities for corruption.
The Federal Board of Revenue (FBR) is also expected to explore faceless tax appeals in future phases of the reform programme.
