BIR suspends field tax audits amid abuse concerns

MANILA, Philippines — The Bureau of Internal Revenue has suspended all field audits and related operations, including the issuance of letters of authority (LOA) and mission orders, following mounting calls from senators to investigate alleged corruption and abuse within the agency.

In a statement yesterday, newly appointed BIR Commissioner Charlito Mendoza said no LOA will be created or signed during the suspension, describing the move as part of his reform agenda.

“The suspension was issued after extensive internal consultations and was undertaken with the guidance and strategic oversight of Finance Secretary Frederick Go to ensure full alignment with national priorities on good governance, taxpayer protection and efficient revenue administration,” Mendoza said.

He clarified that the suspension excludes only urgent or legally mandated cases, such as active criminal investigations and one-time transactions.

It also covers audits conducted within the last six months, refund claims requiring verification and urgent actions involving taxpayers flagged through intelligence reports.

Mendoza ordered the creation of a technical working group to identify operational and systemic weaknesses and craft updated LOA procedures, incorporating digital safeguards and uniform audit standards.

“Our goal is to create processes that are predictable, evidence-based, technology-driven and fair,” he said. “These systems are meant to protect taxpayers while helping the bureau perform its mandate efficiently.”

Go said the suspension was prompted by taxpayer complaints, adding that a full review of BIR policies and procedures is needed “to prevent any potential abuse.”

In July, the Bureau of Customs similarly suspended the implementation of all previously approved but unserved LOAs and mission orders.

Deeper probe

Building on the mounting concerns that prompted the BIR to halt all field audits and the issuance of LOA, senators are now pressing for a deeper probe into what they say is a widening corruption scheme within the agency.

Sen. Erwin Tulfo has urged the Senate Blue Ribbon committee to investigate what he called a “money-making scheme” inside the BIR, alleging that some personnel have been abusing LOAs to extort businesses.

Tulfo filed Senate Resolution 180 and directed the committee to probe the alleged racket, noting that while the chamber has been preoccupied with the flood control scandal, another corruption scheme “has been escalating” inside the tax bureau.

“There have been many complaints brought to us – big companies or small – saying BIR personnel are using the LOA to collect money,” he said in Filipino.

Intended to function like a search warrant when tax payments appear questionable, LOA was reportedly being used even against compliant taxpayers.

“Even if a business has already paid, they still inspect it,” he said, adding that the complaints came from companies across the country.

The alleged scheme involves examiners and regional officials who will be summoned to hearings once the Senate takes up his resolution.

Asked whether this could be linked to Malacañang’s decision to replace former BIR commissioner Romeo Lumagui Jr., Tulfo said he was unsure, but stressed that abuses “happened under his watch.”

While the racket has existed “for quite some time,” he said it intensified in 2024, which he suspects was tied to pressure to meet the bureau’s collection targets.

“Under his administration, the LOA was abused. It exploded this year. In previous years it was being used, but not to this extent. When 2024 began, it was really pushed to the limit,” he said.

Tulfo said he was told that the “marching order” within some BIR offices was to maximize LOA issuances to boost collections.

“The problem is, not everything collected goes to the government. Some of it goes into their pockets, like a kickback,” he said.

Tulfo cited a case in which a company with a P150-million liability was asked to settle only P100 million after being given a supposed P25-million “discount.” The remaining P25 million, he said, “goes into the pockets of BIR officers.”

The senator also revealed that Senators JV Ejercito, Loren Legarda and Raffy Tulfo have also received other complaints from affected taxpayers.

He alleged that some BIR personnel were offering reduced official assessments in exchange for kickbacks, creating an environment where businesses feel pressured to participate.

“It has become a real source of corruption. Even business owners feel they have no choice but to go along with the system,” said Tulfo. — Neil Jayson Servallos