Page 46 - CMA Journal (July-August 2025)

Focus Section
Building a Data-Driven

Tax System in Pakistan

Tax administrations across the globe are under mounting checks. This multi-
pressure. Economic volatility, rising debt, and growing source integration
public demands have created unprecedented fiscal enables more
challenges. Traditional tax systems—grounded in annual precise and fair
paper filings, manual audits, and isolated databases—are enforcement.
no longer capable of generating sustainable revenues.
3) China- Real-time
The transformation is being driven by data. In both Digital Enforce
advanced and emerging economies, data integration, ment: China’s
real-time monitoring, and advanced analytics are State Taxation
being utilized to expand fiscal capacity without Administration
increasing tax rates. operates one of
the largest real-
The shift is clear: tax administrations are evolving into
time compliance Muhammad Ammad
data-driven institutions. From the United States and
systems. All VAT Ansari, ACMA
the United Kingdom to China, India, and Bangladesh,
invoices are issued
governments are adopting integrated data systems Manager Litigation and Audit
electronically and
and risk-based enforcement to close compliance gaps Sui Southern Gas Company
validated instantly.
and broaden the tax base. Pakistan, with its persistently Limited (SSGCL)
The system
low tax-to-GDP ratio of around 9%, now stands at a
connects customs, banking, and e-commerce
decisive juncture. To achieve fiscal stability, it must
platforms, with AI monitoring billions of transac-
follow the global trend and place data at the core of its
tions. With a tax-to-GDP ratio above 18%, China
tax reform strategy.
proves that real-time automation significantly
Global Best Practices in Tax Digitization improves compliance even in large and complex
economies.
1) United States- Data Matching for Compliance: The
US Internal Revenue Service (IRS) has built a 4) India- GSTN and Continuous Monitoring: India’s
compliance framework around data matching. Goods and Services Tax Network (GSTN) integrates
Employers, financial institutions, and investment filings, e-way bills, and invoice matching into a single
platforms submit wage and income data (Forms W-2, platform. Invoices are uploaded in real time and
1099, 1098) directly to the IRS. AI-powered cross-checked automatically between sellers and
algorithms match these records with taxpayer filings, buyers. Discrepancies generate alerts, preventing
and discrepancies trigger instant notices or targeted false claims. Since 2017, these reforms have added
audits. Processing over 5 billion information returns about 1.5–2% of GDP in tax revenues. This highlights
annually, this system achieves a compliance rate of the value of standardized, transparent, and scalable
over 93% for wage income. Pakistan can embed compliance systems.
similar data integration to make evasion structurally 5) Bangladesh- Gradual Digital Progress: Bangladesh’s
difficult. National Board of Revenue (NBR) is gradually

2) United Kingdom- Risk Profiling through Multi- adopting digital tools. Electronic fiscal devices (EFDs)
Source Data: HM Revenue & Customs (HMRC) uses now record retail sales and link them to VAT systems.
Connect, an advanced analytics platform that Work is underway to integrate VAT and income tax
integrates data from over 30 sources, including bank databases, though progress remains slow. Still, even
accounts, property registries, overseas asset declara- partial implementation has helped raise Bangladesh’s
tions, and even social media activity. Connect tax-to-GDP ratio to around 11% in 2023.
assigns risk scores to taxpayers, allowing high-risk Gradual reforms still deliver results if integration is
cases to face targeted audits while reducing random sustained.

44 ICMA’s Chartered Management Accountant, Jul-Aug 2025