While Part 1 of this article, published on October 16, 2026, received a positive reception, a common question was raised regarding whether any global precedent supports separating IT and digitized activities from non-IT functions. It is acknowledged that complete segregation is rare internationally. Nevertheless, given the dominant influence of a bureaucracy predominantly trained in general education, this issue warrants a fresh, alternative examination.
Over the past two to three years, IT infrastructure and digitization capabilities have undergone a fundamental transformation, driving costs down significantly while enhancing operational efficiency.
Back in 2019, during the author’s tenure as Chairman of the Federal Board of Revenue, there was strong pressure to purchase software from one of the major providers of that period - ORACLE, SAP, or Huawei - utilizing available World Bank project funding. As a layman in technology, the author declined to execute any agreement due to a lack of independent, specialized technical support to verify whether the quoted prices reflected fair market value.
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In hindsight, this decision proved to be a blessing in disguise. Technology has advanced dramatically since then while becoming far more cost-effective, making the current moment ideal for Pakistan to make targeted IT investments that offer high returns.
A notable paradox exists in modern technological adoption: nations that made heavy IT investments between 1990 and 2020 often found themselves anchored to outdated architectures as technology shifted post-2015. Consequently, late adopters now hold a distinct advantage by leapfrogging older systems.
Brazil’s experience as a developing nation - detailed below - serves as an instructive model. By following a similar strategy, Pakistan can achieve superior outcomes at a fraction of the cost.
While digital tax systems have been adopted worldwide, the “Brazilian Example” is frequently cited as an exemplary model of successful digital modernization.
Central to this approach is a distinct structural separation between Receita Federal, which handles operational tax administration, and SERPRO, its dedicated state-owned IT agency. A key element of this ecosystem is the Public Digital Accounting System (Sistema Público de Escrituração Digital, or SPED), introduced in the late 2000s and jointly administered with SERPRO. Officially launched in 2007, SPED reshaped Brazil’s financial environment by moving corporate tax compliance away from paper records toward a fully unified, real-time digital architecture.
Conventional annual corporate tax filings became obsolete with the rollout of SPED, which established digitized accounting records and comprehensive electronic bookkeeping. By continuously transmitting transactional and accounting data to tax authorities in real time, the system simplifies compliance and eliminates the heavy administrative burden of retrospective annual filings.
Furthermore, SPED laid the foundation for compulsory adoption of Electronic Waybills (CT-e) and the Electronic Invoice (Nota Fiscal Eletrônica - NF-e). Rather than conducting retrospective paper invoice audits months later, SERPRO and the Receita Federal (Federal Revenue) validate and process transactions instantly at the point of sale or transport, immediately conferring legal validity.
The massive influx of structured digital data allowed tax authorities to implement advanced big data management and risk analysis systems (such as RECEITA DATA).
Authorities can instantly run algorithms to spot discrepancies, mismatching cross-references between buyers and sellers, and artificial accounting adjustments. This drastically reduced tax evasion, minimized unfair market competition from informal businesses, and increased government revenue collection.
Operating purely as an advanced software and data entity, SERPRO has developed infrastructure that far exceeds the technical capabilities of typical public sector agencies. Key components of this ecosystem include:
• Centralized “Receita Data” Lake: SERPRO constructed a unified repository that enables the Receita Federal to deploy sophisticated artificial intelligence, big data analytics, and predictive fraud detection throughout audit procedures and dispute resolutions.
• Automated, High-Precision Audits: Brazil’s Receita Federal is popularly known as “The Lion”, reflecting the remarkable accuracy of its SERPRO-powered auditing algorithms in identifying inconsistencies prior to manual inspection.
