Procedure and guidelines in the effective implementation of Section 171 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, "Examination of Books of Accounts and Pertinent Records of Businessmen by Local Treasurers

May 25, 1993 REPUBLIC OF THE PHILIPPINES City of Manila OFFICE OF THE CITY TREASURER MEMORANDUM CIRCULAR TO : The Chief, License Division Local Treasury Operations Officers; and Other Concerned This Office SUBJECT : Procedure and guidelines in the effective implementation of Section 171 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, "Examination of Books of Accounts and Pertinent Records of Businessmen by Local Treasurers" The following procedure and guidelines is hereby issued, viz.: A. Legal Basis. May 25, 1993 Sec. 171, R.A. No. 7160 is quoted hereunder for ready reference: "Sec. 171. Examination of Books of Accounts and Pertinent Records of Businessmen by Local Treasurer . The provincial, city, municipal or barangay treasurer may, by himself or through any of his deputies duly authorized in writing, examine the books, accounts, and other pertinent records of any persons, partnership, corporation, or associations subject to local taxes, fees and charges in order to ascertain, assess, and collect the correct amount of tax, fee, or charge. Such examination shall be made during regular business hours, only once for every tax period, and shall be certified to by the examining official. Such certificate shall be made of record in the books of accounts of the taxpayer examined". Accordingly, books of accounts of business establishments within the taxing jurisdiction of the City of Manila shall be examined by the City Treasurer or his deputies duly authorized thru Letters of Authority or Special Orders. B. Documents to Examine The deputies shall request the Owner, Manager or Proprietor of the business establishments concerned to present for examination the following documents: a) Current Mayor's Permits and Official Receipts b) BIR Audited Financial Statements c) Books of Accounts (Gen. Journals, Gen. Ledgers, etc. d) Purchase and Sales Invoices e) Articles of Incorporation/Partnership (for corporations and partnerships) f) Such other pertinent records such as: 1. Bills of Lading, Letters of Credit (for importers/exporters) 2. Fixed taxes paid to the BIR, such as Excise, VAT and Percentage 3. Contracts on Projects - specifically on General Engineering, Building and Specialty Contractors. 4. Proofs of Membership with IATA or non IATA Organizations (for Travel Agencies) 5. Deployment reports to POEA, and Remittance from Principals (for recruitment Agencies) 6. Charter of Agreements - for charterer of shipping vessels, shipping lines and/or shipping agencies, and 7. Such other records which can be obtained from the following: BIR, SEC, Bureau of Customs, Central Bank of the Philippines, Board of Investments and Cities and Municipalities, etc. needed in pursuance of the examination. C. Letters of Authority 1. Letters of Authority shall be immediately served by the deputies after receipt thereof and corresponding reports thereon shall be submitted within three (3) days after the examination. 2. In cases where a Letter of Authority could not be served, the deputy concerned shall submit a report in writing to the City Treasurer, citing the reasons therefore, together with the original and duplicate copies of such LOAs. Should the City Treasurer find the reasons to be meritorious, a replacement thereof may be issued. If for some reasons the termination of served letters of authority could not be done or thorough examination could not be conducted, the matter shall be reported to the City Treasurer who shall decide as to what appropriate action should be taken thereon. D. Examination of Books of Accounts, Pertinent Business Records, etc.: 1. Deputies concerned shall wear the prescribed office uniforms; properly identify themselves to the owner/manager or authorized representative/officer of the business establishment; and shall state the purpose of the visit. If the books of accounts and such other pertinent documents are not yet ready for presentation on the first visit, an appointment should be made not later than three (3) days after serving letters of authority. 2. Examination shall be made only during regular working hours and at the place of business, and under no circumstances or instances shall it be conducted in the office of the taxpayer's accountant or business agency. 3. Appointments for examination shall be written in an appropriate space on the original copy of the LOA by the deputy, while on the duplicate copy thereof the printed name and signature of the owner or manager, or any responsible officer/representative of the business establishment shall be required, aside from the date and time it was received which is likewise required to be written thereon. 4. In cases where the examination of books of accounts and such other business records cannot be accomplishment in a single day, the same shall be indicated on the Data and Assessment Form, including the date and time it was started and terminated. As a rule, only three (3) appointments are allowed to accomplish the examination work. 5. In cases where the owner or manager, or any authorized representative of the business establishment cannot be contacted or is not physical present and/or shall fail to produce/present the needed business records at the time of the first scheduled appointment, this matter must be noted on both the original and duplicate copies of the LOA. Should similar circumstances occur on the second and third scheduled appointments/visits, the same facts, likewise must be properly noted, as in the first visit. 6. The books of accounts and other pertinent record of the business establishment examined must be handled with care. Deputies shall avoid making any marks or writings thereon, except for the certification that such documents have been examined indicating the date of examination and affixing the deputy's signature on the space below where the last accounting entry had been made. E. Data and Assessment Form 1. Reports of accomplished/terminated examination shall be submitted, using the accountable Data and Assessment (DA) forms intended for the purpose, together with photo copies of such documents such as: Mayor's Permit, Official Receipts BIR-Audited Financial Statements bearing the stamp of the Revenue District Office which indicates the date it was received or those filed with the SEC, and other supporting documents, depending on the kind and/or nature of the business examined. 2. This form shall contain all the pertinent information on the business concerned and the recorded data on the examination conducted. The findings and recommendations of the deputy concerned shall be indicated in detail, reasons for or basis of the assessment included. 3. The accomplished D & A forms in triplicate copies, shall be attached to the duplicate copy of the Letter of Authority and submitted to the City Treasurer thru the supervisors concerned and the Chief, License Division, this Office. F. Letter of Assessment The Letter of Assessment shall be prepared by the examining deputy for signature of the City Treasurer in the attached form and shall contain the amount due and collectible resulting from the examination/verification made by the deputy. casia G. Review Committee on Contested Assessments 1. A Review Committee to be constituted by the City Treasurer shall take charge of and evaluate contested assessments, and such other controversial cases which necessitate the correct interpretation and/or application of existing local tax ordinances and such other revenue laws. 2. The Committee shall be vested the authority to summon the deputy or revenue examiner concerned to explain and/or clarify matters involving alleged irregular, illegal and inflated assessments, for the purpose of determining/ascertaining the propriety, validity and correctness thereof. 3. The Committee shall likewise, recommend the issuance of Orders of Investigation on contested/controversial cases. 4. Before the Committee submits its decision to the City Treasurer, the business establishments concerned shall be accorded sufficient time within which to appear before it to air and/or present their side on the controverted assessment. However, should the taxpayer concerned fail to or does not avail of this privilege, the same shall be deemed or considered as waived and Section 195, Chapter 6 of R.A. 7160, shall operate. H. Alternatives to Take 1. If the taxpayer refuses to allow the examination of his books of accounts the deputy concerned shall report this refusal and the acts or strategies employees which constitute a violation of Section 171, R.A. 7160. The City Treasurer may (a) Seek the assistance of the City Mayor to enforce Sec. 171, aforecited. (b) File with the City Prosecutor a complaint for the imposition of the penal sanction provided for in R.A. 7160 and the implementing ordinance . cd This Memorandum Circular shall take effect immediately. ANTHONY Y. ACEVEDO City Treasurer