From anti-hero to protagonist? The BIR’s lyrical shift toward audit reform

For years, the relationship between the Bureau of Internal Revenue (BIR) and the taxpayer has been fraught with stress, uncertainty, and administrative friction. Many business owners start their day not with coffee, but with the familiar unease brought by BIR notices of overlapping Letters of Authority (LoA), simultaneous audits, and multiple Revenue Officers (ROs) looking into the books the exact same taxable year. To taxpayers, it feels like being pierced through the heart, but never (quite) killed. We survive the audit only to dread the next one.

Anyone who has dealt with an LoA knows that the BIR’s previous audit system often felt stuck in a loop of “I have this thing where I get older, but just never wiser.” The fragmented examinations, parallel case handling, and redundant investigations became part of the status quo. Under earlier rules, a single company could be pursued by different divisions all at once, e.g., all Internal Revenue Taxes except Value-Added Tax (VAT) cases are handled by the Revenue District Office (RDO) while VAT-specific cases are overseen by the VAT Audit Section (VATAS). This created a multiverse of cases that strained corporate resources, heightened uncertainty and perhaps more concerningly, opened a space for inconsistencies and unintended administrative overreach.

With the recent issuance of Revenue Memorandum Order (RMO) No. 1-2026, however, the BIR appears ready for a new era, almost echoing a familiar line: “It’s me, hi, I’m the problem, it’s me.” Yet this isn’t just a self-deprecating lyric, but more like an earnest step toward a more systematized, transparent, and taxpayer-friendly deficiency assessment procedure.

SINGLE-INSTANCE AUDIT FRAMEWORK
The new directive from the Commissioner, which lifted a two-month suspension on the issuance of LoAs, among others, signals a significant shift. The Bureau’s intention is clear: to streamline the audit process and put an end to the overlapping cases and duplication of audits that have burdened businesses. A key strength of the framework lies in the finality and certainty it seeks to introduce. Once an audit for a particular taxable year is completed, taxpayers can reasonably expect that all tax issues for that year have been examined and resolved, subject only to the narrowly defined fraud exception. This reduces the risk of successive or piecemeal examinations for the same year under different tax categories and reinforces the principle that audits should be comprehensive, conclusive, and time-bound.

On the surface, this is a welcome development that promotes clarity and supports the government’s Ease of Doing Business (EoDB) initiative. However, the issuance does not directly address situations where a taxpayer may be audited for different taxable years at the same time — an experience familiar to taxpayers who are subject to consecutive or multiyear audits. In practice, a company may still find itself undergoing audits for open years such as 2023 to 2025, since the single-instance rule is applied on a per-year basis. As a result, taxpayers may still need to manage separate audit teams, checklists, and timelines for each year, requiring careful coordination and sustained internal resources.

Tax audits are generally intended to be corrective, serving as a means to identify gaps and guide taxpayers toward improved compliance rather than to impose punitive measures. When deficiencies or non-compliances are identified during an assessment, it may be helpful for taxpayers to be given reasonable window to implement corrective and systemic improvements. Allowing such adjustments to take effect before the issuance of a new LoA immediately for the same recurring issues can better support the spirit of voluntary compliance and help avoid an inefficient cycle of repetitive assessments.

CONSOLIDATION, A HELP OR HIDDEN RISK
The implementation of the single-instance audit framework comes with automatic consolidation without any action required from the taxpayer. However, it also comes with incredibly tight deadline to opt out which is Feb. 16, 2026, feels like a tale as old as time, where the taxpayer is left scrambling while the Bureau sets the clock. This raises practical concerns: Can the Bureau realistically implement and operationalize this framework within the timeframe? Will extensions be considered?

While the consolidation of multiple audits is presented as a measure intended to ease the burden on taxpayers, it may also carry certain implementation risks if not carefully managed. If a taxpayer’s All Internal Revenue Taxes except VAT audit was at the Final Assessment Notice (FAN) stage, meaning they were inches away from resolution and settlement, consolidating it with a newly opened VAT audit may effectively be hitting the reset button.

Alternatively, this can also be interpreted as fast forwarding the audit procedure to match the advanced stage of the All-Internal Revenue taxes except VAT audit, it risks violating the taxpayer’s constitutional right to due process. Taxpayers will be unable to adequately defend themselves against VAT findings that haven’t even been properly ventilated at the initial stages of the audit procedure.

This tension between speed and fairness suggests that the Bureau might still be staring directly at the sun but never in the mirror regarding the logistical challenges these tight timeline and consolidations create.

SYSTEM VS HUMAN JUDGMENT
The RMO also introduced a system-assisted, risk-based selection model for audits. The criteria for mandatory and priority cases are outlined in Annex A of the RMO, aim to eliminate the weaponization of audits by removing human discretion and influence. The anonymization of examiners and supervisors also aligns with the Bureau’s digital transformation efforts.

Still, essential questions remain:

Who oversees the algorithm?

Who defines the risk parameters?

To what extent can backend adjustments still be made?

Even with increased automation, human intervention and judgment will continue to play a meaningful role, raising the need for strong controls and oversight.

BALANCING UNIFORMITY AND PRACTICALITY
Furthermore, Annex B of the RMO provides for the standardized Checklist of Requirements for Presentation/Submission of Documents/Record remains a significant burden. While it aims for uniformity, it still requires exhaustive documentation.

For instance, Item 2 – Securities and Exchange Commission (SEC) registration documents are public records held by the SEC. In the spirit of a truly integrated EoDB, there is a golden opportunity here to relieve the taxpayer of their role as the middleman. Similarly, Item 4 – Proof of tax credits is a quarterly and annual submission of taxpayers via the electronic Audited Financial Statements (eAFS) system and should be readily available to the BIR.

To truly embrace streamlined audit procedures and assist taxpayers, the BIR may consider removing the monster on the hill by developing industry‑specific sub-checklists to reduce unnecessary document demands and improve audit efficiency.

FINAL THOUGHTS: ROOTING FOR THE ANTI-HERO
RMO No. 1-2026 marks a meaningful lyrical shift, a recognition that the BIR audit system needed calibration. The Bureau may have played the anti-hero in the taxpayer’s story for too long. The story of the one we “agree with” in principle that is, taxes must be collected, but the one we “disagree with” in practice that is, the procedure is always painful.

But as we navigate the opt-out and mandatory consolidation deadlines of Feb. 16 and March 4, respectively, the business community remains cautiously hopeful. For the BIR to fully remove its anti-hero persona, consolidation must not become a tool for delay, and the promise of single-instance auditing must eventually extend to multi-year audit management.

We are beginning to believe the Bureau is changing. We are slowly letting go of the feeling that the Bureau is the antagonist. But until these reforms function smoothly and consistently, without infringing on due process, taxpayers will continue to root for the Bureau’s reform, even if it is exhausting to always root for the anti-hero.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Charisse A. Datiles is a manager from the Tax Advisory & Compliance practice area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

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