By Wilnard Bacelonia | Philippine News Agency
The Department of Finance (DOF) on Thursday underscored its full cooperation with the Senate Blue Ribbon Committee’s investigation into the alleged misuse of Letters of Authority (LOAs) and Mission Orders (MOs) by Bureau of Internal Revenue (BIR) personnel.
“The state’s power to tax must always be exercised with fairness, transparency, and accountability… President Ferdinand R. Marcos Jr. has made it unequivocally clear—we will not tolerate corruption in government,” Finance Sec. Frederick Go said.
Go temporarily suspended all field audits to allow a full review of enforcement practices.
He said he and BIR Commissioner Charlie Mendoza are aligned in “cleaning up the system, restoring integrity and public confidence,” and modernizing audit procedures to eliminate opportunities for discretion and abuse.
Systemic abuse of LOAs, MOs
Committee Vice Chair, Sen. Erwin Tulfo, opened the hearing by warning that LOAs and MOs—designed to ensure lawful tax collection—have in many cases been weaponized for harassment and extortion.
He said both small and large businesses have reported being pressured into “questionable settlements” in exchange for downgrading or dropping tax investigations.
“Kahit po ang mga international companies… ay hindi nakaligtas sa ganitong uri ng pang-aabuso,” Tulfo said, noting that complaints have reached foreign chambers of commerce and ambassadors.
He also cited a troubling pattern in collection data: only 2% of BIR revenue from the business sector comes from LOA-initiated audits, while 98 percent is collected voluntarily.
“So ibig sabihin po… dalawang porsyento lamang ang pumapasok sa kaban ng bayan sa total tax collection. Yung the rest, 98%, voluntary,” he said, adding that reports allege a large portion of LOA-related payments end up in the pockets of erring examiners and officials.
Tulfo said some reports describe a 75-25 scheme, with only 25% receipted and the remaining 75% allegedly pocketed.
“Our goal here is simple: To restore trust, protect taxpayers, and ensure that public power is never ever again used for private gain,” he added.
Multiple LOAs, bloated assessments
Sen. Joseph Victor Ejercito detailed several alleged patterns of abuse raised by taxpayers and business groups, saying the issue has reached a point where even foreign ambassadors have expressed concern.
He cited reports of multiple LOAs issued to the same taxpayer within a short period, including a Quezon City case involving four LOAs in six months and another in Laoag City where a small family business received four LOAs for a mini-grocery and eatery.
Ejercito also flagged inflated assessments without basis, citing a case in Manila where a business with P12 million in sales was issued a P13 million assessment after refusing an alleged P400,000 “all-in” offer.
Other taxpayers reported negotiated settlements where only a fraction was receipted, including a P1.2 million settlement for a P30 million deficiency, of which P800,000 was allegedly “for the boys.”
“Malaki o maliit ang iyong negosyo, target ka ng BIR… Nagagamit ang LOA sa harassment, coercion, at pilit na negotiation,” he said.
“We have to stop this culture of corruption that is now plaguing the country.”
Two fronts for reform
BIR Commissioner Charlie Mendoza acknowledged the need to improve both enforcement and oversight to eliminate discretion and restore fairness in the audit system.
He said enforcement must be “firm, predictable, transparent,” and rules must be clarified to prevent overlapping or arbitrary issuances.
These reforms, he said, can be strengthened through integrated digital systems, real-time monitoring, and strict audit protocols.
“Rebuilding trust requires reform on both fronts… When the system itself demonstrates integrity, voluntary compliance follows,” Mendoza said.
He noted that the BIR suspended the issuance of LOAs two weeks ago to allow a full reevaluation of the audit process.
‘Integrity, professionalism’
Former BIR Commissioner Romeo Lumagui Jr., meanwhile, also assured the Senate Blue Ribbon Committee of his full cooperation in its investigation.
Testifying during the hearing, Lumagui said he implemented key programs during his term in the agency to curb corruption by focusing on strengthening integrity and professionalism among employees.
Among these programs, he said, are the BIR’s digital transformation through the Online Registration and Update Systems (ORUS) and the new BIR web portal, which reached over 10 million visitors in its first year and secured the agency’s first ISO certification.
“We focused also on the digitalization program of the BIR. That would focus also on integrity and professionalism as well as give excellent taxpayer service,” Lumagui told the panel.
He added these reforms resulted in revenue collection of P2.85 trillion in 2024 and P2.32 trillion from January to September 2025.
Lumagui left the BIR last month. (With a report from Leonel Abasola / PNA)
