BIR outlines audit reforms, cites taxpayers’ right to refuse

MANILA — The Bureau of Internal Revenue (BIR) told the Senate Blue Ribbon Committee on Tuesday that taxpayers may refuse tax audit requests that fall outside the scope and limits of audit instruments such as letters of authority (LOA) and mission orders (MO), as the agency rolls out a strengthened tax audit framework under Revenue Memorandum Order (RMO) No. 1-2026.

BIR Commissioner Charlito Martin R. Mendoza explained the new rules during Tuesday’s Senate Blue Ribbon Committee hearing, framing the reforms as measures meant to make audits fairer, more predictable, and more transparent.

Mendoza said the new rules clarify the proper use of the LOA, the MO, and the Tax Verification Notice, including how taxpayers should understand the government authority being exercised during examinations.

“By prescribing mandatory labels for these instruments, the Bureau provides taxpayers with explicit notice of the scope and limits of the authority being exercised,” Mendoza said.

“If a revenue officer requests something that is not within the scope stated in the audit instrument, the taxpayer has the right to refuse,” he pointed out.

“In this way, we protect due process and ensure that the extent of audit authority is disclosed upfront,” Mendoza added.

At the center of the reform package is the Single-Instance Audit Framework, which Mendoza said would limit examinations to one LOA per taxpayer per year and end simultaneous audits for the same taxable year.

“Under this, there will no longer be simultaneous audits. Compliance becomes simpler and more organized because there is only one audit for a given year and a single submission of requirements,” said Mendoza.

The BIR also adopted risk-based and system-assisted audit selection, where only taxpayers identified through anonymized, system-generated risk criteria may be subjected to regular audit, Mendoza said.

Under the same framework, Mendoza said the agency aims to eliminate the so-called “suki system,” or the perception that the same taxpayers are repeatedly selected.

“Audit assignments are now anonymized. The identity of the taxpayer is concealed until the assignment process is completed,” he said.

“It is like the raffle of cases in court: the identities of the parties involved are not known until the assignment process is completed,” he said.

Mendoza said the anonymized approach is designed to reduce opportunities for harassment or undue influence while strengthening “due process and public trust in a system that is data-driven and risk-based.”

The BIR told the committee it has dissolved all audit-related task forces, including the Value-Added Tax (VAT) Audit Section and the Large Taxpayers VAT Audit Unit, with assessment functions returned to regular BIR offices.

Mendoza said the return of functions to regular offices is intended to ensure audit work happens “where clear lines of supervision and accountability exist.”

The Bureau also highlighted steps to strengthen audit discipline, tighten review and approval of assessments, and enforce standards through the Revalida, or Audit-the-Auditor, system, which it described as a continuing check on quality, timeliness, and propriety of audit work.

Mendoza told senators the reforms were developed after the BIR formed a technical working group, reviewed existing procedures, and collected private-sector recommendations, including through the BIR Partnership with the Multisectoral Group.

After the consultations, the BIR and Finance Secretary Frederick Go announced the lifting of the audit suspension on Jan. 27 through Revenue Memorandum Circular No. 8-2026 and RMO No. 1-2026, which set out new policies, controls, and procedures for resumed audits.

The BIR had suspended all field audits and related operations in November following numerous complaints regarding audit instruments such as LOAs and MOs, according to the briefing.

Mendoza said the audit reform measures are part of the BIR’s broader reform agenda, BIR DARES, which stands for Digital and Data Transformation; Audit Reform and Accountability; Revenue Collection and Base Protection; Employee Empowerment and Welfare Promotion; and Service Excellence and Stakeholder Engagement.

Commissioner Mendoza closed his presentation by assuring the committee and the public: “With these reforms…the BIR audit system is being strengthened. Standards are clear, and accountability is enforced. We also recognize that reform is not static. The resumption of audits under this framework is part of a phased and continuing process. As implementation proceeds, we will keep listening, monitor outcomes, and refine our measures where necessary.”

Even with the new rules, Mendoza acknowledged what he called a “bigger challenge,” focusing on consistent implementation across revenue regions and BIR units.

“We have to make sure that all our revenue regions, our unit in the national office, should be able to implement this consistency, according to the letter of the rules, and there is no unnecessary exercise of discretion. So ang tutukan po namin dito sa mga daratign na araw ay ang actual implementation (So what we will focus on in the coming days is the actual implementation),” Mendoza said.