Pakistan enters execution phase of AI-driven tax reforms as finance minister touts early gains

• Finance Minister Aurangzeb says AI-driven systems broadening tax base and reducing human discretion in revenue collection

• Says digital production monitoring expands to key industries, with sugar and cement sectors generating billions in additional revenue

• Highlights AI-powered risk engine identifies 840 high-risk audit cases with an estimated Rs34 billion revenue potential

 KARACHI: Pakistan's Finance Minister Muhammad Aurangzeb said on Saturday that the government's sweeping overhaul of the national tax collection system had moved from planning to full-scale implementation, with artificial intelligence-powered tools already delivering measurable gains as authorities intensify efforts to broaden the tax base, curb tax evasion and reduce human discretion in revenue administration.

The reforms are part of the government's broader economic agenda to modernize tax administration, improve compliance and boost revenue collection through greater digitization, data analytics and technology-driven governance.

Speaking in televised remarks at the Lahore University of Management Sciences (LUMS), Aurangzeb said the reform programme was no longer at the conceptual stage but was now producing tangible operational results.

"This is not something which is in the design phase," Aurangzeb said. "It is very much in execution and implementation and therefore we are beginning to see the operational effectiveness around this."

"Our vision is clear," he continued. "A documented economy, a digitally integrated state and public institutions where technology replaces discretion, transparency replaces opacity and facilitation replaces harassment."

The finance minister said Parliament had approved a new operating model for the Federal Board of Revenue (FBR) that would end the concentration of powers previously exercised by individual tax officers, with implementation increasingly driven by artificial intelligence, technology and data analytics.

He said digital production monitoring was now operational in four sectors and was being implemented or designed across 16 more, which together account for around 70 percent of Pakistan's manufacturing gross domestic product.

Aurangzeb said monitored production in the sugar sector had increased 31 percent during the latest crushing season, with the system expected to generate around Rs27 billion (US$97 million) in additional revenue. He added that authorities had also recovered Rs32 billion (US$115 million) from the cement sector.

"Sales tax theft is one of the most criminal activities because you are collecting that money to pass it on to the exchequer," Aurangzeb said. "We are going to actually go after all sectors where this is happening, because this is not something which we can tolerate or quite frankly afford anymore."

He said the FBR's AI-powered risk engine had identified 840 high-risk audit cases with an estimated additional revenue potential of Rs34 billion (US$122 million) after integrating taxpayer records with data from the national identity database to detect discrepancies between declared income and actual lifestyles.

Aurangzeb said faceless customs assessments had increased the average declared value of consignments to Rs7.8 million (US$28,000) from Rs6.3 million (US$23,000) while significantly reducing direct interaction between tax officials and businesses.

The finance minister said tax collection had increased from Rs9.3 trillion (US$33.5 billion) in fiscal year 2023-24 to Rs13 trillion (US$46.8 billion) in the last fiscal year—an increase of about 40 percent over two years.

He said the reforms were aimed at making tax compliance easier for honest taxpayers while building stronger, more transparent institutions through technology-driven systems rather than individual discretion.