[Ask the Tax Whiz] Can I avoid a BIR audit? | Part 1

The Bureau of Internal Revenue (BIR) attains its collection targets through its enforcement programs, which include Run After Tax Evaders or RATE, Oplan Kandado, and the Taxpayer Compliance Verification Drive. It also conducts intensified audit and investigation.

What is tax mapping? What are the documentary requirements which will be checked during tax mapping?

Tax mapping or the Taxpayer Compliance Verification Drive is an enforcement program which aims to broaden the tax base by increasing the number of registered business taxpayers. Verification of a taxpayer’s compliance with registration and other requirements prior to, during, and after business operations is conducted by checking the following documents:

1. Registration requirements
2. Invoicing requirements
3. Bookkeeping requirements

What is Oplan Kandado? What are the types of surveillance? What are the grounds for the suspension or temporary closure of business?

Oplan Kandado is an enforcement program involving the strengthening of the bureau’s imposition of administrative sanctions for non-compliance with essential requirements such as the issuance of receipts, filing of returns, declaration of taxable transactions, taxpayer registration, and paying the correct amount of taxes as mandated by the standards of their particular industry or line of business.

There are three types of surveillance:

1. Covert Surveillance – undercover watch on the business operations before an inventory of business documents evidencing receipt of income as well as movement of goods or services
2. Overt Surveillance – begins with inventory-taking of business documents followed by actual observation and close monitoring of business activities 
3. Short-Duration Surveillance (Tax Compliance Check) – an on-and-off activity which does not involve prolonged on-premises observation to detect non-compliance with the bureau’s primary and secondary registration requirements

The following are the only grounds for suspension or temporary closure of business:

1. Failure to issue receipts or invoices by a VAT-registered or registrable taxpayer
2. Failure to file a VAT return
3. Understatement of taxable sales or receipts by 30% or more of the correct amount, in the case of a VAT-registered or registrable taxpayer
4. Failure to register

Can I avoid a BIR audit? Are there any webinars available to help us improve our tax compliance?

All taxpayers are considered possible candidates for audit, whether tax mapping, Oplan Kandado, or RATE. Violation of the tax code will trigger the BIR to conduct an audit and investigation.

To avoid a BIR audit, taxpayers must comply with the law and pay taxes correctly and on time. However, during a BIR audit, the burden of proof is on the taxpayer, so all supporting documents must be ready for verification by the assigned BIR examiner/s.

Taxpayers may attend webinars available on the Facebook page of the BIR. Another option is to join the Elite Taxpayer Circle for free and attend the ETC Exclusive on how to avoid a BIR audit through proper compliance and annual tax health checks.

– Rappler.com

Mon Abrea, CPA, MBA, is the co-chair of the Paying Taxes-EODB Task Force. With the TaxWhizPH mobile app as his brainchild, he was recognized as one of the Outstanding Young Persons of the World, an Asia CEO Young Leader, and one of the Ten Outstanding Young Men of the Philippines because of his tax advocacy and expertise. Currently, he is the chairman and CEO of the Asian Consulting Group and trustee of the Center for Strategic Reforms of the Philippines – the advocacy partner of the Bureau of Internal Revenue, Department of Trade and Industry, and Anti-Red Tape Authority on ease of doing business and tax reform. Visit www.acg.ph for more information or email him at mon@acg.ph and download the TaxWhizPH app for free if you have tax questions.