Senate blue ribbon panel to quiz BIR on steps taken to prevent abuse of LOAs
The Senate will resume this week its investigation into the alleged abuse and misuse of letters of authority (LOAs) and mission orders (MOs) issued by the Bureau of Internal Revenue (BIR), Senate President Pro Tempore Panfilo Lacson said on Monday.
“The Senate Blue Ribbon Committee needs to be formally informed of the new reforms instituted by the BIR in relation to the issuance of LOAs and if safeguards are already in place to prevent or at least minimize abuse committed against our taxpayers, then we may have to conclude the committee hearings on the matter,” Lacson said in a statement.
The BIR announced on Jan. 27 that it is lifting the suspension on the issuance of LOAs and MOs after completing a comprehensive review of its audit procedures and reform measures.
Along with the Department of Finance (DOF), the BIR said the issuance, creation, printing and signing of audit authorities and related field operations may now resume under newly issued guidelines and strengthened oversight mechanisms.
LOAs allow the BIR to examine a taxpayer’s books, records and other relevant documents to ensure tax compliance, while MOs authorize revenue officers to conduct surveillance on business establishments and apprehend violators of tax laws and regulations, among other functions.
70/30 scheme
The issuance of LOAs and MOs was suspended in November last year following mounting complaints from taxpayers.
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 went into their pockets while only 30 percent was officially documented.
During the previous Senate hearing conducted in December, committee vice chair Erwin Tulfo said that LOAs and MOs—which were both intended to ensure lawful tax collection—were being used to harass and extort money from local and international companies.
Sen. JV Ejercito also previously raised the BIR’s alleged “weaponization” of LOAs to “make money,” saying it has lowered confidence among domestic and foreign investors and undermined the country’s tax system.
In a statement on Monday, Ejercito said he had a recent meeting with BIR Commissioner Charlie Mendoza on the matter.
“I am satisfied that the new BIR commissioner acted on the matter of the weaponization of the LOA for extortion … we have to give the new commissioner the chance to institute these reforms and clean up BIR,” he added.
Under the new rules, the BIR will implement a single-instance audit framework, limiting taxpayers to one LOA per taxable year by consolidating multiple audit authorities.
It has also shut down the Value-Added Tax Audit Section and Audit Unit and disbanded various audit task forces. This is intended to establish clearer lines of authority by limiting the issuance of LOAs to regional offices and the Large Taxpayers Service.
To improve transparency, the BIR has also launched an online LOA verifier through the REVIE chatbot on its website.
