BIR audits tax officers’ performance, temporarily suspends taxpayer probes

The Bureau of Internal Revenue 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 to determine their effectiveness in shoring up collections.

In a statement Monday, the BIR said it “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 and/or terminated.”

Also, the BIR “suspended and/or terminated any further investigation, field audit, or any form of business visitation pursuant to the said mission orders unless otherwise authorized in writing,” it added.

Earlier, the BIR also ordered its NID as well as revenue officers to submit a status report of all letters of authority issued after June 30, 2016.

A letter of authority is an official document that empowers revenue officers to examine and scrutinize taxpayers’ books in order to determine their correct tax liabilities.

To recall, Internal Revenue Commissioner Caesar R. Dulay during his first day in office recalled as well as ordered an inventory of all outstanding letters of authority, audit notices and letter notices as of June 30, 2016, in order to know who among tax examiners have pending investigations, and consequently assess their performance.

In August 2016, Dulay issued Revenue Memorandum Order No. 57-2016 that required revalidation of all letters of authority 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 letters of authority 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 letters of authority as well as those issued after June 30, 2016.

“An effective review of audits done pursuant to the revalidated/non-revalidated letters of authority and letters of authority 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 letters of authority 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.

“It’s just reinforcing the program of Commissioner Dulay when he assumed office. We don’t want our people to be lax when Commissioner Dulay isn’t looking,” BIR Assistant Marissa O. Cabreros explained.

Dulay said both the letters of authority and mission orders must have had an impact on taxpayers’ compliance.

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.

RMO No. 8-2018 issued by Dulay on Jan. 23, which contained the BIR’s 2018 collection goal allocation, nonetheless programmed higher tax takes from value-added tax as well as excise taxes this year after the TRAIN Law cut on VAT exemptions while raising the excise tax rates slapped on oil, cigarettes, sugary drinks and vehicles.

Dulay said the TRAIN is expected to contribute an additional P15.893 billion in tax revenues to the BIR this year.

The country’s largest revenue agency is tasked to collect P1.007 trillion in taxes on net income and profits this year, down from last year’s target of P1.057 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 P2.039-trillion total collection goal for 2018.

Collections from VAT are expected to rise to P456.967 billion this year from the programmed P364.431 billion in 2017.

The tax from excise taxes, meanwhile, were programmed to jump to P310.208 billion from 2017’s target of P185.029 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.

Under the TRAIN or Republic Act No. 10963, the unitary excise tax slapped on cigarettes rose to P32.50 per pack effective Jan. 1 from P30 a pack last year.

The TRAIN mandated a further increase in the cigarette excise tax rates to P35 per pack from July 1, 2018 to Dec. 31, 2019; P37.50 a pack from Jan. 1, 2020 to Dec. 31, 2021; and P40 from Jan. 1, 2022 to Dec. 31, 2023.

From Jan. 1, 2024 onwards, the specific tax rate on tobacco products will be increased by 4 percent yearly, under the TRAIN Law.

The BIR is also tasked to collect P88.536 billion in percentage taxes, and P129.019 billion in other taxes.

From non-BIR operations, another P38.342 billion would be collected from taxes on net income and profits, on top of P8.932 billion in other taxes.

Last year, the BIR’s tax take jumped 13 percent to P1.779 trillion but missed its P1.829-trillion target. /je