Audit of Q1 VAT payments start

MANILA, Philippines - The Bureau of Internal Revenue (BIR) will start auditing first quarter value-added tax (VAT) payments of firms under bureau’s Large Taxpayers Service (LTS) and the regional offices, commissioner Lilian B. Hefti said. "The VAT liabilities for the first quarter of taxable year 2008 of taxpayers, who were selected for audit or verification based on the selection criteria pursuant to RMO [Revenue Memorandum Order] No. 20-2008, shall be audited or verified by the concerned investigating offices," she wrote in the order. Under this system, benchmarks are set per industry or profession, and taxpayers who fall below these benchmarks will be singled out for audit. Under RMO 22-2008, LTS will issue letters of authority to large taxpayers, while revenue district offices in Valenzuela, Manila, Quezon City and Makati will target taxpayers with gross sales, revenues or receipts exceeding P5 million, while all other regional offices will target those with such receipts amounting to P2 million and below. A letter of authority empowers a revenue officer to examine a taxpayer’s books of accounts and other accounting records to determine the taxpayer’s correct tax liabilities. It must be served within 30 days from the date of issuance. Benedicta Du-Baladad, head for tax advisory and compliance at Punongbayan & Araullo, said in an interview that the conduct of two audits — the "pre-audit" of 2007 tax payments and the first quarter VAT payment "short audit" (because it covers a short period of three months) — is "inconvenient and inefficient" for both taxpayers and the tax bureau. "Taxpayers are complaining because different set of officers are coming in for audit. Taxpayers have to entertain several group of examiners a year, briefing them when they come. It is time-consuming," she said. "There is [also] a disconnect because the findings of VAT ["short audit"] people will not be communicated to the people who will [conduct the annual] audit," she said in a telephone interview. She said BIR should concentrate on one-year audit that is "all inclusive," rather than focusing on specific type of tax on a short period of time. " — Ruby Anne M. Rubio, BusinessWorld