Islamabad – As part of the ongoing efforts to modernize Pakistan’s tax system and broaden its narrow tax base, the Federal Board of Revenue (FBR) is implementing a transformative framework under the $400 million Pakistan Raises Revenue Project (PRRP). Supported by the World Bank, the project introduces technology-driven reforms and policy restructuring to enhance compliance, simplify enforcement, and integrate untaxed segments into the formal economy.
Key Focus: Expanding the Tax Base Using ICT and Independent Verification
A core element of the PRRP strategy is the identification and onboarding of millions of new taxpayers using ICT-enabled business intelligence. Through automated data sharing, transaction tracking, and risk profiling, the FBR is leveraging analytics to detect economic activity outside the tax net.
To ensure engagement beyond initial registration, the FBR has enlisted Independent Verification Agents (IVAs). These agents are responsible for:
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Verifying new taxpayer registrations
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Ensuring filing and payment compliance
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Following up on responses to FBR-issued notices
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Tracking persistent engagement of taxpayers to reduce drop-off after initial compliance
FBR officials acknowledge a recurring issue—individuals registering for one-time transactions (e.g., vehicle purchases or property transfers) but filing nil returns or exiting the system thereafter. IVAs are tasked with monitoring behavioral consistency and flagging such patterns for further action.
Reforms in Audit Framework: Targeting Risk, Not Volume
Under PRRP’s compliance and governance benchmarks, the FBR has introduced a key reform:
👉 Audit selection is now limited to only 10% of total cases, based on risk analysis, and subject to approval by the Member Audit.
This shift from volume-based to risk-based audit selection aligns with global best practices and ensures that the system focuses on high-risk taxpayers, reducing the burden on compliant filers and enhancing credibility.
Revamped Audit Wing and Compliance Units
To implement this shift, the FBR’s Audit Wing has undergone structural reorganization:
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Creation of Compliance Units and Specialized Audit Units
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Use of risk-based selection tools to identify cases
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Real-time monitoring of field audits by the Compliance Unit
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Closure of audits based on submission of final reports, even if subsequent legal proceedings are initiated by taxpayers
Over the past five years, these units have conducted multiple issue-based audits, particularly targeting large taxpayers, with findings used to shape future audit and enforcement strategies.
World Bank Oversight and PRRP Timeline
The World Bank, as a key stakeholder in the PRRP, is actively evaluating the FBR’s adherence to audit limits, system reforms, and taxpayer onboarding performance. This includes regular performance assessments tied to disbursement conditions and milestones.
The Pakistan Raises Revenue Project is scheduled to run through June 2025, and is considered a critical pillar in Pakistan’s fiscal reform agenda, with the following overarching goals:
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Expand the Active Taxpayer List (ATL)
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Enhance domestic revenue mobilization
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Strengthen institutional capacity of the FBR
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Improve taxpayer trust and compliance
Conclusion
The PRRP marks a major shift in Pakistan’s tax strategy—from reactive enforcement to proactive compliance enablement. With its emphasis on digital integration, targeted audits, and institutional reforms, the project offers a roadmap for sustainable revenue growth and wider tax net coverage.
While the full impact of these initiatives is yet to be realized, early indicators suggest that the FBR is moving towards a more efficient, data-driven, and equitable tax administration system—a vital step for economic stability and public sector development.
Need guidance on tax compliance under the new FBR framework?
Sterling Consultancy provides expert services in risk-based audits, tax registrations, and compliance automation aligned with PRRP reforms.
