Abolition of Special Teams

November 15, 1991 REVENUE MEMORANDUM ORDER NO. 40-91 SUBJECT : Abolition of Special Teams TO : All Internal Revenue Officers and Others Concerned A. Policy Statement It shall be the policy of the Bureau of Internal Revenue to vest more authority and responsibility to the Regional Directors in conducting effective and thorough audit/investigation of internal revenue tax cases with a view to enhancement of voluntary compliance. This is in line with the provisions of Section 9 of the National Internal Revenue Code as quoted below: "Sec. 9. Revenue Regional Director. - Under rules and regulations, policies and standards formulated by the Commissioner of Internal Revenue, the Revenue Regional Director shall, within the region and district offices under his jurisdiction, among others: aisa dc "(1) Implement laws, policies, plans, programs, rules and regulations of the department or agencies in the regional area; "(2) Administer and enforce internal revenue laws and regulations, including the assessment and collection of all internal revenue taxes, charges and fees; "(3) Provide economical, efficient and effective service to the people in the area; "(4) Coordinate with regional offices or other departments, bureaus and agencies in the area; "(5) Exercise control and supervision over the officers and employees within the region; and "(6) Perform such other functions as may be provided by law and as may be delegated by the Commissioner." B. Audit/Investigation Jurisdiction 1. Basic policy. As a general rule, tax audit shall be undertaken by the Regional Office, thru the appropriate audit unit which has jurisdiction over the taxpayer, except when the taxpayer is listed in a Revenue Memorandum Order for audit by the Special Operations Service. This audit function shall be exercised strictly in accordance with "rules and regulations, policies and standards prescribed by the Commissioner of Internal Revenue" (Section 9, NIRC) in official issuances, such as but not limited to RMO Nos. 9-90, 37-90 and 43-90. Any revenue officer and his immediate superiors committing or allowing unauthorized deviation from such policies and standards shall be subject to disciplinary and administrative sanctions. aisa dc For purposes of this RMO, the generic term "head of an audit unit" may refer to the Assistant Commissioner (Special Operations Service), Chief, Intelligence and Investigation Office, and Revenue Regional Director who coordinates and supervises the audit and investigation functions and operations within their respective jurisdictions. 2. Exceptions to the basic policy 2.1 Special Operations Service In addition to the taxpayers who come under its regular audit jurisdiction as listed in a Revenue Memorandum Order, the Special Operations Service may be directed by the Commissioner to audit particular taxpayers or certain categories of taxpayers. 2.2 Intelligence and Investigation Office (IIO) The IIO may be directed by the Commissioner to audit/investigate certain taxpayers. In line with existing policies and procedures, the Chief of the Intelligence and Investigation Office may, upon approval by the Commissioner, audit and investigate a taxpayer only after initial intelligence operations have been undertaken which clearly indicates prima facie proof that the taxpayer has fraudulently under-paid his tax liabilities. cd i 2.3 Revenue Regional Offices The Commissioner may also order the Regional Director to conduct special audit of a particular taxpayer. 3. In all cases where a special audit of a particular taxpayer is ordered by the Commissioner, L/A therefor shall be issued in accordance with existing procedures only upon receipt by the respective head of the audit unit [e.g., Assistant Commissioner (SOS), Chief, IIO or Regional Director, as the case may be] of a memorandum from the Commissioner specifying the taxpayer(s) who will be subjected to special audit. In the case of the IIO, the Commissioner will issue a memorandum ordering the special investigation only if there is a strong indication in the intelligence report that a civil and/or criminal tax audit is necessary. Under these conditions, the heads of these audit units are hereby authorized to issue and sign the corresponding letters of authority (L/As) to conduct such special audits and to assign the revenue officers who are directly under them to undertake the audit. Such L/As for which special audits are ordered by the Commissioner shall be issued only after the said heads of the regular audit units have ascertained that L/As have not been previously issued by other audit units to investigate the tax liabilities of the same taxpayer for the same period, in which case, the same could be reported to the Commissioner. The Commissioner shall, however, approve the audit reports and authority to accept payment of the deficiency tax determined, unless he specifically delegates the same authority on a case-to-case basis to the head of the said audit units. C. Abolition of Special Audit Groups/Team/Units In the light of the abovestated administrative policy, all Special Audit Teams/Groups/Units created under Revenue Special Orders, Memoranda and other issuances, whether by the National Office or Regional Office, except the Special Group conducting investigation of the civil and criminal tax liabilities of the Marcos family and his cronies, are hereby abolished. D. Disposition of cases pending audit by the various special audit teams/groups Audit/investigation of cases of which letters of authority have been issued and which have actually been commenced before the approval of this RMO shall be continued, subject to the reporting requirements prescribed in this Order. All members of the abolished special audit groups/teams shall revert to their respective mother units upon completion or termination of the audit of pending cases which should be not later than December 31, 1991, unless otherwise extended by the Commissioner. aisa dc E. Reports to be submitted The following reports should be submitted by the heads of each special investigation team/group to the Chief, Statistical Analysis Division not later than December 15, 1991: 1. Serial numbers of unused (or unissued) Letters of Authority as of December 15, 1991. 2. List of cases pending audit by the special audit group/team as of the effectivity of this order (Annex "A" format). 3. Performance Report in a format prescribed therefor in Annex "B" showing, among others, the taxpayer's name, kind of tax, adjustments, amounts of deficiency tax determined, paid and/or assessed. Annex "B" should be accomplished for each case reported and terminated for which L/As were issued by the special audit groups and by the Intelligence and Investigation Office since January 1, 1989. A comparative total deficiency tax determination for each taxpayer should be reported in Annex "C". In accomplishing Annex "C", only cases where information on both "current taxable period" and "immediately preceding period" is available should be reported therein. Accordingly, not all cases reported in Annex "B" need to be reported in Annex "C". For purposes of these reporting requirements, the Intelligence and Investigation Office is considered as a special audit/investigation group. cdt Inability of a revenue officer to properly accomplish the performance reports required under this Order is an indication of lack of competence on his part and his immediate superior to conduct tax audit. F. Effectivity This Order shall take effect immediately. JOSE U. ONG Commissioner of Internal Revenue