DoF could limit BIR offices authorized to issue LoAs

FINANCE Secretary Frederick D. Go said the government is seeking to limit the Bureau of Internal Revenue (BIR) offices authorized to issue letters of authority (LoA) following allegations that the tax audit process is being abused.

“There are many departments that can issue an LoA. We’re looking at reducing that,” Mr. Go told reporters in a Dec. 18 briefing.

To curb potential abuse of the tax audit process, only the Commissioner, Charlito Martin R. Mendoza or the Deputy Commissioner, can approve LoAs and mission orders, the Department of Finance (DoF) said.

There are currently four offices that can issue assessments. The current plan is to consolidate the Assessment Division and VAT Audit Section’s issuing authority, the DoF said.

“If a company is being investigated, we can probably combine the VAT (value-added tax) investigation and the income tax investigation as one, rather getting them to deal with a separate group for VAT and a separate group for income tax,” Mr. Go said.

Field audits are currently suspended as the tax authorities look into the alleged abuse of the process. Audits require LoAs and mission orders before they can be initiated. Business groups and legislators had  warned that audits are being used for extortion.

On Dec. 11, the BIR said it will crack down on the issuance of LoAs for tax audits, which will be subject to clearance from Mr. Mendoza.

Mr. Go also said the government is looking to reduce the frequency of LoAs to once a year.

“There has to be a centralized digital record of LoAs being issued,” he added, noting that taxpayers will thereby gain the ability to check the documents for authenticity.

Benedicta Du-Baladad, founding partner, chair, and chief executive officer of Du-Baladad and Associates, expressed support for the BIR’s planned moves regarding tax audits.

“But in addition to that, the selection of taxpayers to be (subject to examination) must be system-generated with no manual intervention based on a certain strict, defined, clear audit criteria of auditable taxpayers during the year,” she said via Viber.

Ms. Du-Baladad also urged the BIR to remove its investigating office and field officers’ discretion in selecting taxpayers for examination.

“Only the Commissioner (and only in justifiable circumstances), should have the discretion to deviate from an issued audit plan,” she added. — Aubrey Rose A. Inosante