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Is Pakistan’s tax system finally stepping into the digital age? The Federal Board of Revenue (FBR) is certainly pushing for ambitious digitalization initiatives. However, leading tax experts are voicing a critical concern: these efforts might fall flat without a robust, integrated strategy to bring the massive pool of non-filers into the tax net.
Digital Hopes vs. Harsh Realities
Faiq Raza, Vice President of the Karachi Tax Bar Association (KTBA), points out a stark reality. While the FBR aims to boost Pakistan’s tax-to-GDP ratio from a mere 10-11% to an ambitious 18% by 2027-28, what we’re actually seeing is primarily an increase in return filing – not a substantial difference in overall revenue.
Raza reveals a surprising statistic that underscores the problem: "50% of the filers are those who file returns only to avoid advance tax, and they contribute nothing to tax collection." This highlights a critical flaw: convenience without compliance isn’t true progress when it comes to broadening the tax base.
The Missing Piece: Enforcement and Expansion
For experts like Raza, the solution is clear: the focus must shift from merely increasing the number of returns to genuinely expanding the tax base through enforcement. He emphasizes that once the FBR system becomes digital, the department itself needs to be upgraded. Instead of constantly asking taxpayers for data, all relevant information should be automatically available with the authorities, fostering a more efficient and less burdensome system.
Earlier this week, Finance Minister Muhammad Aurangzeb chaired a meeting of the Project Steering Committee of the Tax System Digitisation Project at FBR Headquarter. The meeting underscored the potential of leveraging advanced technology and automation to foster a more formalized and documented economy for sustained national development. While promising, critics argue that the roadmap needs to be comprehensive.
Concerns About Current Digitalization Efforts
Tax expert Imran Awan echoes these sentiments, noting that the FBR’s current digitalization efforts appear to be exclusively targeting existing taxpayers. "There is no mention of non-filers," he laments. "No clear mechanism has been outlined to trace undocumented transactions as well."
Awan also brings up practical challenges with the FBR’s online portal, IRIS, citing "major issues related to portal slowdown or website crash" even during recent income tax filing seasons. What good is a digital system if it can’t handle the load when it matters most?
The Vision for True Digital Transformation
Despite the criticisms, both experts acknowledge the immense potential of a truly digitalized system. Awan highlights that it would not only simplify tax filing for taxpayers but also provide the tax authority with complete data. This, in turn, would minimize the role of tax officers, making things easier for filers and, crucially, facilitating the process of bringing non-filers into the system.
Imagine a world where your tax information is largely pre-filled, and the authorities have a comprehensive, transparent view of the economy – that’s the promise of effective digitalization.
Recent Filing Statistics – A Mixed Picture
The FBR has indeed reported a significant increase in income tax returns for Tax Year 2025. As of October 31, 2025, a total of 5.9 million tax returns were filed, representing a 17.6% increase compared to 5 million returns in the same period last year. Out of these, 3.6 million taxpayers filed returns with tax payments, reflecting an 18.6% rise in those contributing revenue. Moreover, individual taxpayers contributed nearly Rs9 billion more than last year, growing from Rs60 billion to Rs69 billion.
While these numbers look positive on paper, experts remind us that quantity doesn’t always equal quality when it comes to substantial revenue generation and broadening the actual tax base. The challenge remains: to translate increased filings into meaningful contributions from a wider segment of the population.
The Way Forward
The road to a truly effective digital tax system in Pakistan is paved with good intentions from the FBR, but also with crucial warnings from experts. Digitalization is a powerful tool, but without a clear, enforced strategy to expand the tax base and effectively tackle non-filers, its impact on the nation’s financial health will remain significantly limited. It’s time to bridge the gap between filing numbers and actual economic contribution for a more robust and equitable tax system.
Source: Original Article
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