With updated digital tool, Pakistan aims to spur tax filing

Pakistan’s Federal Board of Revenue (FBR) will roll out an updated digital tax filing tool to simplify the process and increase the number of tax filers.

Tax returns are crucial for documenting the economy and accurately assessing the wealth of individuals. However, Pakistan has struggled to increase the number of filers, with only around 5-8 million of its over 240 million population filing returns.

During the last fiscal year, only 7.6 million returns were filed. This year, the number stood around 5 million by October 15, forcing the government to extend the deadline for filing the returns for a second time.

Over the years, the authorities have tried multiple methods, including innovation and coercion, to stimulate tax filings, but the progress remained elusive due to lax enforcement mechanisms.

This year, the FBR introduced simplified tax returns for salaried individuals to help them file the returns easily.

The FBR has now planned the rollout of IRIS 3.0, a next-generation digital tax platform with pre-filled data to automate the filing process.

The announcement came during a high-level meeting hosted by the World Bank in Washington, D.C., where Pakistan’s ongoing tax system transformation was presented as a global case study in public sector reform.

Finance Minister Muhammad Aurangzeb led the delegation, which also included FBR Chairman Rashid Mahmood Langrial, the secretaries of Finance and Economic Affairs, and other senior officials.

Speaking at the event, Aurangzeb emphasized that Pakistan’s tax reform efforts are part of a homegrown, institutional transformation plan overseen directly by the prime minister.

The plan, he said, focuses on reforms in people, processes, and technology to strengthen revenue administration and promote long-term macroeconomic stability.

“These reforms are already delivering early wins,” Aurangzeb said, citing visible improvements in revenue collection and broader economic indicators. “We are laying the foundation for sustainable economic growth in Pakistan.”

FBR Chairman Langrial shared that Pakistan’s tax-to-GDP ratio increased from 8.83% in fiscal year 2023–24 to 10.33% in FY 2024–25 — the largest single-year gain in more than 20 years. He attributed the improvement to a transparent, data-driven strategy focused on compliance and operational efficiency.

According to officials, the reform process involved feedback from field officers across the country. The initiative differs from past reform efforts due to “full political backing and alignment across policy, governance, and technology,” they said.

Active Taxpayers List

Separately, the FBR is likely to publish the Active Taxpayers List (ATL) for the tax year 2025 on November 1, following an extension in the income tax return filing deadline from October 15 to October 31.

“The updated ATL for 2025 will be published on November 1, immediately after the extended filing period closes,” said officials.

The ATL, which included the names of individuals who filed their returns for the ongoing tax year, is a critical tool in Pakistan’s tax system. Taxpayers included on the list are eligible for lower withholding tax rates compared to non-filers, incentivizing timely and accurate tax compliance.

Historically, the ATL was released annually on March 1, based on returns filed by the end of February.

Under new policy guidelines, the list is now updated shortly after the filing deadline, improving timeliness and aligning it with the actual tax calendar.

FBR officials say the shift is part of a broader push toward digital transparency, real-time updates, and improved taxpayer facilitation across the country.