By Jun Ramirez
The Bureau of Internal Revenue (BIR) on Thursday instructed regional and district officials nationwide to strictly follow procedures while investigating taxpayers as prescribed in the Tax Code and prevent losing tax collection cases filed before the Court of Tax Appeals (CTA).
Specifically, it ordered regional and district officials to discontinue the practice of using the so-called Letter Notice (LN) in assessing the tax liabilities of taxpayers, and instead utilize the Letter of Authority (LA).
It explained that information gathered via an LN or from third parties cannot be validly used to assess the tax deficiencies of a taxpayer as it is not mentioned in the Tax Code.
An LN is merely a tool in gathering undeclared information from taxpayers’ clients and should be converted into an LA before it is served to taxpayers.
Records showed that tax collection cases involving up to hundreds of millions pesos have been dismissed by the CTA following the Supreme Court ruling that invalidated the BIR assessment against health service provider Medicard that was issued an LN but not an LA.
In Revenue Memorandum Circular No. 75-2018, BIR Commissioner Caesar R. Dulay stated that an LN “is entirely a different purpose than an LA, and not an authority to conduct an audit or examination of the taxpayer leading to the issuance of deficiency assessments.
“Due process demands that after an LN has served its purpose, the revenue officer should properly secured an LA before proceeding with further examination and assessment of taxpayers,” Dulay added.
The BIR chief warned that administrative sanctions will be imposed against an examiner who initiates an audit sans an LA.