ISLAMABAD: National Assembly Standing Committee on Finance Wednesday raised questions over the credibility and authenticity of the “Pakistan’s New Tax Operating Model” to conduct audits and assessments of individuals through “AI” by implementing the National Faceless System (Inland Revenue) in phases from October 1, 2026.
In this regard, Chairman Federal Board of Revenue (FBR) Rashid Mahmood Langrial gave a detailed presentation to the committee on “Pakistan New Tax Operating Model”, highlighting that only “AI” will deal with the taxpayer, replacing the tax official at audit stage.
Chairman of the committee Naveed Qamar asked the FBR to explain the possible “trigger-points” to be used by the “AI” system for starting audits and investigations against individuals under the new system.
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MNA Sharmila Faruqui stated that the government is creating a surveillance state where all data of citizens is available with the FBR in the name of tax reforms.
Another committee Member pointed out that it seems that the taxpayers would be in complete control of the FBR under the new “Pakistan New Tax Operating Model”.
Tax authorities informed that over 450 factors would be possible trigger points for taxpayers, but it would vary from one individual to another.
Finance Minister Muhammad Aurangzeb disclosed before the committee that the revenue theft, leakages and pilferages in tax system would be detected through the National Faceless System (Inland Revenue) to be implemented in phases from October 1, 2026.
During a presentation on “Pakistan New Tax Operating Model” before the committee, Finance Minister said that it is a reality that we tried everything in the past to end corruption in the tax machinery but in vain. Even honest officials were posted in the field formations. The new “AI” based system will definitely detect leakages in the tax system without human intervention, Aurangzeb added.
In a detailed presentation to the committee on “Pakistan New Tax Operating Model”, FBR Chairman Rashid Mahmood Langrial stated that the need for a new “Pakistan New Tax Operating Model” is evident from the astonishing data. Around 80 percent of the highest value property transactions have not been disclosed in the income tax returns. Nearly 9,000 individuals with Rs750 billion deposits reported zero income. A 98.9 percent of high-deposit individuals under-reported in tax returns.
FBR Chairman said that the purpose of the new system is not revenue enhancement, but to end harassment to the taxpayers. A key feature of the new system is that the assessment function has been handed over to the taxpayers. Taxpayers would not have any idea about the tax official who is dealing with his case.
In phase-I of the system to be implemented from October 2026, only “individuals” category (salaried class) would be covered. The phase 2 and 3 would be launched in 2027 for other categories of taxpayers.
FBR Chairman said that the concentration of power to a single tax official would be eliminated under the Faceless system. Presently, all functions relating to a taxpayer are being dealt with by a single tax official having territorial jurisdiction over the taxpayer.
The first major change under the Faceless system is that the Inland Revenue official would not be able to issue any kind of notice to the taxpayer. All powers of the Regional Tax Offices and Corporate Tax Offices to conduct audit/assessments etc would be completely eliminated, FBR Chairman said.
Under pillar-I, the Faceless Audit Unit /National Faceless Audit Wing (NFAW) is a centralised, fully digital, and anonymous wing conducting risk-based audits and continuous WHT and advance tax monitoring through the Central Data Hub (CDH), with algorithmic case allocation and no recovery or demand issuance powers.
The second pillar is National Assessment Wing (NAW) / Faceless Assessment Unit, which will exercise quasi-judicial functions, centralised digital anonymity including assessment orders, show-cause notices, refund approvals, and exemption processing, with no audit or field enforcement mandate.
The third-Pillar Field Operations Wing (FOW) / Field Operations would act as the field enforcement arm, responsible for recovery, prosecution, taxpayer registration, field verification, and tax base expansion, with no powers to assess, adjudicate, or modify demands, Langrial said.
Three green channels would be available to the taxpayer. He can pay tax liability under stage-1 of green channel facility based on the discrepancy report generated through the AI. Taxpayer can rectify his mistake to end discrepancy at stage-one of green channel. If taxpayer does not opt for stage-1, he would be given another opportunity after generating audit report to avail stage-2 of the green channel facility. If the taxpayer does not avail the facility, the final show cause notice will be issued to the taxpayer with all facilities of filing of appeals.
About the success of the faceless system on customs side, FBR Chairman said that 19 percent revenue per goods declaration has been increased.
FBR Chairman further said that taxpayers would have the option of e-hearing against the tax department with faceless tax officials whose identity would be concealed. The Board may independently extend faceless proceedings to appeals, with discretion over scope, taxpayer categories, and phased implementation, regardless of the underlying audit or assessment model.
He added that the faceless processing will be driven through system-based risk identification, with flagged cases handled in two modes with two separate audit and assessment wings:- Single Blind and Double Blind. In the case of Single Blind, the tax officer identity is concealed from taxpayer. In the next stage of Double Blind, taxpayer identity is also concealed from tax officer.
Copyright Business Recorder, 2026
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