Page 42 - CMA Journal (Nov-Dec 2024)

Focus Section

The UAE’s blockchain-based VAT system records Phase 2: 2010–2020 – Early Digitization Efforts
every transaction on a shared ledger accessible to
both businesses and tax authorities, reducing In 2010, Pakistan took its first significant step toward
invoice fraud by 40% while cutting refund digitization with the introduction of the IRIS e-filing
processing times from 30 days to just 48 hours. system. This online portal enabled businesses to file
income tax returns electronically, reducing processing
In Brazil, blockchain is mandatory for public invoicing, times to 2–3 months. However, the adoption rate was
where all invoices are cryptographically sealed and slow, especially among SMEs, due to limited internet
stored on a distributed ledger. This increased SME access and skepticism about digital systems. By 2020, only
compliance by 25% and enabled real-time audits, 15% of taxpayers were using IRIS regularly. Meanwhile,
reducing administrative costs by 15%. the Federal Board of Revenue (FBR) introduced digitized
sales tax portals, but integration issues between federal
3) Robotic Process Automation (RPA): RPA uses and provincial systems hampered efficiency.
software bots to automate repetitive, rule-based
tasks such as data entry, form filling, and report Phase 3: 2020–2024 – Advanced Automation Initiatives
generation. This reduces human error, lowers
operational costs, and enables staff to focus on In recent years, Pakistan has made significant strides with
more complex, strategic tasks. the following initiatives:
• Track and Trace System: Launched in 2021, this
In Japan, the National Tax Agency deployed RPA bots
to extract data from corporate financial statements, RFID-based system monitors production and sales in
populate tax forms, and submit filings. As a result, high-evasion sectors such as tobacco and cement. In
90% of corporate tax filings are now automated, the tobacco industry, for instance, the system
reducing processing time from three weeks to just reduced counterfeit product sales by 30%, resulting
two hours and saving ¥45 billion annually. in a PKR 45 billion boost to tax revenue in 2023.
However, its implementation in the pharmaceutical
4) Predictive Analytics: Predictive analytics uses and textile sectors, which contribute 20% of the
historical and real-time data to forecast future informal GDP, is still pending.
outcomes. In taxation, it predicts revenue trends, •
identifies evasion risks, and optimizes audits. This PRISM Integration: By linking retail Point of Sale
transforms tax authorities from reactive enforcers (POS) systems directly to the FBR, this initiative
into proactive planners, enhancing fiscal stability. enables the automatic transmission of real-time
sales data, reducing underreporting. In 2023, this
Singapore’s Inland Revenue Authority (IRAS) utilizes AI integration reduced sales tax leakage by 15%.
models to analyze GDP growth, inflation, and sectoral •
performance to forecast corporate tax revenues. The E-Payment Surge: Digital tax payments surged by
agency has achieved 95% accuracy in its revenue 45% in 2023, driven by new partnerships with banks
forecasts, enabling proactive policy adjustments during and mobile wallets.
economic downturns. Strategic Opportunities for Pakistan
Pakistan’s path to Tax Automation (1) Expanding the Digital Ecosystem

Pakistan’s tax automation journey has evolved in three a) Subsidized Tools: Partner with tech firms to provide
distinct phases, each characterized by incremental SMEs with subsidized software licenses (e.g., PKR
progress and persistent challenges: 10,000/year). Pilot programs in Karachi showed a
Phase 1: Pre-2010 – Manual Systems and Inefficiencies 40% increase in adoption when subsidies were
introduced.
Prior to 2010, Pakistan's tax administration was primarily
paper-based. Taxpayers submitted handwritten returns,
and officials manually verified records, resulting in
widespread delays, errors, and opportunities for
corruption. For instance, income tax filings often took
6–8 months to process, while discrepancies in sales tax
records were frequent due to mismatched invoices. The
absence of digital infrastructure allowed the informal
economy—estimated at 35% of GDP during this
period—to thrive without being taxed.

40 ICMA’s Chartered Management Accountant, Jan-Feb 2025 BACK TO CONTENTS PAGE