The government has approved in principle a plan to introduce a centralized digital tax operating model under which audits and assessments will be conducted by faceless wings in Islamabad, in a major move aimed at reducing official discretion, curbing corruption, and limiting direct contact between taxpayers and tax officials.
Prime Minister Shehbaz Sharif approved Pakistan’s New Tax Operating Model on Thursday and praised the officials who developed the reform plan. The model will be rolled out in three phases starting from October this year.
Officials said the new system is inspired by faceless and centralized tax structures used in countries such as the UK, Australia, the Netherlands, Singapore, and India. The core objective is to digitize the tax administration process and eliminate physical interaction between taxpayers and tax authorities, which has long been seen as a source of corruption, collusion, harassment, and weak enforcement.
The reforms have been driven by systemic leakages and large-scale under-reporting identified by Pakistan Revenue Automation Limited (PRAL). According to official data, 8,697 individuals holding a combined Rs. 750 billion in bank deposits declared zero income in their tax returns.
Tax compliance gaps were also found across other sectors. In the financial sector, 98.9 percent of high-deposit individuals were found to have materially under-reported their bank flows. In real estate, around 80 percent of top property purchasers, despite maintaining active filer status, were found to have systematically under-declared transaction values to reduce their tax liabilities.
At present, a single tax officer in a Regional Tax Office, Large Taxpayers Office, or Corporate Tax Office handles the full tax cycle, including identification, notices, assessment, and recovery. Officials said this concentration of powers has created room for under-assessment, compromised recoveries, and excessive discretion.
To address these issues, the new framework will divide Inland Revenue operations into three separate wings with clearly defined mandates, statutory powers, and non-overlapping responsibilities. The model will apply across income tax, sales tax, and federal excise duty.
Under the new structure, the National Faceless Audit Wing (NFAW) will be established in Islamabad and operate from an undisclosed location. This fully digital and anonymous wing will conduct risk-based audits and continuously monitor withholding and advance taxes through a Central Data Hub. Cases will be assigned algorithmically, and the wing will not have the authority to issue tax demands or carry out recoveries. Taxpayers will not be allowed to physically visit the wing or submit manual documents.
The National Assessment Wing (NAW), also based in Islamabad, will handle quasi-judicial functions. It will issue assessment orders, show-cause notices, approve zero-rating refunds, and process exemptions, but it will have no role in audits or field enforcement. Hearings under this system will be conducted online, although dedicated hearing rooms will be set up at tax offices across the country.
The third arm of the new structure will be the Field Operation Wing, which will serve as the enforcement arm of the tax system. It will be responsible for revenue recovery, prosecution, taxpayer registration, field verification, and expanding the tax base. However, it will not be allowed to assess cases, adjudicate disputes, or alter tax demands. Field officers will instead focus on verification, assigned information, facilitation, and registration.
For the first two wings, the government plans to appoint around 200 officers on merit, offering market-based salaries and enhanced surveillance measures to strengthen transparency, credibility, and accountability.
Officials say the new model is designed to tighten enforcement against tax evaders while reducing the compliance burden for honest taxpayers. Since all interactions will be digitally logged through an online portal, the system is expected to end officer-dependent compliance and significantly cut direct contact between taxpayers and officials.
To make tax filing easier, the new system will introduce pre-populated returns powered by the Central Data Hub. These returns will automatically pull information related to salary, banking, property, and vehicles, reducing the time needed for filing from hours to minutes.
A single integrated taxpayer account will also be introduced to consolidate income tax, sales tax, and federal excise duty obligations, credits, and refunds into one unified IRIS view.
In addition, the updated system will include predictable and time-bound processing with auto-escalation features aimed at giving taxpayers greater certainty over pending liabilities and tax matters.
The FBR will also retain the authority to gradually shift tax appeals into a faceless format in future phases of the reform.
