Pakistan turns to AI to catch tax evasion and under-invoicing

Pakistan is considering AI-based tax enforcement and digital monitoring in the budget 2026-27 as the government looks to shore up collection to bridge the chronic tax shortfall.

The proposals were discussed in a meeting chaired by Federal Minister Ahad Cheema on Tuesday. FBR officials presented reforms targeting underreporting, under-invoicing, tax evasion, and smuggling.

Pakistan's tax collection fell short of its target by PKR 683 billion during July to April FY26.

The government, which has repeatedly missed annual revenue targets, is now looking towards technology-driven enforcement to fix tax collection.

The proposals include AI-based systems to detect false data in tax returns. Digital monitoring mechanisms would strengthen oversight of underreporting.

Officials also discussed an e-auction system for confiscated customs goods to improve transparency.

Cheema said reforms will be designed to support economic growth. The government wants a tax system with minimal human interaction.

All participants agreed that automated, technology-driven solutions are the most constructive path forward.

Cheema directed the FBR to refine proposals and ensure they are practical. The government's goals include broadening the tax base and modernizing tax administration.

These reforms align with IMF program conditions requiring expanded compliance.