Taxpayers Who Qualify for Availment of Last Priority in Audit and Investigation

August 26, 1985 BIR RULING NO. 141-85 7-b 000-85 141-85 S i r : This refers to your memorandum dated July 10, 1985 requesting information on the following questions: "1. Whether or not taxpayers who refuse to accept the Letter of Authority but are willing to pay the additional 25% of the 1982 deficiency tax payment shall be fully covered by the privilege of "last priority in Audit"; "2. What action the Division will take in cases wherein taxpayers similarly situated but refuse to pay such additional amount and to be investigated at the same time; "3. What action the Division will take on taxpayers who have already accepted the Letters of Authority for the taxable year 1983 but refuse to be investigated and yet are willing to pay the 25% on the 1982 deficiency tax payment; "4. Whether the required 25% for percentage taxes should be based on the sales tax due per return before deducting sales tax credit." In reply, please be informed that under subparagraph 2, paragraph III of Revenue Memorandum Order No. 8-83 reading: "III Determination of last priority privilege xxx xxx xxx "2. Taxpayers who in their income or percentage tax returns in a given year have made payments amounting to at least 25% above the payments made in the immediately preceding year shall be entitled to qualify for the privilege of last priority herein granted, subject, however to the conditions prescribed under 2.1, 2.2 and 2.3 hereof. Likewise, amendments to income and percentage tax returns as well as deficiency tax assessments issued by this Office shall be included in the computation of the 25% needed for the availment of this privilege." taxpayers who filed 1983 blue returns and paid 25% more than their 1982 tax payments per return, in order to qualify for the privilege of last priority in audit and investigation, should voluntarily file amended 1983 tax returns and pay the additional 25% based on deficiency taxes found due and paid after subsequent investigation of their 1982 tax returns, before the authority to investigate their 1983 tax returns is issued and served upon them . Where a Letter of Authority for the taxable year 1983 has already been issued and served upon the taxpayer, the payment of 25% more, based on its 1982 deficiency tax payments shall not entitle him to "last priority" because the availment hereon cannot be considered as voluntarily made. It would appear that the amendment and payment that come after the service of the letter of authority are strategies to hide something rather than the genuine desire to help the government increase its collection of taxes. This situation is not covered by the privilege of blue returns. Taxpayers who, in their percentage tax returns in a given year, made payments amounting to 25% more than those made in the preceding year shall qualify for availment of last priority in audit and investigation. The basis of the 25% should be the percentage tax due per return, before the sales tax credit, plus the deficiency percentage tax found in the prior return. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner