Page 31 - CMA Journal (May-Jun 2026)

F oc us S ec t ion
Era of Digital Accountability:
Transforming Tax and Audit Systems in Pakistan
Introduction introduction of
ePayment 2.0 within IRIS
Data is the lifeline of good governance, and the use of 2.0 established a level
arti cial intelligence (AI) and digital tools within public playing eld for tax
nance are essential factors to consider today. In the payments; enabling
context of the digital transformation drive that is being millions of taxpayers to
followed globally by the public sector, SAIs and make payments easier,
revenue authorities are becoming increasingly at the similar to internet
forefront to maximize the bene ts of AI for banking, ATM or mobile
transparency, accountability and e ciency (Atayah & banking (FBR, 2024). It is
Al-Shater, 2021; Bhatt, 2024). Ing. In view of the fact these pioneering digital
that the world is moving towards an Arti cial advancements, working
Intelligence (AI) system, Federal Board of Revenue in tandem, that will Mahwish Mahmood
(FBR) and Auditor General of Pakistan (AGP) are the key enable the use of more Inspector, Inland Revenue
Department
to e ect this change. This Article under sub theme sophisticated analyses Federal Board of Revenue (FBR)
"Digital and AI Based Tax and Audit System" (FBR/AGP) incorporating AI.
in the News Letter of CMA Journal addresses various
aspects on how AI may help in improving tax AI for Tax Compliance and Fraud Detection
compliance and public sector audit in Pakistan. It
brings together the latest studies and ndings from The use of arti cial intelligence (AI) technologies like
academic institutions, worldwide, and the ongoing machine learning, natural language processing, and
work on the ground in Pakistan, emphasising the data analytics, for tax administration is on the rise in
potential, pitfalls, and purpose of transformation the world.AI technologies like machine learning,
strategies for the future. natural language processing, and data analytics are
giving tax administrations an opportunity to
Digitalizing Tax Administration in Pakistan streamline, calculate, and simplify tax ling and
compliance e orts in the world (Bhatt, 2024). The
Digitalization of the tax system in Pakistan took a stride introduction of AI solutions has improved tax
forward with the launch of the Integrated Revenue collection and minimized the rate of tax evasion thanks
Information System (IRIS), the main online platform for to the use of AI-based tools used in tax risk
tax ling and compliance (Ghazi, 2025). Since its assessments, tax fraud detection and enforcement
inception, the FBR has evolved from paper-based to (Karakoyun, n.d; Attayah & AlShater, 2021). Up to 82%
automated systems and has also moved towards cloud easier detection of tax evasion is achieved, audit tax
technology, enabling 100% real-time monitoring of ling time reduced by 50% and there might be notable
taxes along with data analysis (ICT.net.pk, 2025). tax revenues increases (AI & Big Data Study, 2026).
Indeed, it was going to be a transformation of process, Research by tax authorities around the world identi ed
technology, and people, and one important step in that about half of them are already leveraging AI for
that transformation process was the approval of the risk assessment and fraud detection (Tax Notes, 2024).
Comprehensive Plan for a transformation from the
Prime Minister in October 2024 (FBR, 2025a). This trend In line with this, FBR has o cially jumped on the
looks set to continue and the achievements of the bandwagon of AI and made a commitment to use AI
digitalization and enforcement driven revenue for tax enforcement. Previously the FBR used to audit
initiatives are seeing tax receipts rising from 8,8 per income tax returns and wealth statements while
cent of GDP in 2023-24 to 10,24 per cent in 2024-25 currently the FBR is changing the audit methodology
(FBR, 2025b). With the launch of new version of IRIS from random audits to risk-based audits using Arti cial
(Taxpayer Registration) enhancements were added to Intelligence (AI). In 2025 FBR also initiated a new and
the taxpayer registration, user pro le management groundbreaking ‘mass audit' programme involving
and recovery activities, making the process easier and over 7 million income tax returns through the use of
more e cient to use (FBR, 2025c). Furthermore, the Arti cial Intelligence (AI).
ICMA’s Chartered Management Accountant, May-Jun 2026 29
An initiative dubbed as ‘Operation Greensuit’, which forward in detecting nancial irregularities (Public The OECD (2024) has identi ed ensuring data quality • https://www.dailyindependent.com.pk/ Fixing taxation. Dawn.
and data governance as rst order constraints for PFM
Dawn.
4).
December
(2024,
has mobilised a group of nearly 8000 o cers from the Finance.pk, 2026). Data analysis is more than simply AI use. Not to mention, the security concerns • https://www.dawn.com/
automated what is there; it is a paradigm shift for
Inland Revenue and 4000 auditors for discrepancy
Dawn. (2025, June 29). Traders seek phased introduction of digital
completed AI streamlining in assessing have even
assessment, has been driven by AI tools and digital risk-based auditing in a proactive manner (AGP, 2025; been understood to lower audit threat (KNE • invoicing system. Dawn. https://www.dawn.com/
analytics (TechJuice, 2025). Besides, there are some
Hum News, 2025). Digital Governance, Data Analytics
De nePK. (n.d.). Audit Management Information System in Pakistan:
Publishing, n.d.). The mission's visit to AGP and FBR to
Challenges and Future Road Map. De nePK. https://de ne.pk/
highly visible instances of FBR making use of AI for tax
audit selection including a total of 200 tax audits of and Risk Based approaches have been introduced from brief them regarding transparency and digitalization • FBR. (2024, November 13). FBR launches new ePayment 2.0 system. Pro t
the start in training programmes as the Department of
indicates the signi cance of external supervision and
by Pakistan Today. https://pro t.pakistantoday.com.pk/
companies (PKRevenue, 2025). These are part of its the Auditor General of Pakistan (DAGP) has always abiding by world-class practices (ARY News, 2025). As • FBR. (2025a, September 11). *FBR’s boosts tax-to-GDP ratio to 10.24%,
ongoing e orts to link economic activities with tax been an innovative department. The relevance of this Pakistan steps into a future where AI's in uence is enforcement-driven revenue up eightfold*. Pro t by Pakistan Today.
ling, and to reach out to tax evaders, under its bigger digital transformation becomes even more salient with increasingly felt in public administration, it is crucial to https://pro t.pakistantoday.com.pk/
invest in data governance infrastructures, continuous • FBR. (2025b, September 15). FBR Deploys New IRIS Registry Version for
data-driven economic linkages with tax ling as well as its impact in achieving its mandate, of safeguarding and comprehensive training of CAs and audit tax Taxpayers. TechJuice. https://www.techjuice.pk/
tax ling digitization e ort (Pakistan Today, 2025a). The public nances and tranquillising governance authorities, and strengthening of relevant legislation • Ghazi, M. N. (2025, July 15). FBR's Digital Overhaul: Simpli ed Filing, AI
Audits, and E-Invoicing. LinkedIn. https://www.linkedin.com/
FBR wants to adopt AI to review 3-5% of all tax lings of processes, while gaining momentum from domestic to ensure AI is used responsibly and legally in public • Hum News. (2025, December 17). FinMin Aurangzeb inaugurates data
the six million returns submitted in total, as compared and international alike — including from the IMF (ARY service. analytics centre to boost audit transparency. HUM News English.
to conventional tax audit mechanisms which are News, 2025) and even the President of India (2026). https://humenglish.com/
limited to only 24NewsHD (2025). Further, the While these positive developments are commendable, Conclusion • ICT.net.pk. (2025, December 3). FBR's Digital Transformation 2025: What It
Means. ICT.net.pk. https://ict.net.pk/
introduction of AI in governance by the cabinet with there are signi cant challenges in implementing AI in The transformation of public-sector tax administration • JISEM. (n.d.). Algorithmic transparency is a prerequisite for responsible AI
the approval of the National AI Policy in July 2025, Pakistan's tax and audit processes that need to be and auditing into AI and digital technologies is more adoption in public nance. JISEM. https://jisem-journal.com/
provides a strategic boost towards this trajectory in resolved for sustainable and ethical growth. Digital gap than a mere improvement in technology; it is a shift in • Karakoyun, F. (n.d.). Proactive Approach in Tax Risk Management: Data
to
Identify
Taxpayers.
