BIR audits tax examiners

The Bureau of Internal Revenue (BIR) has temporarily suspended taxpayer investigations as the country’s biggest tax-collection agency audits revenue officers’ outstanding mission orders as well as letters of authority (LOAs) to determine their effectiveness in shoring up collections.

The BIR said yesterday that it had recalled all mission orders issued by the agency’s national investigation division (NID) and ordered all the division’s revenue officers to submit an inventory of all outstanding mission orders, including those already cancelled or terminated.

The BIR also suspended or terminated any further investigation, field audit or any form of business visitation pursuant to those mission orders unless otherwise authorized in writing.

The BIR earlier ordered its NID and revenue officers to submit a status report on all LOAs issued after June 30, 2016.

An LOA is an official document that empowers revenue officers to examine and scrutinize taxpayers’ books in order to determine their correct tax liabilities.

Internal Revenue Commissioner Caesar R. Dulay recalled and ordered an inventory of all outstanding LOAs, audit notices and letter notices as of June 30, 2016, in order to know who among tax examiners had pending investigations and consequently assess their performance.

In August 2016, Dulay issued Revenue Memorandum Order No. 57-2016 that required a revalidation of all LOAs issued under the Run After Tax Evaders (RATE) program, which brings alleged tax cheats to court.

Specifically, RMO 57-2016 required the submission to Dulay for special revalidation of all outstanding LOAs for which no preliminary assessments/final assessments have been issued or no cases have been filed with the Department of Justice or the courts as of June 30, 2016.

Under RMO 7-2018 issued on Jan. 16, Dulay ordered the submission of an inventory/status report of the revalidated LOAs as well as those issued after June 30, 2016.

“An effective review of audits done pursuant to the revalidated/nonrevalidated (LOAs) and (LOAs) issued after June 30, 2016, is central to the [BIR’s] focused effort to significantly improve current audit guidelines, policies and procedures, including reporting requirements governing tax audits/investigations within the context of a responsive system of tax collection/enforcement measures,” Dulay said in RMO 7-2018.

“Noncompliance with the foregoing shall be a ground for the imposition of appropriate administrative sanctions/penalties,” Dulay warned.

Dulay told reporters recently that he felt that while the LOAs were supposed to contribute to the BIR’s collection efforts, he “didn’t see much improvement.”

“And some, like the first time I came in [at the BIR] and had an inventory, they took a long time,” even exceeding the 180-day deadline to issue a tax assessment report and determine a taxpayer’s deficiency, Dulay added.

In light of the lower personal income tax rates that took effect this year under the Tax Reform for Acceleration and Inclusion (TRAIN) act, the BIR expects collections from net income and profits to decline in 2018.

Dulay said the TRAIN is expected to contribute an additional P15.89 billion in tax revenues to the BIR this year.

The country’s biggest-revenue agency is tasked to collect P1.01 trillion in taxes on net income and profits this year, down from last year’s target of P1.06 trillion.

The TRAIN Law raised the tax-exempt cap to an annual income of P250,000.

Taxes collected from personal and corporate income earners will nonetheless account for more than half of the BIR’s P2.04-trillion total collection goal for 2018.

Collections from VAT are expected to rise to P456.97 billion this year from the programmed P364.43 billion in 2017. The tax from excise taxes, meanwhile, were programmed to jump to P310.21 billion from 2017’s target of P185.03 billion.

Earlier Department of Finance data showed that the government targets excise tax collections from cigarettes this year to reach P126.9 billion, on top of collecting P56.2 billion from alcohol products.