• Field officers to lose powers to issue notices, conduct audits
• Reforms aim to curb collusion, harassment
• Phased rollout planned from October

ISLAMABAD: The government has approved in principle a plan to introduce a centralised digital tax operating model, under which audits and assessments would be handled by “faceless” wings in Islamabad to reduce official discretion and direct contact between tax officials and taxpayers.

Prime Minister Shehbaz Sharif approved Pakistan’s New Tax Operating Model on Thursday and commended the tax officials who developed the plan. The model is scheduled for a three-phase rollout beginning in October this year.

The centralised and faceless tax model is similar to systems used in the UK, Australia, the Netherlands, Singapore and India. It is designed to eliminate physical contact between tax authorities and taxpayers to prevent corruption.

The reforms have been driven by systemic leakages and widespread under-reporting detected by Pakistan Revenue Automation Limited (PRAL). Officials said the reforms were not only about curbing collusion or corruption but also about improving weak enforcement.

FBR data revealed a major discrepancy in tax compliance: 8,697 individuals holding a combined Rs750 billion in bank deposits officially reported zero income in their tax returns.

The same pattern was found across the financial sector, where 98.9 per cent of high-deposit individuals were found to have materially under-reported their bank flows.

The real estate sector also showed similar evasion patterns. Despite maintaining active filer status, 80pc of top property purchasers were found to have systematically under-declared their transaction values to avoid their actual fiscal obligations.

At present, a single tax official within a Regional Tax Office, Large Taxpayers Office or Corporate Tax Office handles the entire tax cycle — from identification and notice issuance to assessment and recovery.

Officials said this concentration of duties granted immense discretionary powers, creating opportunities for taxpayer harassment, under-assessment and compromised recoveries.

To address this, the new model introduces separate audit and assessment wings, both operating virtually and facelessly from a centralised hub in Islamabad.

Under the proposed plan, Inland Revenue operations will be restructured into three functionally separate wings, each operating with a defined mandate, distinct statutory powers and non-overlapping responsibilities.

The new framework will apply uniformly across income tax, sales tax and federal excise duty.

The National Faceless Audit Wing (NFAW) will be established in Islamabad and operate from an undisclosed location.

This centralised, fully digital and anonymous wing will conduct risk-based audits and continuous monitoring of withholding and advance taxes through a Central Data Hub.

Case allocation will be algorithmic, and the wing will have no powers to issue demands or execute recoveries. It will be able to handle any taxpayer across the country. Taxpayers will not be allowed to visit the NFAW or submit manual documents.

The National Assessment Wing (NAW), also based in Islamabad, will handle quasi-judicial functions.

The anonymous and digital NAW will process assessment orders, show-cause notices, zero-rating refund approvals and exemptions, but will have no mandate for audits or field enforcement.

Hearings will be held online, while dedicated hearing rooms will be established at tax offices across the country.

The third wing, the Field Operation Wing, will serve as the enforcement arm of the system.

It will be responsible for revenue recovery, prosecution, taxpayer registration, field verification and expansion of the tax base, but will have no authority to assess, adjudicate or modify tax demands.

Field officers will now focus on data verification, assigned information, taxpayer facilitation and registration.

For the first two wings, the government will post around 200 officers strictly on merit, with market-based salaries and enhanced surveillance to ensure credibility, transparency and accountability.

The proposed reform is expected to tighten the net around tax evaders while reducing the compliance burden on honest taxpayers.

This will be achieved mainly by eliminating officer-dependent compliance, as all interactions will be digitally logged through an online portal, ending direct contact with tax officials.

To simplify filing, taxpayers will receive pre-populated returns powered by the Central Data Hub, which will automatically pull salary, banking, property and vehicle data to reduce filing time from hours to minutes.

A single integrated taxpayer account will consolidate all income tax, sales tax and federal excise duty obligations, credits and refunds into a unified IRIS view.

The updated system will also introduce predictable, time-bound processing with auto-escalation features to give taxpayers certainty on contingent liabilities.

The FBR will also retain the authority to independently transition tax appeals into a faceless, phased format.

Published in Dawn, June 5th, 2026