The Asian Development Bank (ADB) has announced an additional $200 million loan to support Pakistan’s efforts to modernize its revenue administration, while calling for a broader tax base and stronger tax compliance. ADB Vice President for South, Central and West Asia Yingming Yang said the bank’s Transforming and Digitalising Revenue Administration Project is expected to be considered by the ADB Board this year. The proposed project is aimed at supporting the Federal Board of Revenue’s transformation agenda through investment in technology, modern revenue systems, data analytics, compliance tools, cybersecurity, and institutional development.
Speaking at a Dialogue on Tax and Fiscal Sustainability in Pakistan, Yingming Yang said Pakistan had made significant progress in restoring macroeconomic stability and strengthening economic resilience. He said the next phase of reforms would depend on the country’s ability to mobilize domestic resources in a more efficient and fair manner. According to the ADB Vice President, strengthening domestic revenue collection is important for supporting Pakistan’s fiscal position while creating greater capacity for public investment and reducing dependence on debt and external financing.
The Transforming and Digitalising Revenue Administration Project is expected to support the Federal Board of Revenue’s ongoing transformation through digital infrastructure and modern tax and customs systems. The project will also include advanced data analytics, Artificial Intelligence based compliance tools, stronger cybersecurity, and institutional development. These measures are intended to help build a more technology driven revenue administration system and provide the Federal Board of Revenue with improved tools for managing taxpayer information, strengthening compliance, and improving revenue collection.
Yang said Pakistan’s tax reform agenda was gaining momentum, with the Prime Minister’s Federal Board of Revenue Transformation Plan and the new tax operating model providing a foundation for a more modern revenue system focused on taxpayers. He noted that successful implementation of the reforms could improve tax compliance and taxpayer services while strengthening the use of integrated data. The reforms could also reduce discretionary interventions by shifting the revenue administration system toward more structured and technology supported processes.
The ADB official highlighted the potential benefits of adopting a stronger risk based approach within revenue administration. Such an approach could help the Federal Board of Revenue identify compliance risks more effectively and direct resources toward areas requiring greater attention. Yang said improvements in domestic revenue collection should not be viewed only as a fiscal target. Higher and more sustainable tax collections could provide the government with greater room to invest in people, infrastructure, and public services while also strengthening economic resilience and reducing reliance on debt and external financing.
Yang identified Pakistan’s narrow tax base, widespread informality, and low compliance as key challenges that need to be addressed as part of the country’s tax reform agenda. He also highlighted ADB’s efforts to support Pakistan in broadening the tax base, improving tax policy, and strengthening public financial management. According to him, improving the structure and administration of taxation can help create a more effective system while supporting stronger domestic resource mobilization.
The ADB Vice President also welcomed the establishment of the Tax Policy Office, saying it could contribute to evidence based policymaking and support the development of a fairer tax system. He said the office could help reduce exemptions and lower compliance costs while supporting improvements in tax policy. The proposed $200 million ADB project, alongside Pakistan’s existing transformation initiatives, is aimed at strengthening revenue administration through digital infrastructure, modern systems, advanced analytics, Artificial Intelligence based compliance tools, and institutional improvements. The project is expected to be considered by the ADB Board during the year.
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