FBR's AI system to look at corporate and non-salary returns first for audit
The Federal Board of Revenue's new AI-based system will prioritise corporate and non-salary returns in its first audit phase, according to sources. High-risk corporate cases will be flagged through the Compliance Risk Management system.
- Corporate and non-salary returns come first in the initial audit phase, sources said.
- CRM became mandatory for case selection under a circular issued on 31 August 2026.
- Criteria for scoring a return as high risk have not been published.
The Federal Board of Revenue's new AI system will look at corporate and non-salary returns first when it begins selecting cases for audit, according to sources cited by Business Recorder and PhoneWorld. The system is part of the FBR's Compliance Risk Management (CRM) setup and will flag high-risk corporate cases in its first phase.
Sources said the FBR is not targeting the salaried class. However, salary returns with short documents or short payments will still be questioned through the CRM system, while data from non-corporate returns will be examined for audit purposes.
CRM was made mandatory for case selection under a circular issued on 31 August 2026, and the rules took effect on 1 September. A corrigendum issued on 1 September added section 111 to the covered provisions, alongside sections 122, 122A and 177 of the Income Tax Ordinance, 2001. Under the new control, a case that did not come through CRM cannot start a new proceeding.
The Directorate-General (Compliance Risk Management) must keep the system running without interruption and provide training and technical support to field staff. Any downtime must be reported to the Member (IR-Operations) within 24 hours. For overrides, the circular requires written justification for an exemption and approval from a named senior officer.
The FBR previously selected audit cases through the Risk-Based Audit Management System. A development-partner project page says the CRM system was finalised in December 2024 and uses machine learning. The AI system is expected to improve gradually through learning and testing.
A risk flag does not automatically mean evasion or fraud; flagged cases may be selected for further examination, audit or assessment. The criteria for scoring a return as high risk have not been published, and the reported portions of the circular say little about how a taxpayer can challenge a selection.
A parliamentary panel has raised concerns about the credibility of the model. No FBR official has been quoted on the record about the system. The FBR is also moving toward a National Faceless System, with phased rollout starting on 1 October 2026.
Background
khabr.pk reported on 2 November that Prime Minister Shehbaz Sharif directed the State Bank of Pakistan and the FBR to address tax problems faced by SMEs and exporters.
Why it matters for Pakistan
Companies filing corporate returns and taxpayers with non-salary income are the first likely to see their returns scored for audit risk. Salaried taxpayers whose returns show short documents or short payments may still be questioned. Because the scoring criteria are unpublished and the circular says little about challenging a selection, taxpayers have limited public information on how cases are picked.
