Leadership change at the BIR: What’s next?

The only constant in life is change.  Last week, the Bureau of Internal Revenue (BIR) witnessed a significant leadership transition with the appointment of Commissioner Charlito Martin Mendoza, succeeding Romeo Lumagui, Jr.   For many, this move came as a surprise — but beyond the headlines, it signals more than a reshuffling of positions. It reflects a renewed government commitment to modernization, transparency, and stronger tax compliance.

Today, the BIR’s role has become even more critical as the government racks up budget deficits.  Note that tax administration is not just about collecting revenue; it’s about building trust, ensuring fairness, and enabling sustainable growth.

As I step back, allow me to highlight the notable legacy left by former Commissioner Lumagui — one that will be remembered for its impact and reforms.

DIGITAL TRANSFORMATION
One of Lumagui’s most notable achievements was accelerating the BIR’s Digital Transformation (DX) Program. At its core was the Online Registration and Update System (ORUS) — a web-based platform that simplified taxpayer registration and information management.

Before ORUS, taxpayers often faced long queues, manual paperwork, and delays in updating records. ORUS changed that by enabling individuals and businesses to register, update, and manage their tax profiles entirely online. This innovation significantly reduced bureaucratic bottlenecks, minimized physical interactions, and improved convenience for taxpayers.

Note that the implementation of ORUS was supported by a series of Revenue Memorandum Circulars (RMCs) that provided clear guidelines for adoption by the public.

What I appreciate most about ORUS is its handling of the annual submission of computerized books of account or loose-leaf records. Previously, taxpayers had to manually submit these documents to their respective BIR offices — a process that was time-consuming and inconvenient. With ORUS, this requirement can now be fulfilled entirely online, allowing taxpayers to upload their compliance documents through the platform with ease and efficiency.

The continued rollout of the E-Invoicing and E-Reporting System, as anchored in the RA No. 11976 (Ease of Paying Taxes) and RA 12066 (CREATE MORE Act), and implemented by Revenue Regulations (RR) No. 11-2025, also highlights the government’s commitment to building a fully integrated and automated tax ecosystem.

Under these RRs, priority taxpayers are required to adopt electronic invoicing and reporting. Those covered include:

• E-commerce businesses and digital service providers

• Large taxpayers overseen by the Large Taxpayers Service (LTS)

• Taxpayers classified as large under the Ease of Paying Taxes Act (RA No. 11976)

• Businesses using Computerized Accounting Systems (CAS) or Computerized Books of Account (CBA)

Accordingly, it will further expand its coverage to exporters of goods and services, registered business enterprises (RBEs) enjoying tax incentives, taxpayers using Point-of-Sale (POS) systems, and other taxpayers as may be required by the commissioner — once the BIR has fully established a system capable of storing and processing the required sales report.

I believe that the goal requires e-invoicing and the establishment of an Electronic Sales Reporting System (ESRS), which will enable real-time monitoring of transactions and further enhance compliance.

It is important to note that full implementation of e-invoicing among the four-priority taxpayer group has been moved from March 14 to Dec. 31, 2026, as provided by the recent RR 26-2025. Meanwhile, the rollouts of ESRS remain on hold until the BIR confirms its readiness to store and process data on a scale.

THE RAFT PROGRAM
Another defining feature of Lumagui’s administration was its uncompromising stance against tax fraud. In 2023, the BIR launched the Run After Fake Transactions (RAFT) program under RMC 38-2023.  RAFT targeted the widespread use of ghost receipts — fraudulent documents used by corporations to inflate expenses and evade taxes.

I noted that the RAFT program targeted three categories of violators:

• Buyers of fake receipts who claim fictitious expenses to reduce taxable income;

• Sellers or ghost corporations that manufacture fraudulent documents; and

• Certified Public Accountants (CPAs) who facilitate these schemes.

Through rigorous audits, investigations, and criminal prosecutions, the RAFT program dismantled networks engaged in fake transactions, sending a clear and uncompromising message from the BIR chief that tax evasion will not be tolerated. Several corporations and their officers — including some prominent names in the business community — now face criminal charges, while CPAs involved in these schemes are subject to administrative complaints that could lead to license revocation.

THE ROAD AHEAD UNDER COMMISSIONER MENDOZA
With the recent leadership change, expectations are high that the new Commissioner will further continue to champion excellence in taxpayer services while ensuring the agency meets the government’s revenue targets. His mandate extends beyond sustaining ongoing reforms but also to strengthening trust and efficiency in tax administration.

Now, some key questions and aspirations that I’m personally looking forward to: will the new commissioner continue to leverage digital technology across BIR transactions?  Personally, I am keen on seeing the full implementation of e-invoicing and the establishment of ESRS in the Philippines — a digital reform that feels long overdue. As to enforcement strategy — will the new Commissioner maintain the aggressive stance of the RAFT program, or pivot toward innovative approaches that encourage voluntary compliance — transforming dishonest and non-compliant taxpayers into responsible, patriotic contributors to nation-building? It is our hope that we see clearer, risk-based guidelines for conducting mandatory tax audits, particularly in the selection process.  It is a common observation that compliant companies are receiving multiple Letters of Authority (LoA), which only impose unnecessary burdens without adding real value to enforcement efforts.

FINAL THOUGHTS
Leadership transitions often mark pivotal moments, and the recent change at the BIR is no exception.  Optimism is warranted that the new administration will champion fairness and transparency, embrace digital advancements, and foster a collaborative environment where taxpayers can thrive and grow their business.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professionals.

Richard R. Ibarra is one of the director from the Tax Advisory & Compliance practice area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.