BIR introduces system reforms to address alleged 'LOA scheme'
By Dhel Nazario
Published Feb 10, 2026 01:08 pm
At A Glance
- The Bureau of Internal Revenue (BIR) has employed a new system to address the alleged money-making scheme involving Letters of Authority (LOAs) within the agency by minimizing human intervention, the agency's officials said.
The Bureau of Internal Revenue (BIR) discussed some of its reforms on Tuesday, Feb. 10, aimed at addressing the alleged money-making scheme involving Letters of Authority (LOAs) within the agency by minimizing human intervention.
Bureau of Internal Revenue (BIR) Commissioner Atty. Charlito Mendoza (Senate of the Philippines)
During the hearing of the Senate Blue Ribbon Committee, Senator Erwin Tulfo asked BIR chief Charlito Mendoza if LOAs will be generated through the BIR's own system and will just be signed by the latter.
"Yung system na po yung mamimili ng i-aaudit. Sapagkat may nakita siya doon sa mga records ng taxpayer na nasa system din po (The system itself will select who will be audited, because it detects this based on the taxpayer records already in the system)," Mendoza said.
"Ibababa po muna para mag-assign ng examiners at ng group supervisors and then iaakyat po samin to de-anonymize at then tsaka po ibababa uli para sa issuance na upon pirma ng letter of authority either ng regional director or ng assistant commissioner (It will first be routed down for the assignment of examiners and group supervisors, then elevated to us for de-anonymization, and afterward sent back down for issuance upon the signing of the letter of authority by either the regional director or the assistant commissioner)," he explained.
Mendoza presented to the panel the audit reforms which include: clearer definitions of audit authority; the Single-Instance Audit Framework, which limits examinations to one Letter of Authority (LOA) per taxpayer per year; risk-based and system-assisted selection; anonymized assignments; and the dissolution of special audit task forces, including the VAT Audit Section and Large Taxpayers VAT Audit Unit, with their functions returned to regular BIR offices.
He said the new rules were shaped by months of internal review and consultations with the private sector, including recommendations gathered through the BIR Partnership with the Multisectoral Group. The goal, he emphasized, was to directly address long-standing taxpayer complaints about overlapping audits, unclear authority, and uneven enforcement.
Among the major reforms presented was the Single-Instance Audit Framework, which limits examinations to one Letter of Authority per taxpayer per year. The BIR also adopted risk-based and system-assisted audit selection, anonymized the assignment of cases, and dissolved special audit task forces, including the VAT Audit Section and the Large Taxpayers VAT Audit Unit. Their functions have been returned to regular BIR offices to normalize procedures and reduce discretion.
He also confirmed that there will be a LOA verifier to help taxpayers determine the authenticity of their LOAs. The presentation comes amid renewed scrutiny of tax enforcement practices, as lawmakers and business groups alike have called for stronger safeguards following past controversies over aggressive or inconsistent audits.
The Senate is conducting an inquiry into the alleged extortion schemes perpetrated by BIR personnel and the misuse and weaponization of LOAs.
A LOA is an official document issued by the BIR authorizing revenue officers to examine a taxpayer’s books and records for specific taxes and periods, marking the start of a tax audit.
Tulfo said that through this, at the audit stage itself, human intervention by Revenue District Offices (RDOs) will already be minimized, because this has long been the primary problem.
Senate President Pro Tempore Panfilo “Ping” Lacson, who chairs the panel, urged the BIR to integrate its platforms with eGovPH to promote ease of access and transparency.
“I suggest that instead of your stand-alone website, you link it to eGovPH. Of course, minimize or eliminate human intervention, because you are heading towards digitalization.” Lacson said, as he pointed out that many Filipinos already use the platform when transacting with government agencies.
Lacson also questioned the extent of remaining human contact in the audit process, stressing that reducing discretion is key to preventing abuse.
Lacson also questioned the extent of remaining human contact in the audit process, stressing that reducing discretion is key to preventing abuse.
In response, Mendoza said there are currently around 45,000 active LOAs, which are subject to consolidation unless taxpayers request otherwise. He explained that under the new rules, the selection of taxpayers to be audited is now system-generated, based on embedded criteria, and approved by the Commissioner of Internal Revenue.
Meanwhile, Tulfo also asked BIR on accountability in tax audits, questioning whether any officials had been held liable amid persistently low prosecution rates, as the agency rolled out reforms aimed at curbing corruption.
He noted that based on records reviewed by his office, only about 1 percent of LOAs previously issued by the BIR had resulted in cases reaching the Department of Justice, with even fewer making it to the Court of Tax Appeals.
Mendoza said agency personnel who violate the new audit rules would face administrative, civil, or criminal charges, stressing that accountability mechanisms are already in place.
“Maliwanag po na nakalagay sa ating RMO na ang mga kawani ng BIR na hindi susunod sa mga bagong panuntunan ay mananagot (t is clear in our RMO that BIR personnel who do not follow the new rules will be held accountable),” Mendoza said.
He added that the agency currently has 30 employees under investigation, with 25 already facing formal charges, as part of its ongoing internal probe into alleged irregularities.