Contractors to face tax fraud audit

THE BUREAU of Internal Revenue (BIR) will investigate the contractors allegedly involved in anomalous flood control projects for possible tax fraud, according to Commissioner Romeo D. Lumagui, Jr.

“The BIR will undertake a parallel investigation of contractors implicated in irregular flood control projects. We will support the President’s crusade by auditing the tax returns and payments of these entities,” Mr. Lumagui said in a statement on Tuesday.

The tax agency’s probe comes after President Ferdinand R. Marcos, Jr. ordered a sweeping crackdown on corruption in public works, particularly in flood control.

Mr. Marcos earlier this month identified 15 contractors that have cornered around 20% or P100 billion worth of flood control projects out of the P545-billion budget since 2022.

Mr. Lumagui said the tax fraud investigation will focus on the contractors involved in these anomalous flood control projects as identified by Mr. Marcos.

“Should any contractor be found to have underpaid or evaded taxes, the BIR will not issue an updated tax clearance to them. The contractor will be disqualified from participating in future government procurements, and the final settlement of their existing government contracts will be suspended,” he said.

Under Revenue Regulation (RR) No. 17-2024, contractors must secure an updated tax clearance from the BIR before the final settlement of any government contract.

Failure to present this clearance will result in the suspension of contract settlements and the imposition of a tax lien over the contract amount in favor of the government, the BIR said.

The updated clearance guarantees that every contractor has no outstanding tax liabilities and has duly filed and paid all applicable taxes.

The BIR clarified that this document is different from the required initial tax clearance during the eligibility phase of the procurement process.

These clauses under Sections 2 and 3 of RR No. 17-2024 are meant to safeguard public funds from contractors who fail to comply with tax obligations.

Additionally, Section 235 of the National Internal Revenue Code authorizes the BIR to conduct multiple audits within the same taxable year in cases involving fraud or irregularities, as determined by the commissioner.

Earlier this week, the Department of Public Works and Highways announced the suspension of District Engineer Abelardo D. Calalo, who allegedly offered around P3.13 million in cash to Batangas Rep. Leandro L. Leviste to dissuade investigations into anomalies in flood control projects.

Meanwhile, Mr. Lumagui said those contractors involved in “ghost” projects will be issued deficiency tax assessments, once the BIR receives official certification from relevant agencies that there were no actual projects.

“If the BIR, through certification or endorsement from the appropriate government agencies, confirms that a flood control project is a ghost project, we will disallow all related cost and expense claims,” he said.

“No project means no deductible expense. A tax deficiency assessment will be issued accordingly.”

The Senate and House of Representatives have launched inquiries into the alleged irregularities in flood control projects. — Aubrey Rose A. Inosante