Digital economy, documentation & AI compliance Huzaima Bukhari & Dr. Ikramul Haq Pakistan's tax debate often proceeds as if the country lacks information about taxable economic activity. The reality is precisely the opposite. Never before in country's history has the state possessed access to so much information regarding citizens, businesses and economic transactions. The National Database & Registration Authority (NADRA) maintains demographic records. Banks generate transaction data. Utility companies possess consumption records. Provincial authorities maintain land and property databases. Customs authorities monitor imports and exports. Telecommunication companies, financial institutions and digital platforms produce enormous volumes of information every day. Collation of data regarding individuals earning taxable income but avoiding returns filing is also possible from credit bureaus established under Credit Bureaus Act,�2015 working under the regulatory control of State Bank of Pakistan (SBP) such as https://tasdeeq.com/. These agencies can also help in tracing and determining correct income quantum of those who are filing NIL incomes or showing laughable income yet not captured under Malomaat (it means information), a portal on the website of Federal Board of Revenue (FBR) "through which every citizen can enroll and access to the information available about them with the FBR". Pakistan's problem is not lack of information. It is failure to integrate and intelligently utilise that information. This distinction is crucial because it fundamentally alters the nature of tax reform. For decades, successive governments attempted to increase revenues through higher tax rates, withholding taxes, petroleum levies and increasingly intrusive enforcement measures. The underlying assumption was that tax evasion persisted because authorities lacked information. The digital economy has rendered that assumption obsolete. Today, the challenge is not collection of information but conversion of information into actionable intelligence. This is where technology-and increasingly artificial intelligence-can transform Pakistan's taxation landscape. The FBR and provincial tax authorities already possess access to multiple databases. Unfortunately, these systems often operate independently, limiting their effectiveness. A taxpayer may appear in banking records, utility databases, land registries and customs documentation simultaneously without those records ever being analysed in an integrated manner. The consequence is predictable. Compliant taxpayers continue facing repeated scrutiny while large segments of undocumented economic activity remain undetected. The solution lies in data analysis and integration by hiring data scientists. A modern tax administration should be capable of identifying discrepancies automatically. Individuals reporting modest incomes while maintaining substantial property holdings, luxury consumption patterns or extensive banking activity should be identified through risk-based analysis rather than arbitrary selection. The objective should not be greater surveillance. The objective should be greater accuracy. Artificial intelligence provides tools capable of analysing millions of transactions and identifying anomalies impossible to detect through traditional administrative methods. Risk profiling, pattern recognition and predictive analytics can help authorities focus enforcement resources where they are most likely to generate results. This approach offers several advantages. First, it broadens the tax base without increasing rates. Second, it reduces unnecessary interaction between taxpayers and officials. Third, it limits opportunities for corruption and rent-seeking. Fourth, it improves voluntary compliance because enforcement becomes more credible and less arbitrary. The significance of reducing human discretion cannot be overstated. Much of Pakistan's tax administration remains heavily dependent upon subjective decision-making. Discretion often produces uncertainty, litigation and allegations of harassment. Technology can reduce these problems by replacing arbitrary selection with objective criteria. This principle should extend beyond income taxation. Digital invoicing systems can strengthen sales tax documentation. Real-time reporting can reduce opportunities for under-invoicing and tax fraud. Automated matching of transactions can improve compliance throughout supply chains. Several countries have successfully adopted such systems. Pakistan possesses the technical capacity to do the same. The challenge is institutional rather than technological. Technology alone cannot compensate for fragmented administration. Earlier articles in this series highlighted the problems arising from multiple tax authorities, overlapping jurisdictions and inconsistent procedures. Digital reform must therefore accompany administrative reform. An autonomous and fully automated federalised tax agency, operating within constitutional limits but integrating federal and provincial databases, offers one possible solution. Such an institution could facilitate information sharing while reducing duplication and compliance costs. The Canadian experience is instructive. The Canada Revenue Agency (CRA) administers federal taxes and many provincial taxes through a coordinated framework. Citizens and businesses interact with a largely integrated system rather than multiple competing bureaucracies. Technology supports administration, but integration provides the foundation. Pakistan's fragmented model produces the opposite result. We must learn from CRA and other federalised tax agencies working in federations e.g. Internal Revenue Service (IRS) of United States, GST Council of India, Director General of Taxes of Indonesia (DJP), Australia Tax Office (ATO), BZST of Germany, and Federal Tax Administration (FTA) of Switzerland. Pakistan is a member of Forum of Federations, an international organization that develops and shares comparative expertise on the practice of federal and decentralized governance through a global network. However, Ministry of Finance and FBR have never bothered to seek help of the Forum to prepare/present a study of tax models prevalently used by 25 countries having federal form of state/governance. Businesses in Pakistan operating nationally frequently confront multiple registrations, separate returns and overlapping audits. Data exists, but coordination remains limited. Digital reform should, therefore, be viewed as part of a broader governance agenda. The same technology that improves compliance can also strengthen taxpayer rights. Automated refunds, online dispute resolution, digital appeals and transparent case-tracking systems can reduce delays and improve confidence. Taxpayers should benefit from technology as much as tax authorities. This principle deserves emphasis because digitalisation is sometimes presented merely as an enforcement tool. Such an approach would repeat past mistakes. Technology should broaden compliance, not broaden coercion. The objective is to create a system where taxpayers can fulfil obligations easily, where authorities can identify genuine risks accurately and where disputes are resolved efficiently. This becomes particularly important as Pakistan seeks to achieve ambitious growth and revenue targets simultaneously. Higher tax rates are politically contentious and economically damaging. Expanding the tax base through intelligent use of information offers a more sustainable alternative. The country's future fiscal capacity depends less upon new taxes than upon better administration of existing taxes. Data integration, artificial intelligence, digital invoicing and automated compliance systems collectively offer opportunities unavailable to previous generations of policymakers. Pakistan should seize them. The central lesson is straightforward. The country does not suffer from a shortage of taxable information. It suffers from failure to transform information into effective administration. Digitalisation, if combined with institutional reform, can broaden the tax base, reduce corruption, strengthen taxpayer rights and improve revenue collection without imposing additional burdens on already documented sectors. That is precisely the kind of reform Budget 2027 requires. [Concluded] _____________________________________________ Huzaima Bukhari, lawyer and author, is an Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Senior Visiting Fellow of Pakistan Institute of Development Economics (PIDE) Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.
The Tax Proposals Budget 2027 series: Tax Proposals Budget 2027-I · Tax Proposals Budget 2027-II · Tax Proposals Budget 2027-III · Tax Proposals Budget 2027-IV · Tax Proposals Budget 2027-V · Tax Proposals Budget 2027-VI · Tax Proposals Budget 2027-VII · Tax Proposals Budget 2027-VIII · Tax Proposals Budget 2027-IX · Tax Proposals Budget 2027-X · Tax Proposals Budget 2027-XII
