The Bureau of Internal Revenue (BIR) is pivoting its enforcement strategy toward high-value targets, effectively abandoning the pursuit of small-scale tax delinquents where the cost of collection exceeds the potential recovery.

BIR Commissioner Charlito Martin R. Mendoza issued Revenue Memorandum Order No. 11-2026, raising the “cost to collect” threshold for delinquent accounts to ₱80,000 from the previous limit of ₱20,000.

The new BIR order, which takes effect immediately, allows the bureau to classify certain accounts receivable as revenue losses if they are deemed no longer economically feasible to pursue.

The move provides a statutory basis for the BIR to write off tax cases that are final and demandable but fall below the new ₱80,000 floor. By raising this limit fourfold, the government’s main tax collecting agency aims to rationalize its enforcement efforts and reallocate manpower toward more significant tax recoveries.

“This order is issued to rationalize collection enforcement efforts when continued collection is no longer economically feasible,” Mendoza stated in the memorandum published on Tuesday, May 12

The policy shift comes as President Ferdinand Marcos Jr.’s economic team tasks the BIR with a ₱3.46 trillion collection target for 2026. While the agency exceeded its revenue goals in 2025—notably despite a two-month suspension of tax audits—the 2026 target requires a more streamlined approach to resource management.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), told Manila Bulletin on Wednesday, May 13, that the BIR’s move is mainly a measure to enhance tax haul efficiency.

“In practice, many small delinquent accounts have low recovery rates and can be costly to pursue, so reallocating enforcement resources toward larger cases can improve overall collection efficiency,” Asuncion said.

“While there may be a nominal reduction in collectible amounts on paper, the net impact on 2026 revenues is likely neutral to modestly positive if enforcement on higher-value accounts strengthens,” Asuncion further said.

Meanwhile, Asuncion noted that the policy shift carries collection risks. “It may create the perception that smaller tax liabilities are less likely to be enforced, which could weaken compliance at the margin,” he said.

“Managing this will be key—particularly through clear communication that the measure is about cost efficiency, not tolerance—and by maintaining audit visibility across all taxpayer segments,” he suggested.

Overall, the economist said the move is “sensible” from a standpoint of allocating resources, especially manpower. He, however, stressed that the success of this new measure will hinge on the government officials’ execution and enforcement credibility.

For Reyes Tacandong & Co. senior adviser Jonathan Ravelas, the measure is about “smarter tax administration rather than lost revenue,” explaining that the BIR’s move conveys a message to stop spending more than the agency collects on small, low-chance cases and to “focus resources on big-ticket compliance where the returns are higher.”

Ravelas told Manila Bulletin that some write-offs would soon pile up after the implementation of the measure, “but these were mostly uncollectible anyway—so the net impact on revenues should be minimal, if not positive over time,” agreeing with Asuncion’s view.

He also pointed out the compliance risk if taxpayers think smaller tax violations will not be pursued.

“So the key is balance: streamline operations, but maintain visible enforcement to protect the integrity of the system,” Ravelas said.