Prime Minister Shehbaz Sharif on Thursday approved, in principle, Pakistan’s New Tax Operating Model, with an aim for a three-phase rollout beginning in October.
Audits and assessments under the new policy, which introduces a centralized digital tax operating model, would be handled by “faceless” wings in Islamabad. This aims to reduce official discretion and direct contact between tax officials and taxpayers.
According to officials, the model is similar to systems in place in the U.K., Australia, the Netherlands, Singapore and India. It would seeks to eliminate physical contact between tax authorities and taxpayers to prevent corruption.
Local media has reported the new model stems from systemic leakages and widespread under-reporting detected by Pakistan Revenue Automation Limited (PRAL) and would not just curb collusion or corruption, but also improve weak enforcement. Its introduction follows the Federal Board of Revenue (FBR) discovering under-reporting across various sectors, including finance and real estate.
Under the existing model, a single tax official posted at a Tax Office handles the entire tax cycle, including identification and notice issuance to assessment and recovery. This concentration of duties grants immense discretionary powers, enabling taxpayer harassment, under-assessment and compromised recoveries.
The new model seeks to correct this by introducing separate audit and assessment wings, operating virtually and facelessly from a centralized hub in Islamabad. It seeks to restructure Inland Revenue operations into three functionally separate wings, each operating with a defined mandate, distinct statutory powers and distinct responsibilities.
Under the New Tax Operating Model, a National Faceless Audit Wing (NFAW) would be established in Islamabad and operate from an undisclosed location. The fully-digital and autonomous wing would conduct risk-based audits and continuous monitoring of withholding and advance taxes through a Central Data Hub. It would have no powers to issue demands or execute recoveries and no taxpayer would be permitted to visit it or submit manual documents.
The National Assessment Wing (NAW), meanwhile, would handle quasi-judicial functions, processing assessment orders, show-cause notices, zero-rating refund approvals and exemptions. However, it would have no mandate for audits or field enforcement.
The Field Operation Wing would serve as the enforcement arm of the system, assuming the mandate for revenue recovery, prosecution, taxpayer registration, field verification and expansion of the tax base. Its mandate would not extend to assessing, adjudicating or modifying tax demands.
Under the new model, field officers would focus on data verification, assigned information, taxpayer facilitation and registration.
According to the government’s plans, the government would post 200 officers to NFAW and NAW, with market-based salaries and enhanced surveillance to ensure credibility, transparency and accountability.
The new model also seeks to simplify filing by providing taxpayers with pre-populated returns powered by the Central Data Hub, which would automatically pull salary, banking, property and vehicle data to reduce filing time from hours to minutes.
A single integrated taxpayer account would consolidate all income tax, sales tax and federal excise duty obligations, credits and refunds into a unified IRIS view. The updated system would also introduce predictable, time-bound processing with auto-escalation features to give taxpayers certainty on contingent liabilities.
The FBR would retain the authority to independently transition tax appeals into a faceless, phased format.