Standard Operating Procedure (SOP) in the Exercise of Visitorial Powers under Section 171 of the Local Government Code of 1991

September 1, 1993 MAKATI OFFICE ORDER NO. 01-93 TO : Fiscal Examination Staff Municipal License Division RE : Standard Operating Procedure (SOP) in the Exercise of Visitorial Powers under Section 171 of the Local Government Code of 1991. FROM : Engr. Rolando M. Carlos Acting Municipal Treasurer To enhance and maximize the collection of local business taxes, fees and charges without prejudicing the rights and obligations of the taxpayers in paying what is legally due to the local government unit, the following standard operating procedure (SOP) in the conduct of examination of books of accounts and other pertinent records are hereby promulgated and implemented, to wit: aisa dc SOURCES OF EXAMINATION I. 1st 1,000 business establishments, based on the payment of business taxes, fees and charges; II. Offices granted permits as executive, administrative, liaison, documents monitoring and display spaces except professional offices; III. Business establishments duly registered with the Bureau of Internal Revenue upon proper representation with that agency; IV. Business establishments with abrupt decreases or increases of gross sales/receipts based on records from the preceding 3 calendar years following the year of examination; V. Retiring businesses of the 1st 1,000 business establishments; VI. Other businesses on a case to case basis. DOCUMENT OF EXAMINATION I. Preliminary Letter of Authority ( Pre-LA ) Purpose: A. To avoid duplicity/multiplicity of issuance of letters of authority on the same business establishment; B. To determine in advance the tax status of business establishment subject to examination; and C. To save time and effort in the preparation of letters of authority, particularly on preliminary data and/or information known prior to formal issuance. II. Procedure : A. From the sources of information listed above, each revenue examiner is assigned an initial 10 business establishments within a month, replenished another LA, upon completion of the other LA previously issued; B. The 10 selected business establishments are listed in office form No. 1 (hereto attached) by the Records Unit, Fiscal Examination Staff, after the letter has verified the tax records of businesses already examined or pending examination; C. Office Form No. 1, with Office Form No. 2 (hereto attached) are endorsed to the Municipal License Division, for verification of the tax records status of the 10 selected business for the preceding 3 calendar years following the year of examination. D. The Preliminary Letters of Examination are reviewed by the Assistant Treasurer of Operations before the same are approved for examination by the undersigned. III. Letter of Authority ( LA ) A. A revised letter of authority (LGS Form No. 1 of the Department of Finance), hereto attached, is adopted to conform with Section 171 of the Local Government Code of 1991, enjoining among others, the business establishment under examination to furnish the following financial documents: 1. Certified xerox copies of audited financial statements, with the originals stamped by the Bureau of Internal Revenue or Securities & Exchange Commission; 2. Xerox copies of the official receipts in payment of business taxes, fees and charges, upon verification of the originals; 3. Xerox copies of the application for renewal of business permits, upon verification of the originals; 4. Books of accounts and other pertinent financial records, upon request of the revenue examiners. B. Service 1. By personal delivery. 2. By special registered mail with postal return card. 3. For service records control, the Records Unit shall maintain a service record logbook, where the following information are duly recorded: a) The date when the LA was received for personal delivery or if delivered by mail, the date when the return postal card was sealed by the Post Office. b) If the LA is not delivered for reasons beyond the control of the revenue examiner who effected the delivery or if delivery is made thru mail, no response is made, a report to that effect is made and recorded in the service logbook to determine and trace the LA status. c) Police Assistance in LA delivery - A Letter of Authority not served by personal delivery or despite mailed with registered return postal card, no response by the business establishment is made, shall be formally endorsed to the Police Department, thru Office Form No. 3, (hereto attached) for police assistance. C. Five (5) Days Period to Submit Documents 1. The financial documents listed in the LA shall be submitted/furnished the revenue examiners concerned within (5) days from receipt of the LA. 2. Except for the books of accounts which may be submitted or furnished the revenue examiner on a date mutually agreed upon, all other financial documents shall be submitted within (5) days from receipt. cd i 3. Hostile Taxpayer - Failure on the part of the taxpayer to submit/furnish the revenue examiners the required financial documents within five (5) days from receipt shall be construed as taxpayer's action hostile to the conduct of examination. 4. Accordingly, the revenue examiner shall make a report in Office Form No. 4 (hereto attached) for the immediate information of all concerned. CONDUCT OF EXAMINATION I. Proper Uniform Attire A. Revenue Examiners while in the conduct of examination must wear the proper uniform prescribed. B. The revenue examiner shall pin his identification card and must be presented to the taxpayer, upon demand. II. Office Hours at the Office of the Taxpayer A. The conduct of examination shall be held during the Office Hours (from 8:00 A.M. to 11:00 P.M. to 5:00 P.M.) on working days of the week. B. Likewise, the conduct of examination shall be held in the office of the taxpayer where the books of accounts are usually kept. C. If in the course of examination, certain financial documents are necessary but which are not available or ready for examination, the taxpayer shall be informed two (2) days in advance of the financial documents needed. ASSESSMENT OF COLLECTIONS I. Assessment in the Worksheet A. For proper verification of deficient/delinquent taxes, fees and charges assessed in the course of examination, a worksheet shall be provided, indicating there the following: 1. Name of the business establishment. 2. Years (calendar years or fiscal years) covering the period of examination. In case of fiscal year, a readjustment from fiscal year to calendar year shall be made by the taxpayer. 3. The business activities for which corresponding taxes, fees and charges are assessed. 4. The gross sales and/or receipts indicated in the year to year audited financial statements. 5. The taxes, fees and charges paid on a yearly basis. 6. The correct taxes, fees and charges due after reassessment or reclassification business activities as the case may be. 7. The deficiency/delinquency taxes, fees and charges. 8. The additional increment surcharges and monthly interests on the year to year of delinquency. 9. The total amount due. B. The taxpayer as a matter of right shall be furnished the worksheet indicating therein in detail the reassessment of taxes, fees and charges. II. Notice of Assessment A. With the verified worksheet, the revenue examiners shall discuss with his immediate superiors the assessment and justify the results of the examination. cd i B. A Notice of Assessment (Office Form No. 5) hereto attached, indicating therein the computation of delinquent/deficient taxes, fees and charges and the corresponding increments (surcharges and monthly interest) on a year to year basis. C. The notice of assessment shall be supported with the worksheet for the taxpayer to verify the figures indicated therein. D. Under Section 191 of the Local Government Code of 1991, the taxpayer is given 60 days from receipt of the notice of assessment to pay or to make on tax protest. If after 60 days period, no tax protest is made, the notice shall become final and executory. However, if within 60 days period, a tax protest is made, the notice of assessment is set aside and the tax protest shall be reviewed based on the grounds of protest. If the tax protest is partially or wholly granted, a reply is made to this effect. In case of partial grant of the tax protest, the taxpayer is given within 30 days to pay the tax, otherwise the assessment is final and executory. If within 30 days the taxpayer elevate the protest in a court of competent jurisdiction, the notice of assessment is set aside until the tax case is decided by the court. III. CIVIL REMEDIES FOR COLLECTION OF REVENUES A. Section 78.01 on "Local Government's lien," Section 78.02 on "Civil Remedies;" Section 78.03 on "Distraint of Personal Property;" Section 78.04 on "Levy on Property" and all other provisions of Municipal Tax 92-072, otherwise known as Revenue Code of Makati, relative to the enforcement of collection of taxes, fees and charges, as a result of the conduct of examination, are hereby adopted. FOR STRICT COMPLIANCE OF ALL CONCERNED. ROLANDO M. CARLOS Acting Municipal Treasurer