Broadening and deepening Pakistan’s tax base

Project Active from to State Effectiveness, Income taxes and Tax compliance

In collaboration with the Federal Board of Revenue, this project examines policy options to enhance tax base expansion through machine learning, transparency in taxpayer information, and streamlining processes.

Building on IGC’s engagement with the Federal Board of Revenue in Pakistan, this projects aims to support analytical work in the finance division and deepen the tax base by trialling different policy interventions for taxpayers and evaluating their success.

It is critical to learn which policies work best for certain groups of taxpayers to target them appropriately. To better understand that, we will:

  • Use machine learning tools to predict the income of targeted individuals based on their expenditures from other sources, suggesting a reasonable amount of income to declare.
  • Reveal to taxpayers what kind of third-party information is held on them and how much they have already paid as withholding or advance income tax.
  • Emphasise the unfairness of tax non-compliance through the accounts of honest taxpayers to appeal to individuals’ consciences.
  • Work together with the judiciary to streamline appeals and private disputes, to limit the scope for individuals to appeal to courts and evade paying taxes.

Lessons learnt from evaluating the impact of these interventions will be used to improve subsequent rounds of notices, eventually pointing out to the most effective ways to target individuals with policy options.