MANILA, Philippines – Finance Secretary Carlos Dominguez III has ordered the Bureau of Internal Revenue to stop special audits despite being authorized by the BIR Commissioner, as some of these — like the taxman’s tiff with property giant Megaworld Corp. last week — supposedly duplicated investigations on alleged tax cheats.
Upon Dominguez’s orders, BIR officer-in-charge and Deputy Commissioner Marissa Cabreros last Friday issued a memorandum, released to all revenue officers nationwide, which suspended revenue special orders and operations memoranda that, as allowed under the Tax Code, created special audit task forces. Internal Revenue Commissioner Caesar Dulay is on medical leave for over a month now.
The country’s biggest tax-collection agency issues revenue special orders invoking Section 5 of the Tax Code, which empowers the BIR chief to conduct audits. This was the same legal basis which regional director Eduardo Pagulayan Jr. of the BIR’s revenue region 8B covering south National Capital Region (NCR) cited for his investigation on Megaworld.
But Dominguez said in a statement on Saturday that “the functions and responsibilities of the different units in the BIR are provided in revenue administrative orders issued by the Secretary of Finance, upon the recommendation of the Commissioner — the issuance of the revenue special orders and operations memoranda has distorted this and even caused uncertainty for some taxpayers.”
Existing revenue special orders included task forces covering property developers as well as direct selling or multi-level marketing firms. The BIR had also issued operations memoranda running after e-sabong and Philippine offshore gaming operators (Pogos). Following Dominguez’s directive and Cabreros’ memo, these special audits had been suspended since Friday, until further notice, the DOF said.
The DOF told the BIR that “all existing audits and investigations under the revenue special orders and operations memoranda shall be handled by the revenue district offices unit/s in the BIR where the concerned taxpayers are registered.”
A source said the DOF will also recommend that preliminary findings of these now suspended special audits be forwarded to the proper BIR office for validation, so that those to be verified as tax cheats will be meted with the necessary penalties.
To recall, Pagulayan cited that even as Megaworld was under the jurisdiction of the BIR’s large taxpayers’ service, revenue region 8B wanted to audit the Andrew Tan-led property developer’s taxes on one-time transactions (ONETT) on the sale and transfer of properties. “The situs of taxation of sale, transfer, and other disposition of real properties is where the property is located,” Pagulayan said in a statement last Friday.
“The said properties being subjected to investigation are located within the premises of Taguig City, which clearly falls within the jurisdiction of the said BIR regional office and not with the large taxpayers’ service,” Pagulayan added, referring to Megaworld’s upscale Uptown Bonifacio development. The BIR’s large taxpayers’ service collects big corporations’ dues, while revenue regions usually go after smaller businesses and individual taxpayers.
Dominguez said the DOF was “working with the BIR to review these issuances and ensure these do not create redundancies and cause taxpayer confusion.”
“If found to be in violation of our revenue administrative orders, these issuances should ultimately be revoked by the BIR,” Dominguez said. Revenue administrative orders referred to BIR issuances which “cover subject matters dealing strictly with the permanent administrative set-up of the bureau, more specifically, the organizational structure, statements of functions and/or responsibilities of BIR offices, definitions and delegations of authority, staffing and personnel requirements and standards of performance,” the agency’s website said.
“All field audits and other field operations under the task forces authorized to conduct examinations and verifications of taxpayers’ books of account, records, and other transactions were also ordered suspended. As such, no field audit, field operations or any form of business visitation in execution of any letter of authority/audit notices, letter notices or mission orders should be conducted by the task forces,” the DOF said.
The DOF noted that prior to Dominguez’s order to suspend special audits, revenue special orders and operations memoranda had “allowed revenue officers to secure and conduct examination of books of accounts, papers, records, and other documents, and issue letters of authority in connection with the task force’s audit or investigation.”
This was the same as the probe initiated by Pagulayan, which he had said had been ignored by Megaworld. “The BIR regional office, however, found that the said corporation failed in its compliance and reportorial requirements under the Tax Code. Failure to comply with said requirements is a ground for closure,” Pagulayan said.
To recall, the BIR last Tuesday issued a media advisory saying it was supposed to issue a closure order against Megaworld the next day. After the advisory spread on social media, listed Megaworld’s stocks fell, shedding billions of pesos before it recovered before the trading day closed.
“At first instance, Megaworld refused to comply with the BIR audit… Last Wednesday, it was resolved that Megaworld will now comply with the audit. Hence, closure was set aside,” Pagulayan said.
Pagulayan added in his statement that investigation of Megaworld was “ongoing” — but Dominguez’s order already superseded this.
Sources said Pagulayan’s statement was approved by his BIR higher-ups as the taxman was supposedly being battered in the media as it was up against a big corporation. But this same statement was the straw that broke the camel’s back, and led to Dominguez ordering to suspend special audits, sources said.
As Pagulayan was left on his own, sources said the BIR official may be reassigned to another post, even as he was supposed to retire next month.
Dominguez himself had tried to intervene at the start of the BIR-Megaworld tiff last Tuesday, asking the two parties — for Megaworld, the Finance chief reached out to president and chair Andrew Tan — to discreetly resolve the issue and avoid making public statements. As DOF chief, Dominguez supervises the BIR while also overseeing capital market development.
But Megaworld issued another press release defending itself on Wednesday, the day it was supposed to be meted out with a closure order by the BIR.
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The article was originally published in Inquirer.NET and written by Ben O. de Vera.
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