In an attempt to meet the government?s tax collection target for the year, Bureau of Internal Revenue (BIR) Commissioner Lilian Hefti has ordered an audit of all 2007 tax returns using an ?industry benchmarking? method.

The audit will cover corporate and individual taxpayers.

Revenue Memorandum Order No. 20-2008 stipulates the guidelines for tax audits using industry benchmarks on tax payment-to-sales ratios.

Under the industry benchmarking method, the BIR will come up with threshold levels on various tax-to-sales ratios. A taxpayer whose payment falls short of the standard ratio of income tax to gross revenues will have to be subjected to a full-scale audit.

The standard ratios vary per-industry and per-profession.

Hefti said in the memorandum: ?From the results of the benchmarks established, the investigating offices shall draw a list of taxpayers for the issuance of LAs [letters of authority] and TVNs [tax verification notices] for those whose tax compliance is below the normal or common benchmark for the industry/profession.?

LAs are issued to tax personnel who are asked to conduct tighter audit of returns of certain taxpayers. TVNs are issued to the taxpayers concerned to inform them that their returns will be subjected to tighter audit after the benchmarking method reveals that they do not reach standard ratios of tax payment to revenues.

Hefti also said in the memorandum order that the audit would also focus on verifying the computation of taxpayers? dues, the validity of claims for income tax holidays and tax credits, and accuracy in computing allowable deductions from taxable income, among others.

In line with the government?s aim of posting a balanced budget this year, the BIR is tasked to collect P845 billion in taxes, up 10.3 percent from P765.9 billion last year.. With editing by INQUIRER.net