The Bureau of Internal Revenue (BIR) will give its assessment division the authority to audit the books of taxpayers to ensure the payment of appropriate taxes.

Internal Revenue Commissioner Sixto S. Esquivias IV yesterday said this is in line with their aim to intensify enforcement activities that seek to improve taxpayer compliance and offset revenue losses brought about by the global economic downturn.

He added this would address the lack of manpower among regional district offices (RDO) which are conducting the audit.

"The payments by small taxpayers are dropping... We decided that the assessment division can conduct audits," he told tax experts at the launch of the 2009 National Internal Revenue Code textbook published by accounting firm Isla Lipana & Co.

"Right now only RDOs conduct audits We need a lot of people for our enforcement activities," he added.

The assessment division currently determines the amount of taxes due.

Mr. Esquivias said the move would enable the BIR to look into the records of small taxpayers exempted from value-added tax (VAT) to check their entitlement. Under the law, sales of persons and establishments earning not more than P1.5 million annually are exempted from paying VAT.

In a chance interview, BIR Deputy Commissioner Nelson M. Aspe said authorizing the assessment division to conduct audits would allow the BIR to review the records of "hundreds of thousands" of small taxpayers.

He admitted that allowing the assessment division to conduct audits may not totally solve the manpower lack but this would still augment the people conducting their enforcement programs.

"If these small taxpayers are not audited, then we will never have the chance to audit them," he said.

"A typical RDO would have more than a thousand taxpayers. If there are 10,000 taxpayers in a district, the RDOs can audit around 2,000 only," he added.

Mr. Aspe said they will soon fine-tune the details of the scheme.

Mr. Esquivias said around 99.4% of BIR revenues came from voluntary compliance, while only 0.6% come from enforcement.

He cited the need to ensure tax compliance as the economic slowdown may motivate taxpayers to underdeclare their income.

"The BIR has to do more in terms of enforcement activities. The taxpayers should feel the presence of BIR," he said.

The BIR fell short of its target for the first quarter, collecting only P154.8 billion compared to a target of P165.3 billion. Officials have blamed the slowdown in economic activity as well as the tax relief measure for the shortfall.

The bureau also failed to meet its revenue goal last year, collecting P778 billion against the target of P810 billion. The BIR, which accounts for bulk of the total tax collection revenue, is required to collect P850.6 billion this year. — Alexis Douglas B. Romero