The Federal Board of Revenue has stepped up its use of artificial intelligence, third party data and a faceless assessment system to identify tax discrepancies and curb income underreporting across the country. Chairman Rashid Mahmood Langrial has warned taxpayers and tax consultants that traditional methods of exploiting gaps in the tax system are becoming increasingly ineffective as the regulator strengthens its ability to analyse tax returns using newer analytical tools.
Langrial explained that tax consultants had previously factored in both a taxpayer’s actual tax liability and the likelihood of the tax authority detecting any misreporting when advising clients on what to declare. According to the chairman, the tax authority had limited capacity in the past to examine every return in detail, which allowed consultants to weigh the probability of detection before advising taxpayers on their reported income and tax liability. He cited an example in which a taxpayer with an actual liability of fifty rupees might previously have been advised to report a considerably lower figure, since the chances of the discrepancy being caught were considered low under the older system.
That situation, Langrial said, has changed significantly with the introduction of artificial intelligence tools and improvements in the tax authority’s ability to analyse returns. The Federal Board of Revenue now has the capacity to examine individual returns more closely and cross reference third party data to identify inconsistencies and potential discrepancies that would previously have gone unnoticed. He noted that the organisation already held substantial data within its systems but had previously lacked the analytical capacity to make full use of it, and that the introduction of artificial intelligence based tools is now enabling more efficient processing and analysis of taxpayer information. Third party information can also be compared against declared income, increasing the likelihood of identifying discrepancies between what taxpayers report and what other available financial data suggests.
Alongside its use of artificial intelligence, the tax authority is also strengthening its faceless assessment system, an approach designed to reduce opportunities for personal influence during the assessment process. Langrial said taxpayers could no longer expect that personal relationships with tax officials or their associates would help resolve issues arising from assessments, adding that the shift toward faceless operations is intended to make the tax system more technology driven while reducing direct interaction between taxpayers and officials. He urged taxpayers to have detailed discussions with their tax consultants before filing returns and advised consultants to rely on their knowledge of tax law to help clients remain compliant, rather than depending on past experience of navigating gaps in enforcement.
The chairman also pointed to the September 30 deadline for tax return filing, urging taxpayers to ensure their submissions are accurate before the cutoff, while noting that some taxpayers may have filing arrangements extending into December depending on their category. He clarified that the objective behind the new system was not to create unnecessary difficulty for taxpayers, but to ensure that the shift toward a more technology driven and data informed approach is properly understood across the taxpayer base. With expanded analytical capabilities, artificial intelligence tools and third party data now part of its enforcement approach, the Federal Board of Revenue is seeking to strengthen compliance and reduce the effectiveness of strategies that previously relied on gaps in detection.
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