The Federal Board of Revenue (FBR) chairman announced on Wednesday that a new faceless tax system would be launched in October to protect citizens from harassment by tax collectors. He admitted that information sent to tax field offices was often used as a weapon against taxpayers.
New Tax Model to End Exploitation
In a briefing to the National Assembly Standing Committee on Finance, FBR Chairman Rashid Mahmood Langrial stated that a barrier must be created between taxpayers and taxmen to stop exploitation. The government proposed the new tax model in the budget to conceal the identity of tax collectors from taxpayers, though in some cases collectors can still see taxpayer details. Former Finance Minister Syed Naveed Qamar chaired the meeting.
Langrial revealed that 8,697 individuals had deposits of Rs750 billion but reported zero income. "The existing tax model either allows such information to be used for harassment or is simply ignored. The new operating model is being introduced to protect taxpayers," he said. He added that officers equipped with rich information were manipulating it for personal gain. "Frequent physical taxpayer-officer interactions despite available digital systems create opportunities for collusion and rent-seeking."
Finance Minister Muhammad Aurangzeb noted that the new model is based on other countries' experiences and will be implemented in phases to minimize human interaction.
Focus on High-Potential Taxpayers
Since becoming chairman in 2024, Langrial said he would focus on only 5% of taxpayers through better enforcement, who have the potential to pay Rs1.2 trillion in income tax. The FBR presentation highlighted that a 1% increase in corruption index leads to a 4.57% decline in the tax-to-GDP ratio, and Pakistan ranks lowest in the region with a Political Risk Services score of 52 out of 100.
Faceless processing will be driven by system-based risk identification, with flagged cases handled by two separate audit and assessment wings. Under the new system, a red flag will be raised to the National Assessment wing, which randomly assigns the case to an officer. The quality control wing then checks the assessment report. Only worth pursuing matters go to the audit wing, and taxpayers will have an e-hearing option in a faceless manner. The pilot project is expected to start in October, with full implementation in three years.
Concerns and Clarifications
MNA Jawed Hanif Khan expressed that 95% of people cannot understand such a complex system, urging user-friendliness. Langrial informed the committee that 98.9% of high-deposit individuals underreported their bank flows, and 80% of top property purchasers materially under-declared their assets despite being filers.
MNA Hina Rabbani Khar remarked that while the new operating model seems well-thought-out, past initiatives have not yielded desired results. Langrial explained that discretionary powers and limited specialization have led to weak case quality, and combining audit, assessment, enforcement, and recovery under one officer has resulted in poor outcomes. The new system is built around variances in expenditures, sales, and means, said Hamid Ateeq Sarwar, Member Strategic Transformation.
According to the FBR briefing, the system will detect under-declaration across property, vehicle, and banking data using a rules-based third-party compliance management system (TCMS). It will flag filers and non-filers to clear their tax position before property and vehicle transactions proceed. The model will also use sales tax compliance to match digital invoices with monthly returns, detecting ghost buyers, under-reporters, and disappearing sellers. Inland Revenue operations will be structurally bifurcated into three exclusive wings with distinct mandates and non-overlapping jurisdiction.
Committee members expressed concerns that the new system might again target compliant taxpayers like salaried persons and the corporate sector. However, Langrial assured that quality controls are deployed at multiple stages to prevent wrongdoing. Minister of State for Finance Bilal Azhar Kayani briefed the committee on the fixed tax scheme for traders, clarifying it is not an amnesty. In case of abnormal discrepancies, the government can audit in consultation with trading community representatives. Compliance risk management triggers will also apply to traders, leading to audits and tax demands, added Hamid Ateeq Sarwar.
