The federal government has introduced an ambitious digital transformation plan for the Federal Board of Revenue (FBR) as part of the fiscal year 2025–26 federal budget. This comprehensive initiative, announced by Finance Minister Muhammad Aurangzeb during the budget speech, reflects the government’s efforts to modernise Pakistan’s tax administration, improve transparency, and increase revenue through technology-driven enforcement and automation.
Under the new budget, FBR has been tasked with collecting Rs14.13 trillion in FY2026, marking a 19% increase from the revised estimate of Rs11.9 trillion for FY2025. This collection target includes Rs6.9 trillion from direct taxes and Rs7.2 trillion from indirect taxes. To achieve these goals, the government is relying heavily on digital tools to enhance compliance and streamline operations.
A key element of the reform strategy is the national implementation of Digital Production Tracking, a system designed to monitor manufacturing activity in real time and integrate it with digital invoicing. This step is expected to curb underreporting, ensure better documentation of production processes, and strengthen compliance. In parallel, FBR is expanding mandatory business-to-business e-invoicing to several sectors, encouraging more structured and accountable financial transactions between enterprises.
Retail operations are also under the reform spotlight, with deeper integration of the Point of Sale (POS) system. The POS initiative will be scaled up to improve transaction recording in the retail sector. Additionally, the E-way Billing framework will be introduced to digitally track the movement of goods across the country, helping FBR monitor logistics and reduce tax evasion during goods transportation.
Significant structural changes are being made to audit practices as well. The budget outlines the full-scale adoption of Faceless Audit and Faceless Customs Audit systems. These systems aim to reduce human involvement in audit selection and execution, thereby lowering the potential for corruption and ensuring fairness. Artificial Intelligence will support risk-based audit targeting, while fraud analytics will enhance the effectiveness of customs enforcement and tax refund verification.
To ensure oversight and coordination, a Central Control Unit will be set up, providing real-time visibility into compliance and enforcement activities across the FBR network. A digital case management system and automated alerts will help speed up processing and reduce bureaucratic inefficiencies.
Institutional reforms will be supported by the PRAL Board, which will manage system upgrades and IT governance. Capacity building is also a priority, with the introduction of Audit Mentors to assist FBR staff in adapting to digital processes and enhancing technical capabilities.
These efforts are designed to raise Pakistan’s tax-to-GDP ratio and bring the country’s tax systems in line with international standards. For taxpayers, the shift means increased compliance requirements, but it also holds the promise of reduced delays, less red tape, and more predictable enforcement. Multiple milestones under this initiative are scheduled for implementation throughout FY2026 as the government prioritises a technology-first approach to tax administration.
