Prime Minister Shehbaz Sharif has approved in principle a new centralized digital tax operating model aimed at reducing corruption, improving tax enforcement, and minimizing direct interaction between taxpayers and tax officials.
The reform, known as Pakistan’s New Tax Operating Model, will be implemented in three phases beginning in October. The system draws inspiration from digital tax frameworks already operating in countries such as United Kingdom, Australia, Netherlands, Singapore and India.
Officials say the new model will create a “faceless” tax administration where audits, assessments, and taxpayer interactions will take place through digital platforms rather than physical meetings.
Tax Data Reveals Massive Under-Reporting
The reform follows findings by Pakistan Revenue Automation Limited, which identified widespread under-reporting and significant leakages in the tax system.
According to official data, 8,697 individuals holding a combined Rs750 billion in bank deposits reported zero income in their tax returns. Authorities also found that nearly 98.9 percent of individuals with high bank deposits had materially under-reported their financial transactions.
The real estate sector showed similar trends. Around 80 percent of major property buyers who maintained active filer status were found to have systematically under-declared property transaction values to reduce their tax liabilities.
Three Separate Wings to Replace Existing Structure
Currently, a single tax officer often handles the entire tax process, including identification, notices, assessments, and recoveries. Officials believe this concentration of authority creates opportunities for taxpayer harassment, under-assessment, and compromised recoveries.
Under the new model, Inland Revenue operations will be divided into three independent wings with clearly defined responsibilities.
National Faceless Audit Wing
The National Faceless Audit Wing (NFAW) will operate from Islamabad through a fully digital and anonymous system.
This wing will conduct risk-based audits, monitor withholding and advance taxes, and use a Central Data Hub to analyze taxpayer information. Cases will be assigned through algorithms rather than manual selection.
Officials said taxpayers will not be allowed to visit the NFAW or submit documents physically. The wing will also have no authority to issue tax demands or recover revenue.
National Assessment Wing
The National Assessment Wing (NAW) will handle assessment orders, show-cause notices, refund approvals, and exemption matters.
The wing will function digitally and anonymously. Hearings will be conducted online, although dedicated hearing rooms will be available at tax offices nationwide. The NAW will not conduct audits or field enforcement activities.
Field Operation Wing
The third component, the Field Operation Wing, will focus on enforcement.
Its responsibilities will include revenue recovery, taxpayer registration, prosecution, field verification, and tax-base expansion. However, it will not have powers to assess taxes or alter tax demands.
Easier Filing and Greater Transparency
The government plans to appoint around 200 officers to the audit and assessment wings through a merit-based process. These officers will receive market-based salaries and operate under enhanced monitoring systems.
Officials believe the reforms will make tax compliance easier for honest taxpayers while tightening enforcement against tax evaders.
The new system will provide pre-populated tax returns using data from salaries, bank accounts, property records, and vehicle ownership. Authorities expect this feature to reduce tax filing time from hours to just minutes.
In addition, taxpayers will receive a single integrated account that combines income tax, sales tax, and federal excise obligations within one digital platform. The system will also introduce time-bound processing and automated escalation mechanisms to improve transparency and predictability.
The government expects the faceless tax model to reduce discretionary powers, eliminate direct contact between taxpayers and officials, and strengthen confidence in Pakistan’s tax administration system.