BIR almost done with proposed reforms in tax audit process
The Bureau of Internal Revenue (BIR) has nearly completed its evaluation of controversial letters of authority (LOAs) that allow its agents to audit the books of a taxpayer, sometimes resulting in extortion and corruption, BIR Commissioner Charlie Mendoza said on Thursday.
Mendoza’s update comes a month after the BIR introduced reforms to prevent unscrupulous revenue agents from using LOAs to harass taxpayers, including the creation of a technical working group to review current practices and develop a new system.
According to Mendoza, the main drive is to address complaints about multiple LOAs being issued by different offices and officers within the BIR.
“Our technical working group is already in the advanced stages of the study,” he told reporters. “We are moving toward a streamlined, consolidated LOA framework.”
Clear parameters
Under the proposed system, taxpayers would receive only one LOA per taxable year, covering all internal revenue taxes. The reform has already been backed by Finance Secretary Frederick Go.
“They [taxpayers] will no longer need to file documents repeatedly with different officers. We are also developing clear parameters that revenue officers must follow when issuing LOAs,” Mendoza said.
He further clarified that while the BIR plans to reduce the number of offices authorized to issue LOAs, it is unlikely to be limited to just one.
“Currently, we have the Value-Added Tax Audit Section, regional offices, the Large Taxpayer Service, the National Investigation Division for fraud cases and special task forces,” Mendoza said.
“As much as possible, we will reduce the number of offices that can issue LOAs. If we can implement a single LOA per taxable year based on risk-based parameters, it will be better for the taxpayer and easier for us,” he added.
Millions of pesos were allegedly collected through bloated tax assessments conducted by some BIR personnel, who reportedly applied a 70/30 scheme: 70 percent of the assessed amount was pocketed by revenue officers, while only 30 percent was officially documented.
Mendoza stressed that only around two to three percent of the agency’s collections come from the issuance of LOAs.
As of Jan. 7, the BIR’s 2025 revenue collections stood at P3.103 trillion, about 3.4 percent shy of its P3.219-trillion target. Mendoza conceded that it is now unlikely for the agency to meet its full-year target.
