By Joey Brillantes
ON NOV. 17, during the Senate plenary deliberations on the proposed 2026 national budget, Senate Deputy Majority Leader JV Ejercito sounded the alarm over the alleged “weaponization” of Letters of Authority (LoA) by the Bureau of Internal Revenue (BIR), saying the issuance of LoAs is now being used as a tool for corruption.
In theory, a Letter of Authority from the BIR is simply a document empowering an examiner to check a taxpayer’s books. In practice, it has become one of the most feared instruments in Philippine business — especially among small and honest entrepreneurs who lack the lawyers, accountants, and political insulation of large corporations.
For many SMEs, the LoA is not an audit notice. It’s an implicit threat. The moment it arrives, day-to-day operations freeze. Employees panic. Owners brace for weeks or months of visits, requests, “re-requests,” and shifting requirements that often feel less like a compliance process and more like a slow tightening of a vise. The LoA has evolved into a culture of intimidation, where even those who try their best to comply are treated as if they are already guilty.
This isn’t how a modern tax system should work. It’s time we admit — publicly and without defensiveness — that our system normalizes behaviors and incentives that enable abuse.
To understand what’s possible, I looked at the Singapore system and spoke to tax law expert Edward G. Gialogo of Gialogo and Associates.
TAX SCRUTINY IN SINGAPOREThe closest counterpart to the LoA in Singapore is the IRAS Audit Notification, but the similarities end with the label. Gialogo said the Singapore model is built on:
1. Risk-Based, Data-Driven Selection. Businesses are chosen for review through analytics, not “tips,” not anonymous leads, and not arbitrary regional directives. When the Inland Revenue Authority of Singapore (IRAS) flags a taxpayer, it’s because specific data patterns were detected — not because an examiner chose a target.
2. Transparent Scope and Timeline. An audit notification clearly states: what specific issues are being reviewed; what documents are needed; and how long the process will take. There are no endless follow-ups for “additional documents.”
3. No On-Site Intimidation. Most audits are done off-site using digital submissions. Inspectors don’t loiter around a business. No one shows up unannounced. There’s no implied pressure created by a physical presence.
4. Clear Rights and Recourse. Taxpayers receive written guides on: how the audit works; their rights; their ability to contest findings; and clear escalation paths.
5. Predictable Penalties, Not Negotiated Ones. Penalties are formula-based — not subject to negotiation, discretion, or “interpretation.” Because the rules are consistent, there’s no room for gatekeeping or extracting concessions.
So why are we suffering? We suffer because the Philippine LoA system has four deep structural flaws:
One is Excessive Discretion, because a single revenue officer has wide latitude in interpreting scope, timelines, and findings. Discretion becomes leverage. Leverage becomes abuse. Another one is the Absence of Digital, Data-Driven Screening. Most LoAs are still initiated through manual triggers. This exposes the system to human biases, internal politics, and external influence.
Physical Presence as Pressure is the third factor. Inspectors visiting offices or stores — sometimes repeatedly — breeds fear. This creates an atmosphere ripe for “settlements.” Last but certainly not least, a Compliance Framework Built on Suspicion leads to negative outcomes. The BIR’s posture toward taxpayers is adversarial. Every business is considered a potential cheat, not a partner in nation-building. The result? Small businesses — those without accountants on retainer — are the most vulnerable to harassment, coercion, and arbitrary assessment.
WHAT PHL CAN DOGialogo recommends a practical, four-step blueprint to reform the LoA system without needing a constitutional overhaul or massive bureaucracy restructuring:
1. Replace LoAs with “Digital Audit Notices.” These should be auto-generated through data analytics; specify the exact issue under review; require only digital submissions; and be time-bound unless formally extended by a supervisor. This alone will eliminate most opportunities for discretionary abuse.
2. Eliminate On-Site Audits for 95% of Cases. The BIR can adopt a “remote-first” policy. All documents should be uploaded through an online portal. Zero physical visits unless flagged by a specific risk. Mandatory body cameras and audit logs for any in-person inspections. No small business owner should ever fear someone “dropping by” with a LoA.
3. Establish a “Taxpayer Rights Charter” with Enforcement Teeth. This charter must guarantee predictable timelines; clear limits to an audit’s scope; the right to recorded communications; and penalties for officers who violate protocol.
4. Lower Filing Fees in the Court of Tax Appeals. When the BIR issues an assessment (computation of deficiency tax liabilities), the remedy of the taxpayer is to file a protest — also with the BIR. Reversals are seldom granted because the protesting agency evaluates its own assessments. This is why, in practice, the cancellation of an assessment normally happens at the level of the Court of Tax Appeals (CTA) if the taxpayer appeals against the denial of protest. But not all taxpayers elevate the case to the CTA because of the prohibitive filing fees, which are around 1% of the amount being assessed by the BIR. This is non-refundable even if the taxpayer wins the case. Thus, lowering CTA filing fees will encourage taxpayers to elevate arbitrary assessment to the CTA instead of entering a “compromise” with the BIR.
The bottom line: fear does not build compliance. Trust does. Singapore’s IRAS has long applied such principles, reinforcing trust between taxpayers and the government.
The Philippines does not need a tax system that bullies its own entrepreneurs. It needs one that protects them, honors their contributions, and treats them as partners in national development, Gialogo said. If Singapore — one of the most efficient, corruption-resistant tax regimes in the world — can conduct audits without intimidation, the Philippines can certainly do the same.
Reforming the LoA system is not just a matter of administrative policy. It’s a matter of economic justice. In a country where the vast majority of jobs come from small and medium enterprises, every abusive LoA is not just a document — it is a threat to national progress.
Joey Brillantes is the founder and managing partner of the public relations and digital marketing agency Integral Public Relations, Inc. The individuals, brands, nations, companies, organizations, entities, agencies, and institutions mentioned in this commentary have no business relationship with his agency, nor are they competitors of its clients.
