Federal Board of Revenue (FBR) Chairman Shafqat Mahmood Langrial has warned taxpayers that they could face unexpected and potentially costly consequences this year as the tax authority expands the use of artificial intelligence (AI), third-party data and automated systems to identify discrepancies in tax returns.
Speaking about the changing tax environment, Langrial said the traditional advantage tax consultants gained from understanding the FBR’s internal working methods is rapidly disappearing.
He explained that consultants previously assessed not only a client’s actual tax liability but also the likelihood of the FBR detecting any underreporting.
According to Langrial, limited resources meant the tax authority could not thoroughly examine every return. This allowed some taxpayers to weigh the potential benefit of reporting less income against the perceived risk of being caught.
That calculation is becoming increasingly difficult, he said, as the FBR’s ability to analyze returns has improved substantially.
Langrial said the FBR now has the capacity to examine every return and cross-check declarations against information obtained from third parties.
He said the FBR already possessed considerable information within its systems, but previously lacked the analytical capability to effectively identify discrepancies.
The introduction of new technology has effectively provided the FBR with the “eyes” needed to analyze that data, he added.
AI Changing the Tax Enforcement Landscape
Langrial said artificial intelligence is now contributing to a fundamental change in how the FBR identifies potential irregularities.
The authority has also introduced other reforms and strengthened its management capabilities, further reducing the effectiveness of practices that previously relied on gaps in enforcement.
He highlighted the FBR’s move toward a faceless tax administration system as another major change.
Under the evolving system, taxpayers will have fewer opportunities to rely on personal connections with individual tax officials to resolve issues or influence the outcome of tax-related matters.
Warning to Tax Consultants
The FBR chairman urged taxpayers to speak openly with their tax consultants before filing their returns.
He advised consultants to use their expertise in tax law to help clients meet their obligations but avoid relying on past experience of navigating weaknesses in the FBR’s enforcement mechanism.
Langrial said continuing to use outdated approaches could result in unexpected problems for taxpayers.
He particularly urged taxpayers to review their returns before the September 30 deadline, while noting that some cases may be dealt with later in the year.
The FBR chairman said taxpayers should not take unnecessary risks when filing their returns because the authority now has significantly greater capacity to identify inconsistencies.
He stressed that the combination of AI, third-party information and improved data analysis has changed the probability of tax misreporting being detected.
The message from the FBR, he said, is clear: the old assumption that discrepancies may go unnoticed is no longer reliable.
