Islamabad: The federal government has proposed a major transformation in Pakistan’s tax administration system through the Finance Bill 2026, introducing a new framework for faceless audits, assessments, and appeals aimed at reducing direct interaction between taxpayers and tax officials.
The proposed amendments seek to modernize the tax system by establishing a National Faceless Centre, which will handle selected tax proceedings through digital platforms and electronic communication. The initiative is intended to enhance transparency, minimize discretionary powers, and improve taxpayer confidence in the tax administration process.
Faceless Audits and Assessments Under Section 122E
A newly proposed Section 122E empowers the Federal Board of Revenue (FBR) to conduct various tax proceedings without physical interaction between taxpayers and Inland Revenue officers.
Under the proposal, the faceless regime may apply to:
- Tax audits conducted under Sections 177 and 214C of the Income Tax Ordinance, 2001.
- Proceedings related to unexplained income, assets, or expenditures under Section 111.
- General tax assessments.
- Rectification of mistakes under Section 221.
The FBR will determine the categories of taxpayers, types of income, and cases that will be processed through the faceless system.
E-Hearings and Officer Confidentiality
Where a hearing is required, taxpayers will participate through electronic hearings (E-hearings) instead of physical appearances.
A notable feature of the proposal is the strict confidentiality of tax officers involved in proceedings. The identity, face, and voice of officers conducting E-hearings will remain undisclosed to taxpayers, a measure designed to promote objectivity and prevent undue influence or harassment.
Separate Officers for Greater Transparency
To strengthen accountability, the National Faceless Centre will separate key functions within the same case. Different officers will handle:
- Audit proceedings
- Assessment functions
- Quality control reviews
This segregation of duties is intended to create internal checks and balances and improve the fairness of tax decisions.
Faceless Appeals Introduced Through Section 129A
The Finance Bill 2026 also proposes Section 129A, extending the faceless model to tax appeals.
Under the proposed framework, appeals filed by taxpayers under Section 127 can be processed through the National Faceless Centre in accordance with procedures prescribed by the FBR.
While the appeal process becomes digital, the legal rights and protections available under existing provisions of Sections 127, 128, and 129 will remain intact.
Fully Digital Communication
All appeal-related communications, including:
- Submission of evidence,
- Filing of documents,
- Notices and notifications,
- Responses and representations,
will be conducted exclusively through electronic means.
The move is expected to accelerate dispute resolution while reducing administrative delays.
National Faceless Centre to Operate Through Algorithms
The National Faceless Centre, established under proposed Section 227D, forms the backbone of the new faceless tax regime.
According to the proposed law, jurisdiction over cases will be assigned through automated algorithms developed by the FBR. This system aims to reduce human intervention in case allocation and ensure impartial distribution of cases among officers.
The Finance Bill further provides legal protection to the faceless framework by stating that notices, orders, or proceedings cannot be challenged solely because:
- The officer’s identity was kept confidential; or
- The officer lacked traditional territorial jurisdiction over the taxpayer.
Tax experts view the proposed faceless audit and appeal system as one of the most significant digital reforms included in the Finance Bill 2026. If enacted, the measures could substantially reduce direct taxpayer-officer interaction, strengthen transparency, and align Pakistan’s tax administration with international digital governance practices.
The proposals, however, are subject to parliamentary approval and may undergo amendments before becoming law.
