The government has approved in principle a major overhaul of Pakistan’s tax administration, introducing a centralized digital operating model under which audits and assessments will be handled by faceless wings in Islamabad to reduce official discretion and direct contact between taxpayers and tax officials.
Prime Minister Shehbaz Sharif approved Pakistan’s New Tax Operating Model on Thursday and praised the officials who developed the reform plan. The model is set to be rolled out in three phases starting from October this year.
Officials said the new system is modeled on faceless and centralized tax structures used in countries including the United Kingdom, Australia, the Netherlands, Singapore, and India. The aim is to digitize tax administration, curb corruption, and eliminate physical interaction between taxpayers and tax authorities.
The reforms were driven by systemic leakages and widespread under-reporting identified by Pakistan Revenue Automation Limited (PRAL). According to official data, 8,697 individuals holding a combined Rs. 750 billion in bank deposits declared zero income in their tax returns.
Similar patterns were also found in other sectors. In the financial sector, 98.9 percent of high-deposit individuals were found to have materially under-reported their bank flows. In real estate, around 80 percent of top property buyers, despite maintaining active filer status, were found to have systematically under-declared transaction values to reduce tax liability.
At present, a single officer in a Regional Tax Office, Large Taxpayers Office, or Corporate Tax Office handles the entire tax cycle, including identification, notices, assessment, and recovery. Officials said this concentration of authority has created room for under-assessment, compromised recoveries, harassment, and misuse of discretionary powers.
To address these issues, the new framework will split Inland Revenue operations into three separate wings with distinct mandates, statutory powers, and non-overlapping responsibilities. The new structure will apply across income tax, sales tax, and federal excise duty.
Under the proposed system, the National Faceless Audit Wing (NFAW) will be established in Islamabad and operate from an undisclosed location. This fully digital and anonymous wing will carry out risk-based audits and monitor withholding and advance taxes through a Central Data Hub. Cases will be assigned through an algorithm-based system, and the wing will not have powers to issue tax demands or recover dues. Taxpayers will not be allowed to visit the NFAW or submit documents manually.
The National Assessment Wing (NAW), also based in Islamabad, will handle quasi-judicial functions. It will issue assessment orders, show-cause notices, process zero-rating refunds, and deal with exemptions, but will have no authority over audits or field enforcement. Hearings will be conducted online, while dedicated hearing rooms will be set up at tax offices across the country.
The third component of the model, the Field Operation Wing, will serve as the enforcement arm of the system. It will be responsible for revenue recovery, prosecution, taxpayer registration, field verification, and tax-base expansion. However, it will not have the authority to assess cases, adjudicate disputes, or alter tax demands. Its role will focus on verification, facilitation, and registration.
For the first two wings, the government plans to appoint around 200 officers on merit, offering market-based salaries and enhanced surveillance to strengthen transparency, accountability, and credibility.
Officials say the model is intended to tighten the net around tax evaders while reducing the compliance burden for honest taxpayers. Since all interactions will be digitally logged through an online portal, the new system is expected to end officer-dependent compliance and significantly reduce direct contact with tax officials.
To simplify return filing, taxpayers will be provided pre-populated returns powered by the Central Data Hub. These returns will automatically pull salary, banking, property, and vehicle data, reducing filing time from hours to minutes.
A single integrated taxpayer account will also be introduced to consolidate income tax, sales tax, and federal excise duty obligations, credits, and refunds into one unified IRIS interface.
The updated system will also include time-bound processing and auto-escalation mechanisms to give taxpayers more certainty over pending liabilities and tax matters. The FBR will retain the authority to gradually move tax appeals into a faceless format in later phases of the reform.
