A promising step toward tax audit reform

The Bureau of Internal Revenue (BIR) ended the two-month suspension of tax audit activities after issuing Revenue Memorandum Circular (RMC) No. 8-2026 and Revenue Memorandum Order (RMO) No. 1-2026.

- KATHRINE JOY CAPALES

The latter introduces tax audit process reforms, which include, among others, a move to consolidate tax audit cases involving the same taxpayer and taxable year. The consolidation is a welcome relief as it seeks to address a longstanding pain point in tax administration, which is simultaneous to multiple audits covering the same period.

For years, it has been common practice for the Bureau to issue multiple electronic Letters of Authority (eLAs) to a single taxpayer for the same taxable year. The issuance of three separate eLAs is not unusual, covering two semesters of a value-added tax (VAT) audit, and another encompassing all internal revenue taxes except VAT (AIRT). The resolution of each tax audit entails resources diverted from the business such as manpower, time, and documentation to address the requests and findings raised.

While specialized audits enable more targeted and risk-based examinations, experience has shown us that a fragmented audit approach does not necessarily result in better tax enforcement. The consolidation, if properly implemented, may promote efficiency and coherence in tax audits. To help ensure that the RMO’s implementation aligns with existing rules on due process and audit authority, some points may need to be clarified further.

VAT-ONLY LOAS

The Single-Instance Audit Framework allows taxpayers with multiple ongoing tax audits within the same taxable year to file a Request for Non-Consolidation of Cases by Feb. 16 with the BIR office handling their AIRT audits. Without this, all eLAs for the period are automatically consolidated into one eLA covering all applicable internal revenue tax types under audit.