FBR Increases AI Monitoring of Tax Returns

The Federal Board of Revenue (FBR) has broadened its utilization of artificial intelligence and data analytics to scrutinize tax filings and detect inconsistencies. As part of the system, tax returns will be cross-referenced with data from various government entities and other sources, encompassing property transactions, bank records, vehicle registrations and travel information.

The AI tool will also juxtapose taxpayers with comparable profiles to detect abnormal patterns or inconsistencies in their declarations. The FBR disclosed that the system was originally piloted on selected income tax and sales tax returns, and has now been expanded to encompass Income Tax Returns for Tax Year 2026 and subsequent sales tax returns.

An AI-generated risk flag does not inherently indicate that a taxpayer has engaged in tax evasion or fraud. Instead, cases flagged by the system may be chosen for further scrutiny, audit or assessment proceedings under the relevant legislation. This initiative will also augment the National Faceless Center (NFC) established in Islamabad, which employs computerized risk-based systems to select and allocate audit cases.

The FBR opined that the strategy aims to minimize discretionary intervention and promote greater consistency and transparency in the audit procedure.