Pakistan to launch AI-driven faceless tax audit system, FBR tells lawmakers

Pakistan's tax authorities are preparing to launch a technology-driven, faceless audit system to reduce human intervention, curb tax evasion and limit the discretionary powers of tax officials, senior officials told a parliamentary committee Tuesday.

Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial told the National Assembly Standing Committee on Finance that tax officers would no longer be able to independently issue notices to taxpayers under the proposed framework.

How will the faceless tax audit system work?

Artificial intelligence will analyze data from multiple databases to flag suspicious transactions or anomalies in taxpayer records. Cases identified by the system will then be referred for audit. Field offices will handle tax collection and registration only, while enforcement and audit powers will be centralized within the FBR.

"The audit process will be faceless, and field officers will neither conduct inquiries nor alter the outcome of investigations," Langrial told lawmakers. Regional tax offices will continue offering taxpayer services even as audit and enforcement decisions move to the central system.

Why is Pakistan introducing AI-driven tax audits?

Finance Minister Muhammad Aurangzeb defended the initiative, saying it was designed to minimize human intervention and improve transparency in tax administration. He said the system will help prevent tax evasion and pointed to its similarity with banking-sector tools used to detect suspicious transactions under anti-money laundering and counterterrorism financing rules.

Officials say the approach mirrors a model already used elsewhere in Pakistan's tax system. Langrial noted that Pakistan Customs adopted a faceless system last year, and the new framework builds on that experience. Pakistan Revenue Automation Ltd. (PRAL) is supporting the broader digital transformation of tax administration, he added.

What data will the system use to flag taxpayers?

Langrial said the system will rely on lifestyle and income-related data drawn from multiple databases, including the National Database and Registration Authority (NADRA). It will flag only abnormal activity rather than scrutinizing all taxpayers equally. He said taxpayers who accurately declare their income and assets would not face difficulties under the new system.

What concerns have lawmakers raised about the system?

Committee member Javed Hanif warned the system could place excessive scrutiny on citizens and businesses and affect economic activity. Lawmakers questioned whether automated flagging could create compliance burdens for taxpayers operating within the law.

Langrial also told the committee that only about 7% of households in Pakistan have air conditioners installed, an example cited in the broader discussion on income and asset data.

Pakistan's tax administration operates under the Federal Board of Revenue, the country's main federal authority for revenue collection and enforcement.