Prime Minister Shehbaz Sharif has directed the closure of Pakistan Revenue Automation Ltd (PRAL), the company currently responsible for running the country’s tax system, within the next six months. A new and modern organization will be created to take its place.
This sudden decision has raised concerns among experts who fear that shutting down PRAL so quickly could disrupt daily tax operations. It may also cause delays in a $400 million World Bank project aimed at upgrading the Federal Board of Revenue’s (FBR) digital systems.
PRAL has long been criticized for using outdated technology and facing internal management problems. These issues have already caused setbacks in modernizing the tax system. Replacing it with a fully functional and efficient system by December will be a major challenge.
At the same time, the government has reportedly eased back on strict tax enforcement efforts. This softer approach has sparked further concern over whether Pakistan will be able to meet its commitments under the IMF program. Strict tax collection and digital reforms are key parts of the IMF’s expectations from Pakistan to improve revenue generation and reduce the budget deficit.
While the government claims that a new organization will bring better results, experts believe that the transition must be carefully managed.
Otherwise, it could damage ongoing reforms and reduce trust in Pakistan’s ability to handle financial programs supported by international lenders. The coming months will be critical in determining whether the tax system can be improved without creating chaos.
