The Bureau of Internal Revenue (BIR) is taking a closer look at the rules governing documents that allow for tax audits. This comes after some reports suggested that certain officials might be using these documents to put pressure on businesses, as shared by a lawmaker.
These important papers, called letters of authority (LoA), give revenue officers the green light to start digging into a taxpayer’s liabilities—making them a must-have before any audit can kick off.
On Monday, Senator Sherwin T. Gatchalian shared in the Senate that the newly appointed BIR Commissioner, Charlito Martin R. Mendoza, plans to scrutinize how these audit authorizations are being issued and the overall policy behind them.
“The new commissioner indicated he’ll be reviewing how LoAs are issued,” he stated. “Since taxpayers are expected to provide all these documents, there should definitely be a solid reason for issuing an LoA.”
Business groups have often voiced their concerns about inconsistent audit practices, which create uncertainty and could put companies at risk of unfair treatment. So far, the BIR hasn’t provided any details about this review or mentioned if it will roll out updated guidelines.
A member of the BIR’s communications team mentioned via Viber that they haven’t yet received a formal directive from Mr. Mendoza regarding the review of LoA policies and their justifications.
Senator Joseph Victor “JV” G. Ejercito also spoke in the Senate, pointing out that the overuse of LoAs has raised eyebrows among foreign investors.
He highlighted feedback from ambassadors and representatives from both the American Chamber of Commerce and the European Chamber of Commerce about the excessive issuing of LoAs.
“If this practice isn’t carefully managed, it could create a climate of uncertainty for businesses and push away foreign investors who might view it as a sign of unpredictability or overreach in tax administration,” he warned. — AMCS
