BIR launches tax probe into flood control contractors

The Bureau of Internal Revenue has launched a tax fraud investigation into contractors allegedly involved in anomalous flood control projects flagged by President Ferdinand “Bongbong” Marcos Jr.

BIR Commissioner Romeo D. Lumagui Jr. announced on Monday that all regional and district offices have been instructed to conduct a parallel audit to support the President’s anti-corruption drive.

“The BIR will undertake a parallel investigation of contractors implicated in irregular flood control projects,” Lumagui said.

“We will support the President’s crusade by auditing the tax returns and payments of these entities. 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 added.

The directive is anchored on Revenue Regulation No. 17-2024, which requires all government contractors to obtain an updated tax clearance before the final settlement of any public project.

This updated clearance is separate from the initial one required during the project’s bidding phase and confirms that the contractor has no unpaid tax liabilities.

Under Sections 2 and 3 of RR No. 17-2024, failure to present this clearance will result in the suspension of project payments and the imposition of a tax lien on the contract amount in favor of the government.

The move comes after reports surfaced that some flood control projects were allegedly paid for but never built—so-called “ghost 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,” Lumagui said.

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

Section 235 of the National Internal Revenue Code permits the BIR to conduct multiple audits within the same year in cases of fraud or irregularities, which the agency is invoking in this case.

The BIR said it would issue deficiency tax assessments against contractors once it receives official certifications confirming project non-implementation.

In a public appeal, Lumagui called on citizens to report errant contractors:

“Sisiguraduhin ng BIR na nagbabayad ng tamang buwis ang lahat ng contractor sa bansa,” he said.

“Kumikita sila sa mga proyektong pinopondohan ng buwis mula sa milyon-milyong Pilipino at mga negosyo—hindi katanggap-tanggap kung hindi sila magbabayad ng tamang buwis. Kung may kilala kayong contractor na hindi nagbabayad ng tamang buwis, isumbong agad sa BIR.”

As of this writing, the Department of Public Works and Highways (DPWH) has not released an official list of contractors under investigation, nor confirmed the number of questionable projects.

Government auditors and the Presidential Anti-Organized Crime Commission are also believed to be conducting parallel probes into the irregularities.