BIR to review audit authorization rules amid ‘weaponization’ claims

The Bureau of Internal Revenue (BIR) is reviewing rules on documents that authorize tax audits after reports that some officials have been using them to pressure businesses, according to a lawmaker.

These documents — known as letters of authority (LoA) — allow revenue officers to open an investigation into a taxpayer’s liabilities and are required before any audit can proceed.

Senator Sherwin T. Gatchalian told the Senate plenary on Monday that newly appointed BIR Commissioner Charlito Martin R. Mendoza intends to examine both the basis for issuing the audit authorizations and the broader policy behind them.

“The new commissioner mentioned to me that he will also review the policy of issuance of LoAs,” he said. “Because all of these documents are supposed to be submitted by the taxpayer, the LoA should have a basis.”

Business groups have long complained that inconsistent audit practices create uncertainty and expose firms to potential abuse. The BIR has yet to release details of the review or say whether it plans to issue revised guidelines.

A BIR communications staffer said in a Viber message that the agency has yet to receive a formal directive from Mr. Mendoza regarding a review of the policy on the issuance of LoAs and their basis.

Senator Joseph Victor “JV” G. Ejercito told the Senate plenary the excessive use of LoAs have raised concerns with foreign investors.

Mr. Ejercito cited complaints about excessive LoAs from ambassadors and members of both the American Chamber of Commerce and European Chamber of Commerce.

“Such practice, if not carefully regulated, may create an atmosphere of uncertainty among businesses and discourage foreign investors who may perceive it as a sign of unpredictability or overreach in tax administration,” he said. — AMCS