The Bureau of Internal Revenue (BIR) has dismantled its specialized value-added tax (VAT) audit units, executing a major structural overhaul designed to boost collections and eliminate overlapping enforcement that previously fueled allegations of corruption.

BIR Commissioner Charlito Martin R. Mendoza ordered the immediate abolition of Large Taxpayer VAT Audit Units (LT VAUs) and regional VAT Audit Sections (VATAS), according to Revenue Administrative Order No. 4-2026.

The directive, which took effect June 1, fully implements a restructuring plan Mendoza first signaled in January.

The move aims to restore institutional credibility after the tax bureau faced intense scrutiny over “weaponized” audits and extortion claims under prior operations. By shifting all VAT compliance functions into the broader divisions of the Large Taxpayers Service (LTS), revenue regions, and revenue district offices, the agency expects to establish a cleaner line of audit authority.

This restructuring aligns with the single-instance audit framework, which generally limits audits to one Letter of Authority (LOA) per taxpayer per taxable year. Under this setup, multiple audit authorities will be consolidated into a single LOA, subject to clearly defined exceptions.

The order also addresses the future of the employees currently serving in these units. “All affected or concerned personnel of LT VAU and VATAS shall be distributed or transferred to offices,” Mendoza said, ensuring that the existing workforce's expertise is integrated into the broader assessment divisions and regional offices.

The BIR collected ₱3.11 trillion in 2025, even as a temporary suspension of audit operations slowed the tax authority’s enforcement activities. While the full-year 2025 collection stood 8.9 percent higher than the previous year’s haul of ₱2.85 trillion, it fell 3.9 percent short of the target. The BIR has since resumed issuing LOAs and mission orders, ending the suspension that began in late 2025.

Collections from LOA-based enforcement account for up to 3 percent of the agency’s overall revenues. For the BIR’s ₱3.58-trillion collection target in 2026, this translates to around ₱107.4 billion.

Meanwhile, an extended filing season earlier this year helped lift tax revenues. The BIR's collections for the first five months of 2026 reached ₱1.43 trillion, up from ₱1.35 trillion in the same period last year. These cumulative revenues exceeded the agency’s ₱1.42-trillion target, a success Mendoza attributed to the institutionalization of the BIR DARES reform agenda, which has streamlined tax administration through digitalization and simplified compliance.