Amicus Curiae


As we all know, a huge portion of our government coffers are derived from taxation. The Bureau of Internal Revenue (BIR) is the agency mandated by law to enforce tax laws, assess, and collect national taxes.

According to the BIR Collection Statistics, approximately P600 billion was collected from July to September. However, last October, there was a reported deficit of about P16 billion below its target collection. Some believe that this deficit is attributable to the suspension of issuances of the Letters of Authority (LOAs) and Mission Orders (MOs), which, to a certain extent, have immobilized revenue officers from exercising their authority to audit, assess, and collect taxes.

To recall, on May 30, a Circular was issued suspending all field audits and field operations of the BIR covered by LOAs and MOs. The Circular also instructed no further issuances of LOAs and MOs. While there was an order to lift the suspension released in August, the guidelines issued were limited to outstanding LOAs and Audit Notices.

Then, just last Friday, our newly appointed BIR Commissioner issued Revenue Memorandum Circular No. 148-2022 lifting the suspension and now authorizes all revenue officers to resume the conduct of all forms of business visitation in execution of LOAs or MOs and their issuances. Thus, all field audits, field operations, or any form of business visitation and execution of LOAs or MOs can already be conducted, and new LOAs/MOs can be further issued.

As the name implies, this serves as the official document issued by the BIR to notify the taxpayer of its authority to examine the latter’s books of accounts and other accounting records for a certain tax type and for a particular taxable period.

The LOA is a very important document, and its presentation is a prerequisite to satisfy the due process rights of a taxpayer. It goes without saying that absent a valid LOA, the entire assessment is null and void. When served with a LOA, a taxpayer must observe the following to ensure its validity:

1. It must be issued by the proper approving official;

2. The names of the assigned Revenue Officers must be clearly indicated in the LOA;

3. The tax type/s covered by the audit shall be reflected on it;

4. It must cover only one taxable year, except in tax fraud cases authorized by the Commissioner;

5. It must not contain any manually written character, notation, or erasure; and,

6. It must be served to the taxpayer within 30 days from the issuance thereof.

With the failure to observe any of the foregoing requisites, the taxpayer has all the right to refuse its service or question its validity at any stage of the assessment.

On the other hand, a Mission Order, unlike a LOA, only gives the revenue officers a more general authority and limits their power to conduct inventory-taking to determine tax liabilities, and to place any taxpayer under surveillance if there is a reason to believe that the latter is not paying the proper taxes.

The BIR defines the following types of surveillance they may conduct, provided they are armed with an MO:

1. Covert Surveillance — this is the surreptitious and undercover observation of the business operations of a taxpayer for a certain period and is carried out before inventory-taking of documents;

2. Overt Surveillance — inventory-taking is conducted first before the monitoring of the business activities of the taxpayer; and,

3. Short-Duration Surveillance (Tax Compliance Check) — a target taxpayer is under observation to check compliance with the registration requirements.

However, note that overt surveillance shall only be conducted for at least 10 days and not more than 30 days, unless otherwise extended in writing.

Indubitably, the conduct of field work will help revenue officers easily access and understand the business operations of taxpayers. Meanwhile, the taxpayers should be given more direct opportunities to explain their side.

It is with high hopes for the government, especially for the newly minted Commissioner, to reach its target collections for 2022, amounting to P2.438 trillion. Indeed, the new administration cannot sit back without using its power of enforcement. To be sure, the BIR officials, in going back into the audit arena, will not just give them more teeth, but also more eyes for them to “actually see” what is happening on the field.

It was not long ago that a new administration was welcomed by our country. In the first year of administration, this government is still heavily indebted, recuperating from the COVID-19 onslaught, facing rising inflation rates, worsening traffic conditions, and a huge population with low employment opportunities, among others. It is certainly not an ideal situation to succeed to, and this will be a tough road. To ensure sufficient funding, this government is thus expected to streamline its enforcement of taxation laws through the audit arena — since this will certainly help improve the tax collection efficiencies and ultimately increase the government’s revenue.

The views and opinions expressed in this article are those of the author. This article is for general information and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.


Ma. Karisha Mae C. Orcullo is an associate of the Tax department of the Angara Abello Concepcion Regala Cruz Law Offices.