TO PREVENT ABUSES like extortion and corruption, the Bureau of Internal Revenue (BIR) adopted a recommendation of its technical working group — to regulate the issuance of Letters of Authority (LOA) to just one for every taxable year.
A month after suspending the issuance of LOAs and mission orders, no less than Revenue Commissioner Charlito Mendoza hinted at the need to keep the only mechanism that would compel businesses to pay the right taxes to the government.
CHECK AND BALANCE
According to Mendoza, the audit of the LOA system is now nearly complete after a month that the bureau introduced reforms to prevent unscrupulous revenue agents from using the system to harass taxpayers.
Mendoza explained that the review of the LOA system was meant to stop complaints about the issuances of multiple LOAs by different offices and officers within the bureau.
“Our technical working group is already in the advanced stages of the study,” Mendoza told newsmen, saying that “we are moving toward a streamlined, consolidated LOA framework.”
CLEAR PARAMETERS
Under the new system, taxpayers would receive only one LOA per taxable year, covering all internal revenue taxes. The reform has already been backed by Finance Secretary Frederick Go, the Inquirer reported.
“They [taxpayers] will no longer need to file documents repeatedly with different officers. We are also developing clear parameters that revenue officers must follow when issuing LOAs,” Mendoza assured.
He further clarified that while the BIR plans to reduce the number of offices authorized to issue LOAs, it is unlikely to be limited to just one.
Currently, he said, offices that could issue LOAs are: the Value-Added Tax Audit Section; regional offices; the Large Taxpayer Service; the National Investigation Division for fraud cases and special task forces.”
“As much as possible, we will reduce the number of offices that can issue LOAs. If we can implement a single LOA per taxable year based on risk-based parameters, it will be better for the taxpayer and easier for us,” he added.
BLOATED ASSESSMENTS
Millions of pesos were allegedly collected through bloated tax assessments conducted by some BIR personnel, who reportedly applied a 70/30 scheme, with the lion’s share pocketed by revenue officers, leaving 30 percent to the government.
Interestingly, Mendoza clarified that only around two to three percent of the agency’s collections come from the issuance of LOAs.
Just last year, a friend of mine, who owns a small resort and a few smaller businesses, was issued a LOA for which the officer demanded from him P5 million to clear him of the investigation. Pressured, he paid the officer concerned so that his business could continue operating without further hassle.
TARGET ALMOST MET
As of January 7, the BIR’s 2025 revenue collections stood at P3.103 trillion, about 3.4 percent shy of its P3.219-trillion target. Mendoza conceded that it is now unlikely for the agency to meet its full-year target.
Mendoza said that for 2026, the tax collection target is possibly around P3.5 trillion, but he is still waiting for the announcement from the Development Budget Coordination Committee.
“For now, we are setting our goal on that na P3.58 trillion and that will be around 15.5 percent increase from our collection,” he added.
The BIR remains optimistic about a revenue rebound in 2026 after missing its target with a 2025 performance of P3.105 trillion.
AFFECTED BY SCANDAL
Mendoza told Business World that the preliminary figure for 2025 is net of refunds. “The total came in 3.56% below the full-year target but exceeded the 2024 collection total of P2.85 trillion.”
“During the second half, starting July, when the flood control investigations started, our revenue collection efforts were really significantly affected, primarily because of the slowdown in spending,” he intimated to reporters on Thursday.
Mendoza said he remains “very optimistic” that momentum will build following a 7.5% increase in December revenue. “We will do our best to hit the target. The government needs it. We have many projects that need funding,” he said.
NEW LOA FRAMEWORK
The BIR suspended field audit operations in December in the face of allegations the audit process is being used for extortion.
For 2026, the BIR is tasked to collect P3.58 trillion, 11.19% higher than its 2025 target.
Mendoza added that the BIR is moving towards a streamlined, consolidated LoA framework — “We’re looking at the possibility of having just one letter of authority per taxpayer per taxable year, covering all internal revenue taxes,” he said.
NO TO VAT REDUCTION
Insofar as legislative tax-related proposals are concerned, Mendoza expressed apprehensions over a proposal seeking to reduce the value-added tax rates.
Mendoza said a slash in the value-added tax rate will significantly impact collections.
“It’s a policy decision that belongs to Congress. What we do is tax administration. We do our best to maximize collections (by being) efficient… but fair,” he added.
Legislators have proposed to reduce the 12% VAT rate to 10%.