BIR to resume tax audits under reformed, risk-based rules

The Bureau of Internal Revenue (BIR) is set to resume tax audits soon, following a high-level public-private consultation on Jan. 21 that finalized key reforms to promote transparency, reduce discretion, and strengthen accountability in audit practices.

The consultation, held under the BIR Partnership with the Multi-Sectoral Group (BIR-PMSG), focused on the draft order prepared by the Technical Working Group Review Committee on Assessment Integrity and Audit Reform (TWGRC-AIAR), led by Deputy Commissioner Marissa O. Cabreros.

One of the centerpiece changes is the introduction of a single-instance audit framework, which ensures that each taxpayer is generally subject to only one electronic Letter of Authority (eLA) per taxable year for all internal revenue taxes.

Exceptions are defined in the draft order.

Multiple eLAs issued to the same taxpayer for the same year will now be automatically consolidated into a single audit authority.

Taxpayers may also request non-consolidation within specific deadlines, subject to approval.

To reduce discretion in audit selection, the BIR is shifting to a risk-based, system-assisted audit approach, using anonymized taxpayer lists to increase objectivity and fairness.

The reforms aim to prevent bloated assessments and reinforce due process. These include strengthened documentation requirements, standardized audit checklists, increased supervisory oversight, and clear penalties for erring personnel.

BIR Commissioner Charlito Martin R. Mendoza presented the reforms as a central part of the agency’s five-point reform agenda, known as BIR D.A.R.E.S.: Digital and Data Transformation, Audit Reform and Accountability, Revenue Collection and Base Protection, Employee Empowerment and Welfare Promotion, and Service Excellence and Stakeholder Engagement.

“While these reforms cannot be completed overnight, they are already underway, and progress will continue as reforms are implemented, monitored, and refined over time,” Mendoza said.

The private sector expressed broad support for the reforms and offered additional suggestions for refinement.

No opposition was raised regarding the lifting of the audit suspension.

Ruben Pascual, secretary general of the Philippine Chamber of Commerce and Industry (PCCI) — which co-chairs the BIR-PMSG — said the reforms were responsive to long-standing business sector concerns.

“The initial set of reforms is right smack at the heart of taxpayers’ concerns—indiscriminate issuance of LOAs, bloated initial assessments, and inconsistent application and interpretation of audit rules. There are other concerns, but we are convinced that the DOF and BIR are listening to us,” Pascual said.

Department of Finance (DOF) Undersecretary Rolando Ligon, Jr. affirmed that the BIR’s audit revamp is part of a broader national agenda to build investor trust and economic resilience.

“The BIR’s audit reforms reflect the big, bold reforms our government is undertaking this year, as articulated by Secretary Go—to inspire optimism and renew and encourage investor confidence in the Philippines,” Ligon said.

“We are encouraged that the feedback from the private sector is positive and that the major issues have been addressed. Other concerns can be refined along the way, and this group has a strong working relationship that gives us confidence moving forward.”

Some of the digital and dashboard-related reforms will require phased implementation, including system development, integration, training, and testing, according to Mendoza.

However, reforms ready for rollout are already included in the current draft order.

“The goal is to move forward responsibly,” Mendoza added.

“Reforms must be workable, fair, and sustainable, and this kind of engagement helps ensure we get there.”

The BIR plans to refine the draft order based on the feedback received before formally lifting the audit suspension and activating the new framework.

The meeting was attended by the full BIR Management Committee, including all Deputy and Assistant Commissioners, and chiefs of offices.

On the government side, DOF Undersecretary Ligon, Jr., and Assistant Secretary Nina Asuncion participated in the discussions.

Private sector attendees included 20 representatives from organizations such as the PCCI, Tax Management Association of the Philippines (TMAP), Management Association of the Philippines (MAP), Financial Executives Institute of the Philippines (FINEX), Philippine Institute of Certified Public Accountants (PICPA), and the Makati Business Club (MBC), among others.