Priority for new BIR chief
While Filipinos were glued to developments in the massive flood-control scandal, two senators are drawing the public’s attention to the Bureau of Internal Revenue (BIR), an agency that has long been tagged for corruption. If the Department of Public Works and Highways (DPWH) has flood control projects that its personnel use to steal taxpayer money, Sen. Erwin Tulfo says the BIR has the Letters of Authority (LOA) that its unscrupulous employees employ to do the same.
During the Senate plenary deliberations on the proposed 2026 national budget last week, Senate Deputy Majority Leader JV Ejercito also sounded the alarm over the “weaponization” of LOAs, warning that their use as a tool for corruption is scaring off investors and undermining confidence in the country’s tax system.
Ejercito detailed some disturbing cases he has heard, including the issuance of LOAs covering taxable years already settled and fully paid; LOAs that lump multiple taxable years, and a tax assessment of P100 million reduced to P75 million after a “settlement,” with instructions to “fix the receipt.”
Tulfo, for his part, noted that he has many friends in the business community who complained to him about the scheme. “They’re even going after the small ones … single-proprietorship businesses—they target them and issue a LOA,” Tulfo lamented.
Tax-audit power
“Of course, they don’t want the hassle, so they’d rather just settle. Because even if they’ve paid everything completely and have receipts for all of it, some BIR inspectors—the examiners—will keep looking for faults. Sometimes they even backtrack five to six years. Where are they supposed to find those documents?” he said in Filipino.
This abuse of the LOAs is not a recent development. Just like the corruption in DPWH projects, this appalling BIR scheme has been going on for decades as well. Commissioners of the tax agency come and go, but the individuals below them who use this tax-audit power to force companies and other entrepreneurs to cough up money remain.
The excessive use of LOAs by BIR personnel has raised serious concerns among domestic and foreign investors, according to Ejercito, citing his discussions with the European Union ambassador and the American and European chambers of commerce. Ejercito added that the Philippines’ already low ranking in foreign direct investment attractiveness is further affected by these practices, which create “deterrents” for investors who seek stability and fairness in tax enforcement.
Second most corrupt agency
Newly appointed BIR Commissioner Charlito Martin Mendoza, who was plucked out of the Department of Finance where he is serving as undersecretary to replace Romeo Lumagui Jr., has stated his urgent and nonnegotiable priority is to maximize revenues and close the gap between actual collections and the revenue target. He also plans to sustain and expand efforts to advance digitalization and streamline processes to make taxation more client-focused and transparent.
However, we believe Mendoza’s mission should include addressing immediately the problem on LOAs. As Tulfo noted during the Senate budget deliberations, Mendoza really needs to do something about his own subordinates who are using those LOAs to make money. “If you’re going to take action [about LOA abuse], you need to reform that agency. Because right now, it seems like it’s the second most corrupt agency after the [DPWH]—that’s the BIR.” Ejercito likewise urged Mendoza to move swiftly to “clean house” and install safeguards to prevent LOA misuse.
One measure is to set up a hotline for complaints against the abuse of LOAs similar to the “Sumbong sa Pangulo” website launched by President Marcos to receive exclusively the public’s complaints against DPWH corruption.
Smuggling and illicit trade
It should be separate from the BIR’s existing online eComplaint system which handles all types of problems the people experience in dealing with the BIR. The hotline must be dedicated solely for tax-audit issues and be handled directly by Mendoza’s office.
The business community believes Mendoza, who was appointed by the President last Nov. 13, is well equipped to address this problem. As undersecretary at the DOF, he had been supervising both the BIR and the Bureau of Customs. A key part of his role was leading the campaign that sought to curb smuggling and illicit trade through digitalization. The initiative helped the DOF exceed its revenue target in 2024, reaching a 27-year high of P4.42 trillion.
In his message to the BIR employees upon assuming the post, Mendoza reminded the men and women of the BIR to conduct their duties with integrity and transparency in order to foster trust and compliance in the tax system. “When people walk into our offices and experience clarity, courtesy, and consistency, their trust in us grows. And when trust grows, compliance follows naturally. This is how we change the narrative, not through slogans, but through service.” Addressing the LOA problem now will go a long way in achieving this goal.
