New VAT audit team to scrutinize large taxpayers

The Bureau of Internal Revenue (BIR) will implement this month a stricter audit program for value-added tax (VAT) payments made by large taxpayers. According to a revenue memorandum order (RMO) signed by BIR Commissioner Kim Henares in July, the VAT Audit Program shall be enforced by an team to be composed of two leaders and five audit groups. RMO No. 19-2012 directs the VAT Audit Team to investigate the VAT returns of taxpayers belonging to the Large Taxpayers Service (LTS). Large taxpayers include corporations with an authorized capitalization of at least P300 million; multi-national enterprises with an authorized capitalization or assigned capital of at least P300 million; companies listed in the Philippine Stock Exchange; and universal, commercial and foreign banks. The large taxpayers will be classified into two groups: High-risk taxpayers will include those who show signs of under-reporting or non-payment of VAT collections. Characteristics or risk factors of taxpayers in this group include significant increase in exempt or zero-rated sales and VAT returns that reflect substantial input taxes, such as when the total input taxes claimed exceed 75 percent of total output tax. Taxpayers with a history of filing claims for refund and those who report net loss despite having substantial sales may also belong to this group. Medium-risk taxpayers will include taxpayers with complex corporate structures, including mergers, consolidations spin-offs and other types of corporate reorganizations; and taxpayers registering for changes in tax status or business registration. The taxpayers that will be subject to audit by the VAT Audit Team shall be determined from this list. The VAT audit team shall recommend the issuance of one Letter of Authority by the BIR for each taxable quarter or semester. The BIR has been trying to collect more from large taxpayers. Based on Revenue Memorandum Circular 1-2012, 63.22 percent or P674 billion of the BIR’s P1.066-trillion revenue goal this year should be collected from the large taxpayers. The audit team for large taxpayers will also be in charge of collecting the agency’s excise tax target of P71.083 billion. — BM, GMA News