Prime Minister Shehbaz Sharif has ordered the shutdown of Pakistan Revenue Automation Limited (PRAL) within the next six months, marking a significant shift in the country’s approach to tax system management and digital infrastructure. PRAL, established over 30 years ago as a private limited company fully owned by the Federal Board of Revenue (FBR), currently functions as the central platform for filing tax returns, processing payments, and storing all tax transaction data. Its existing hardware and software, however, have become obsolete, raising concerns over the long-term sustainability and reliability of the system.
Government officials confirmed that the premier issued instructions last month to abolish PRAL and replace it with a modern organisation equipped to lead Pakistan’s digital tax transformation. The move comes despite the allocation of a foreign loan in 2019 to upgrade PRAL’s technological framework, with all associated deadlines now lapsed. While the government has committed to enhancing FBR’s IT capabilities, including the setup of new data centres and an automated income tax refund system through a $400 million World Bank loan, only limited progress has been made. Out of the total loan, $80 million was specifically allocated for technology upgrades, yet inefficiencies and overlapping responsibilities between FBR’s Reforms and IT wings have slowed down execution.
The prime minister directed that the new body should be composed of top-tier professionals and possess complete functional and financial autonomy. The intent is to build an institution that can serve as the core of FBR’s digital infrastructure and provide a seamless, end-to-end user experience for taxpayers and the tax authority alike. Despite the urgency, forming an entirely new organisation capable of seamlessly taking over PRAL’s functions before the end of the year poses considerable challenges, especially when past efforts to appoint a Chief Information Security Officer for PRAL were unsuccessful.
The current directive follows the earlier appointment of a high-level PRAL board aimed at reforming the entity. However, the decision to dismantle PRAL entirely signals that reform efforts under the board did not yield the desired impact. Reports suggest that this decision was taken during a meeting attended by PRAL’s board members. Queries sent to FBR’s spokesperson regarding whether the board recommended dissolution or restructuring remained unanswered even after two weeks.
PRAL’s management had consistently cautioned that delays in technology upgrades could compromise the performance and security of FBR’s data centres. The prime minister also instructed that the new data centres be inaugurated shortly, with August 14 set as the target date. However, sources indicate the servers are not yet operational, casting doubt on whether a fully functional launch can be achieved by Independence Day.
FBR’s data infrastructure is currently supported by three main data centres located at FBR House, Software Technology Park in Islamabad, and Customs House in Karachi. The last major investment in these facilities was made in 2010, and since then, the technology has become outdated. The new data centres are expected to significantly improve application performance and data processing capabilities, supporting key tax functions such as collection, analysis, and reporting.
During a recent routine meeting on FBR affairs, the prime minister was informed that compromises with the business community had hindered enforcement efforts. The government has revised its earlier approach of targeting under-taxed wealthy individuals by relaxing restrictions on major purchases and softening its stance on banking treatment of cash deposits. A new explanation from the FBR now states that any cash deposited into the seller’s bank account against invoices, whether by a national tax number holder or not, will be considered as a banking transaction. This adjustment represents a reversal of the earlier firm position.
The government has also held back from implementing immediate bans on the purchase of vehicles, property, and stocks by non-eligible persons. Officials acknowledge this retreat represents a major setback in efforts to improve tax compliance, particularly in light of commitments made to the International Monetary Fund.
