Prime Minister Shehbaz Sharif has announced plans to digitize Pakistan’s tax collection agency, the Federal Board of Revenue (FBR), for which consultants would be hired by next month to facilitate the transformation.
During an address at a Tax Excellence Awards ceremony in Islamabad, held on March 26, PM Sharif emphasized the need for restructuring the FBR.
“The FBR will be totally restructured… Consultants will be hired next month for complete digitalization of the tax collection body,” he was quoted saying. “We will have to enhance the tax base,” he added.
In December, the FBR had highlighted a pressing issue, stating that the country had a “very narrow tax base” of just 5.2 million people out of a total population of 240 million. The agency had aimed to expand this base by adding 1.5 million new taxpayers in the current fiscal year.
Sharif further said that while the government had been compelled to enter the IMF program for economic stability, it would also focus on fostering growth, job creation, and tackling inflation.
Pakistan has been grappling with severe economic challenges and is currently implementing a $3 billion International Monetary Fund (IMF) program. This program helped the nation avoid a sovereign default last year and requires Pakistan to achieve a primary budget deficit target of Rs401 billion ($1.44 billion), equivalent to 0.4% of its GDP, before presenting the annual budget in June.
IMF calls for digitization of taxation
An official from the finance ministry revealed that during recent negotiations with an IMF team for the final review of the existing program, Pakistan had lagged in two areas: digitization of taxation and expanding the taxpayer base.
“The IMF wants us to continue the economic stabilization and reforms agenda until the negotiation of the new loan program,” the official stated.
Finance Minister Muhammad Aurangzeb, speaking at the same event, highlighted that the digitization of the FBR was crucial for ensuring transparency and boosting revenue collection.
He expressed confidence that this move would restore public trust and confidence in the tax collection body.
Earlier, in February, the Federal Cabinet had approved the proposal for a digital and technology-driven tax body using big data.
The tax reform project aimed for substantial growth, targeting a tax collection of Rs31.72 trillion by fiscal year 2027, a massive increase from Rs7.16 trillion in fiscal year 2024. The government also expected the tax contribution to GDP to surge to 20% by 2027, up from the current 8.5%.
Autonomous Data Access and Management Systems
To facilitate this transition to a data-driven tax administration, the government had proposed to establish a new autonomous body called the Autonomous Data Access and Management Systems (ADAMS) Agency, which would focus on efficient data management and will operate under strict data-sharing regulations. Additionally, the government planned to enact a National Documentation Law, making it compulsory for both public and private sector organizations to share data while adhering to stringent quality and security protocols.