To modernize Pakistan’s tax administration, the Federal Board of Revenue (FBR) has implemented a suite of advanced digital initiatives and IT-driven measures, which encompass the following key functions:
a. Six-Year Digital Data Archiving: Registered entities must preserve digital records of all transmitted sales and purchase transactions for six years.
b. National Faceless Centre (NFC): Legally grounded in the Finance Act 2026 and sanctioned by the Federal Board of Revenue (FBR), the NFC replaces manual officer-conducted assessments with automated, risk-assessed digital audits and faceless proceedings to remove direct contact between taxpayers and tax authorities.
c. Automated Return Review via AI: The FBR is leveraging artificial intelligence to systematically evaluate tax returns, flag factual and legal discrepancies, and issue automated electronic notices through the IRIS portal, providing taxpayers a seven-day window to respond or rectify errors.
d. New Tax Operating Model (NTOM): Introduced within the FY2026-27 budgetary roadmap, the NTOM restructures tax administration into a technology-driven, centralized model that structurally decouples field operations from assessment and audit functions.
e. Electronic Invoicing & POS Integration: To document commercial transactions and counter sales tax leakage, the FBR is continuously expanding mandatory real-time electronic invoicing and Point-of-Sale (POS) integration for registered enterprises.
f. Production Monitoring via Digital Eye: Developed under the UK-supported REMIT Pakistan initiative in partnership with Adam Smith International, the “Digital Eye” tracking system enhances operational oversight and tax compliance in critical industrial sectors like sugar and cement.
While the measures taken or proposed in Pakistan align with international precedent, such as in Brazil, four decades of experience suggest that these steps will ultimately prove ineffective without a capable, trusted institution to execute them. By all measures, the FBR currently lacks both the technical capacity and public trust required for this task. Furthermore, neither the FBR nor its technology wing, PRAL, possesses the software capabilities needed to manage an undertaking of this scale.
Like other areas of governance, the bureaucracy in Islamabad remains unwilling to delegate or dilute its authority due to an entrenched desire for control. This stance rests on the flawed belief that maintaining direct control over economic data is necessary to collect state revenues and extract personal gains - a fundamentally farcical premise.
Given the distinct socioeconomic realities of Pakistan’s economy, expanding or building the IT capacity of a digital organization directly within the FBR is, in the author’s assessment, ill-advised.
Currently, the national economy operates across three distinct tiers: first, a formal, documented sector whose financial activities flow through the tax system; second, a pseudo-documented sector where transactions pass through banking channels and fintech platforms like EasyPaisa - as evidenced by substantial bank deposit balances - yet remain entirely outside the tax net; and third, an undocumented cash economy completely detached from both banking and tax frameworks.
Rather than establishing an isolated digital enclave within the FBR - an exercise destined to be ineffective - Pakistan requires a comprehensive national database of economic transactions that serves broader economic needs while concurrently supporting tax administration. For example, merely monitoring physical output, such as tracking sugar production via camera surveillance, fails to curb tax evasion when wholesale prices to dealers are understated by 10 to 15 percent and downstream distribution channels operate outside the tax system.
The proposed digital data authority should be physically autonomous and geographically separated from the traditional tax administration. Drawing a parallel with the State Bank of Pakistan, which functions out of Karachi, this body ought to be headquartered in the nation’s premier port city - a strategic hub handling approximately 95 percent of all imported goods.
Under this setup, a comprehensive audit trail would trace transactions from the initial Goods Declaration directly to the end-consumer invoice.
Because modern commercial activity is fundamentally intertwined with the banking sector, it is imperative that the State Bank of Pakistan mandate full compliance from its licensed scheduled banks. These institutions must seamlessly integrate and share financial data with data-processing entities that double as tax-collection bodies. This integrated approach represents the future of taxation in an increasingly digital world.
The takeaway at this junction is clear: evolving paradigms offer a timely window for Pakistan to adopt advanced and highly proficient technology. International precedents confirm that administrative and operational responsibilities can be effectively partitioned between the core tax authority and its IT/digital partner.
Enforcing a distinct structural division between these entities is vital. The digital arm needs to function as a completely faceless yet powerful institution - empowered to gather, source, and analyse data to drive actionable, intelligent insights. Under current conditions, this entity must not remain subordinate to the FBR in Pakistan.
Copyright Business Recorder, 2026