The Federal Board of Revenue (FBR) has stepped up the use of artificial intelligence (AI), third-party data and a faceless assessment system to identify tax discrepancies and curb income underreporting.
FBR Chairman Shafqat Mahmood Langrial has warned taxpayers and tax consultants that traditional methods of exploiting gaps in the tax system are becoming increasingly ineffective as the regulator strengthens its ability to analyze tax returns.
Langrial said tax consultants previously considered both a taxpayer’s actual tax liability and the likelihood that the FBR would detect any misreporting when advising clients.
According to the FBR chairman, the tax authority previously had limited capacity to examine every return. Consultants could therefore assess the chances of detection before advising taxpayers on their reported income and tax liability.
He gave an example of a taxpayer with an actual tax liability of Rs. 50 potentially being advised to report a much lower amount because the probability of detection was considered low.
However, Langrial said this situation has changed significantly with the introduction of AI and improvements in the FBR’s ability to analyze tax returns.
The FBR now has the capacity to examine individual returns and use third-party data to identify inconsistencies and potential discrepancies.
Langrial said the FBR already had substantial data within its systems but previously lacked the analytical capacity to use it effectively.
The introduction of AI-based tools is enabling the tax authority to process and analyze taxpayer information more efficiently.
Third-party information can also help the FBR compare declared income with other available financial data, increasing the likelihood of identifying discrepancies.
This development could make it significantly more difficult for taxpayers to rely on underreporting strategies that were previously considered less likely to be detected.
The FBR is also strengthening its faceless tax assessment system to reduce opportunities for personal influence during the assessment process.
Langrial said taxpayers could no longer expect personal relationships with FBR officials or their associates to help resolve issues arising from tax assessments.
The move toward faceless operations is designed to make the tax system more technology-driven while reducing direct interaction between taxpayers and tax officials.
Langrial urged taxpayers to have a detailed discussion with their tax consultants before filing their returns.
He advised consultants to use their knowledge of tax law to help clients comply with their tax obligations rather than relying on past experience of exploiting weaknesses in FBR enforcement.
The FBR chairman warned that taxpayers could face unexpected consequences if they continue using traditional methods to reduce their reported tax liabilities.
Langrial also highlighted the September 30 tax return deadline, urging taxpayers to ensure their filings are accurate before submission.
He noted that some taxpayers may have filing arrangements extending into December.
The FBR chief clarified that the objective of the new system is not to create unnecessary difficulties for taxpayers but to ensure that the technology-driven approach is properly understood.
The FBR’s enhanced analytical capabilities, AI tools, third-party information and move toward faceless assessments are changing the risks associated with tax misreporting.
With greater access to data and improved tools for analyzing tax returns, the FBR is seeking to strengthen compliance and make it harder for taxpayers to exploit gaps in the tax enforcement system.
The FBR’s expanded use of AI and third-party data marks a significant shift in Pakistan’s tax administration. Taxpayers and consultants are being encouraged to focus on accurate tax filings and compliance as technology-driven assessments reduce the effectiveness of traditional methods of underreporting income.
