BIR’s ‘Letters of Authority’ become the new cash cow, Tulfo flags: ‘If DPWH has flood control, BIR has LOA’
MANILA, Philippines — In the long, familiar list of agencies plagued by corruption, the Department of Public Works and Highways (DPWH) has long carried the reputation of being the worst offender — thanks largely to its flood-control projects. But on Monday, November 18, Senator Erwin Tulfo suggested that another agency is catching up fast.
“If the DPWH has flood control, the BIR has the LOA,” Tulfo declared during the Senate’s plenary deliberations on the proposed 2026 budget of the Bureau of Internal Revenue (BIR), calling the tax agency the second-most corrupt office in government.
Letter of Authority
At the center of the alleged scheme is the Letter of Authority (LOA) — a formal document that allows BIR examiners to audit taxpayers. For many small business owners, it has become a symbol not of due diligence, but of intimidation.
Tulfo said he was approached by several business owners who claimed that certain BIR personnel were using LOAs to extort money — pressuring even the smallest enterprises with aggressive audits.
“They’re even going after the small ones,” Tulfo said in Filipino. “Even those that aren’t corporations — single proprietors — they target them and issue a LOA.”
The senator said that many small businesses would rather “settle” than deal with the lengthy audit process, fearing examiners who “keep looking for faults” despite complete receipts and documentation.
“They’ll say, ‘You’re missing this, you’re missing that — where’s this, where’s that?’ Sometimes they even go back 5 or 6 years. Where are they supposed to find those documents?” Tulfo added.
The alleged scheme echoes long-standing public complaints about BIR operations: examiners conducting extensive backtracking, repeatedly requesting documents, and leaving taxpayers feeling cornered until they agree to pay under the table.
Facing Tulfo during the debate, BIR Commissioner Charlito Martin Mendoza was urged to confront the issue head-on.
“You really need to do something about this — about your own subordinates,” Tulfo told him. “They are using that letter of authority to make money.”
The senator called on the BIR chief to review and overhaul the bureau’s LOA processes, warning that without significant reforms, the agency’s credibility will continue to erode.
What exactly is a BIR Letter of Authority (LOA)?
A Letter of Authority, commonly known as an LOA, is one of the most powerful documents issued by the Bureau of Internal Revenue (BIR). It is the formal go-signal that allows BIR examiners to audit a taxpayer’s books, records, and transactions to determine whether the correct taxes have been paid.
But because of its broad reach — and the pressure it places on businesses — the LOA has also been at the center of allegations of abuse.
Here’s what you need to know:
1. What is an LOA?
An LOA is a written authority signed by a BIR official that authorizes a specific revenue officer or a team of examiners to conduct a tax investigation or audit.
It is required before BIR personnel can legally examine a taxpayer.
2. Who gets issued an LOA?
It can be issued to:
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Corporations
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Small and medium enterprises
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Self-employed individuals
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Single proprietors
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Professionals
Anyone registered with the BIR may be subject to an LOA-based audit.
3. What does an LOA allow the BIR to do?
With an LOA, BIR examiners may:
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Request financial documents
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Review receipts and invoices
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Examine books of accounts
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Reconcile tax declarations
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Validate reported income and expenses
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Determine tax deficiencies
In some cases, examiners review transactions going back several years, depending on the assessment period.
4. What are the taxpayer’s rights?
Taxpayers have the right to:
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Verify that the LOA is genuine
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Check if the names of the examiners match those in the LOA
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Request clarification on which tax types or periods are being investigated
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Receive a written report of findings
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Appeal or contest any assessment
An LOA must be properly issued. Without it, a taxpayer is not legally required to submit to an audit.
5. Why is the LOA controversial?
Several businesses linked the LOA to alleged extortion, harassment, or “negotiated settlements.”
Some taxpayers say they are pressured into paying under the table to avoid prolonged audits or repeated document requests.
Senator Erwin Tulfo’s recent expose underscores how the LOA — meant to strengthen tax enforcement — may be misused by unscrupulous BIR personnel to pressure taxpayers, especially small businesses.
6. What reforms are being discussed?
Calls for reform include:
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Stricter monitoring of LOA issuance
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Digitization of audit processes
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Clearer audit timelines
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Stronger penalties for extortion
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Greater transparency on ongoing investigations
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