High-Risk
Techniques
CEEOL.
Analysis
addition to the use of AI in tackling several tax issues and lack of digital competency are the main concerns. governance. In conclusion, the AI-driven audit of tax https://www.ceeol.com/
(The IGC, 2025). Many countries, especially in the developing world like evasion by the FBR and the data analytics center by the • KNE Publishing. (n.d.). AI optimization strategy in taxes can mitigate the
Arti cial Intelligence in Public Sector Pakistan lack those experts to implement and operate AGP represent key strides in the direction of a level of tax audit risk. KNE Publishing. https://knepublishing.com/
AI powered tax administration platforms and some transparent, accountable and e cient public nancial • OECD. (2024). The AI-augmented state: enforcing scal promises. ODI.
https://odi.org/
Auditing taxpayers may have di culties with tax compliance in management system in Pakistan. The moment one • Pakistan Today. (2025a, September 10). FBR unveils reform drive to
Meanwhile, the concept of digitisation of the auditor the context of digital platforms (Studia UBB - n.d.; goes one level more, from greater adherence to tax modernise tax system, boost compliance. Pro t by Pakistan Today.
rules and regulations, and fraud detection services to
general of Pakistan has been revolutionised. The ATI/OECD 2023). Those gaps are: the IRIS portal was proactive risk-based auditing services, there are https://pro t.pakistantoday.com.pk/
highlight among these developments is the Audit frequently experiencing outages and people were considerable bene ts. But, the future journey will need • PAAA. (n.d.). Training programs tailored to align with global trends. PAAA.
https://paaa.gov.pk/
Management Information System (AMIS), an apprehensive about the implementation of digital to be traversed with prudence, as there are a number • PhoneWorld. (2025, December 17). Finance Minister Inaugurates
all-encompassing digital solution that is set to make invoice, especially for small traders, is an a ordable of key challenges to be overcome, including AI-Powered Centre for Government Data Analytics to Boost Transparency.
the audit more streamlined and e ective, eliminating solution (Dawn 2025). In addition, AI implementation infrastructure, know-how, data governance and ethics. PhoneWorld. https://www.phoneworld.com.pk/
Obviously, the technologies explored in this essay • PKRevenue. (2025, October 30). FBR’s AI Audit Detects 200 Corporate Tax
the need for the cumbersome manual audit process in public sector auditing might be hindered by factors strategic and responsible can change the landscape of Cases. PKRevenue. https://pkrevenue.com/
(TMC, 2024; De nePK, n.d.). The most important of the like resistance to change, high implementation costs the tax world, no less than the books they can turn in • President of India. (2026, May 14). President Droupadi Murmu says, Audit
needs to keep up with technological evolution to perform e ectively.
various achievements is the Federal Minister (FM) for and lack of infrastructure. The studies conducted in Pakistan. The road has begun and the next is to make it NewsOnAir. https://www.newsonair.gov.in/
Finance having opened the Centre for Government Kenya revealed multiple reasons why AI is not yet • Public Finance.pk. (2026, May 10). Public Financial Management Reforms in
Data Analytics at the AGP headquarters in December widely adopted, most notably, there is still a challenge Inclusive, Transparent and Irreversible. Sindh: Progress and Challenges. Public Finance.pk.
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Advisers Critical for AI. Tax Notes. https://www.taxnotes.com/
e ciency, e ectiveness and transparency (Daily digitalisation, e orts are still required for quality and • TechJuice. (2025, November 12). *FBR Launches AI-Powered Audit of 7
APP. (2025, December 17). Finance Minister inaugurates Centre for
reach of audit in Pakistan (AGP, 2025). • Government Data Analytics in AGP. APP. https://www.app.com.pk/ Million Tax Returns*. TechJuice. https://www.techjuice.pk/
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on the public nances management system. AI-driven responsible use of AI, since it is crucial to understand ceremony of the 16th Asian Organisation of Supreme Audit Institution
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