The Bureau of Internal Revenue (BIR) is looking to resume the issuance of letters of authority (LOAs) in the first quarter, its top official said.
“Yesterday we had a consultation with the BIR Partnership with Multisectoral Group to stress-test the reforms provided in the draft order to relaunch the audits and the provisions were generally well received and supported by private sector partners,” BIR Commissioner Charlito Martin Mendoza told The Manila Times on Thursday.
“The TWG (technical working group) is now refining the draft order based on the consultation results. We are close to lifting the suspension,” he added.
BIR field audits and related operations, which include the issuance of LOAs, were suspended by the Department of Finance (DOF) in November last year following allegations that the system was being used to harass taxpayers.
LOAs allow BIR personnel to examine a taxpayer’s books and complaints have been raised about repeated and overlapping audits. Fake or unauthorized LOAs are also allegedly being used to extort money.
Finance Secretary Frederick Go said during an event late Wednesday that stronger safeguards were in place to prevent abuse.
“As you're all aware, last November, we suspended the letters of authority of the Bureau of Internal Revenue. However, I must tell you that the Bureau of Internal Revenue cannot also survive if these letters of authority are suspended forever,” he said.
“But before we restore it, what I'd like to assure you is that we're working on several things,” he added.
Go said that maintaining the suspension was not sustainable and that the restoration of LOA issuances would come with reforms to ensure that audits were fair, transparent and data-driven.
One key measure is the digitization and institutionalization of audit selection.
“By leveraging automated risk-based modeling, we are creating a system that minimizes discretion and strengthens accountability,” Go said.
“The key word here is quality assessments, and we will not allow arbitrary or abusive audits.”
The DOF also plans to limit the scope of audit powers within the BIR.
Once LOAs are resumed, fewer BIR offices will be authorized to issue them and the number of LOAs that a single taxpayer can receive in a year will also be capped.
In addition to audit reforms, Go said the DOF also pushed for easier tax exemption procedures, particularly for socialized and economic housing projects, adding that the process was streamlined so applicants no longer need to secure multiple certifications from different agencies.
“[A]ll you have to do now is get a certificate from DHSUD (Department of Human Settlements and Urban Development) or from the BOI (Board of Investments), and you don't need another certificate from the BIR,” he said.
The BIR on Wednesday rolled out a new reform agenda ahead of the planned resumption of tax audits.
Audit reform is the most urgent as public trust in the tax system largely depends on how audits and assessments are conducted, Mendoza said.
Measures that will govern the lifting of the LOA suspension and the resumption of audits are being finalized and he said “the work being done now will define how we carry out our mandate moving forward.”