FBR Expects Digitalisation to Improve Tax Collection

The Federal Board of Revenue (FBR) believes that the growing use of digital systems and better taxation of the digital economy will help increase tax collection during the fiscal year 2026-27. According to the FBR’s latest revenue forecasting report, digitalisation can play an important role in improving direct tax revenue and strengthening Pakistan’s overall tax system.

In recent years, digital businesses have expanded rapidly. More people now use online platforms for shopping, banking, freelancing, and other services. As the digital economy continues to grow, the government sees an opportunity to bring more businesses and individuals into the tax net. By properly documenting and taxing digital transactions, the FBR expects to increase revenue and build a fairer taxation system.

FBR Expects Digitalisation to Improve Tax Collection

The report highlights that the rising share of direct taxes in total government revenue is a positive sign. Direct taxes, such as income tax, are generally considered more stable and equitable than indirect taxes because they are based on a person’s or company’s earnings. However, the FBR believes that maintaining this positive trend will require more than just higher tax rates. It will depend on expanding the tax base and encouraging more businesses to operate within the formal economy.

One of the key priorities identified in the report is improving documentation. Many economic activities in Pakistan still take place outside the formal system, making it difficult for tax authorities to monitor income and collect taxes. Better documentation can help reduce tax evasion and increase transparency. The FBR also plans to improve the use of third-party data, allowing it to verify financial information from different sources and identify taxpayers more accurately.

Reducing informality is another important goal. A large informal sector limits the government’s ability to generate revenue and creates an uneven playing field for businesses that already pay taxes. By encouraging businesses to register and comply with tax laws, the FBR hopes to strengthen long-term revenue growth and improve economic governance.

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The report also stresses the importance of diversifying government revenue. Instead of depending heavily on traditional tax sources, the FBR believes that there is a need to develop new revenue streams. Effective taxation of the digital economy, careful review of tax exemptions, and better administration of indirect taxes can all contribute to a stronger and more balanced tax system.

Rationalising tax exemptions is another area of focus. Some exemptions may no longer serve their intended purpose and can reduce government revenue unnecessarily. Reviewing these exemptions can help improve fairness while increasing the amount of tax collected.

Overall, the FBR is optimistic that digitalisation will support stronger tax collection in the coming years. By improving documentation, using modern technology, expanding the tax base, and bringing more economic activities into the formal sector, Pakistan can build a more efficient and sustainable taxation system. If these reforms are implemented successfully, they can not only increase government revenue but also support economic stability and create a fairer environment for taxpayers across the country.