Govt unveils ambitious digital overhaul for FBR in Budget 2025–26

The Federal Board of Revenue (FBR) is set to undergo a sweeping digital transformation as part of the government’s strategy to modernise Pakistan’s tax administration and improve revenue collection, according to the federal budget speech presented by Finance Minister Muhammad Aurangzeb for FY2025–26 on Tuesday.

Aurangzeb presented the federal budget for the second time as the coalition government sought to revive the economy, meet the International Monetary Fund (IMF) benchmarks and provide some relief to the tax-weary masses.

FBR Tax Target

The Federal Board of Revenue (FBR) is assigned to collect Rs14.13 trillion in FY26, up 19% as compared to Rs11.9 trillion revised estimates for FY25.

The tax collection for FY26 includes Rs6.9 trillion in direct taxes and Rs7.2 trillion in indirect taxes.

Key components of the transformation

The reform plan includes a nationwide rollout of Digital Production Tracking, aimed at monitoring manufacturing output and linking it with digital invoicing systems.

This move is expected to reduce underreporting of production and ensure greater documentation of business activity.

To further strengthen documentation, the FBR is expanding business-to-business (B2B) e-Invoicing, making it mandatory across multiple sectors.

The plan also includes deeper integration of the Point of Sale (POS) system for retailers and the deployment of an E-way Billing framework to digitally track the movement of goods.

In a significant shift away from traditional audit practices, the FBR will fully implement Faceless Audit and Faceless Customs Audit systems. These aim to eliminate human discretion in audit processes, reduce corruption, and improve taxpayer confidence.

Technology-led enforcement

Artificial Intelligence (AI) will be used for risk-based audit selection, while fraud analytics tools will support customs enforcement and refund scrutiny. A Central Control Unit is being established to provide real-time visibility and centralised oversight across all enforcement and compliance operations.

Workflow digitisation is also being prioritised, with automated alerts and a digital case management system intended to expedite processing and enforcement without bureaucratic delays.

Institutional support and capacity building

The transformation will be supported by the PRAL Board, which will oversee IT governance and system upgrades. Additionally, the government plans to introduce “Audit Mentors” within the FBR to guide staff through the transition and promote digital literacy.

According to budget documents, these reforms are not only targeted at boosting the tax-to-GDP ratio – currently one of the lowest in the region – but also at aligning Pakistan’s tax administration with global best practices.

What this means for taxpayers

For taxpayers and businesses, the FBR’s digital push signals a future of increased compliance obligations but potentially fewer bureaucratic hurdles. E-invoicing, production tracking, and centralised audits will make non-compliance harder and speed up legitimate processing.

The government’s digital transformation agenda is expected to gain traction over the fiscal year, with multiple milestones scheduled for rollout through FY2026.