E-Invoicing and Digital Recordkeeping in Pakistan: Legal Readiness of the FederalBoard of Revenue and Taxpayers for a Digitized Compliance Regime

Abstract

The adoption of e-invoicing and the implementation of digital record-keeping as a mandatory practice in Pakistan have led to a notable change in the country's taxation administration and compliance environment. These reforms will be operationalized by making changes to the Sales Tax Rules, 2006, and delegated legislation of the Federal Board of Revenue (FBR) to improve transparency, reduce evasion of taxes, and to enhance revenue collection. Nonetheless, the institutional and legislative readiness to such a digitized regime is not yet studied. The paper provides a doctrinal discussion of the e-invoicing system in Pakistan, its legal foundation, administrative capability of the FBR and Pakistan Revenue Automation Limited (PRAL) and the willingness of the taxpayers to adapt to the digital demands. It concludes that the process of digital tax enforcement is mostly based on delegated and fragmented laws with low parliamentary oversight, and institutional constraints such as lack of governance and technical capacity of the process hamper successful execution. On the part of the taxpayer, a move to mandatory digitization is a liability in terms of compliance, especially to small and medium businesses, and is constitutionally questionable in terms of the due process, equality, and freedom of trade. The paper ends with a recommendation of legal and institutional changes to bring digitization back to constitutional and administrative viability and the rule of law.