Audit of 1986 Business Taxes for Value-Added Tax Project Data Requirements

November 21, 1986 REVENUE MEMORANDUM ORDER NO. 41-86 SUBJECT : Audit of 1986 Business Taxes for Value-Added Tax Project Data Requirements TO : The Revenue Service Chief, Sector Operations Office, Regional Directors and Others Concerned A. Background and purpose. This Revenue Memorandum Order authorizes the investigation of business tax liabilities for the first and second quarters (or first semester) of 1986 primarily for gathering data and information in connection with the value-added tax project. casia Under the 1986 Tax Reform Program, the value-added tax system will be adopted in 1988. Preparations for its implementation require determination and cost estimates of resources in terms of manpower and equipment and design of the system of compliance and enforcement. One aspect of this preparation is the generation of data which will serve as a basis for (a) formulating the structural design of the value-added tax system, (b) prescribing implementation procedures, and (c) developing a timetable of specific tasks and/or activities to be undertaken in 1987. B. Tasks and project activities. Among the activities to be undertaken in 1987 are: 1. Final conceptualization of the value-added tax system. 2. Drafting of the Executive Order enacting the value-added tax simultaneously if feasible with the codification of the National Internal Revenue Code. 3. Pilot project for dummy implementation of the value-added tax in at least two revenue district offices, including dry-run computerization. 4. Tax information and education campaign. 5. Preparation of revenue memorandum circulars, orders, regulations and other official issuances prescribing the manner of compliance and implementation. 6. Training of enforcement officers. 7. Organizational re-structuring to accommodate the new system. C. 1986 Business Tax Data. In order to have a reasonably reliable data as basis for undertaking the mentioned tasks and activities, the audit and investigation of business tax liabilities for the first semester of 1986 is hereby authorized. D. Specific data requirements. In addition to the normal audit report requirements, the following data should be reported in forms prescribed in Annexes "1" to "6". Form Data to be submitted, arranged by buyer, supplier, customer or contractor, as the case may be . Annex "1" Schedule of purchases of raw materials/stock in trade 1.1 Invoice No. 1.2 Date 1.3 Amount 1.4 Tax Billed, if any Annex "2" Schedule of purchase of supplies 2.1 Invoice No. 2.2 Date 2.3 Amount 2.4 Tax Billed, if any Annex "3" Schedule of capital goods 3.1 Invoice No. 3.2 Date 3.3 Amount 3.4 Tax Billed, if any Annex "4" Payment for services rendered by contractors 4.1 Receipt No. 4.2 Date 4.3 Nature of service 4.4 Amount Annex "5" Schedule of sales invoices 5.1 Invoice No. 5.2 Date 5.3 Amount 5.4 Tax Billed, if any Annex "6" July 27, 1985. Revenue District Office . In the revenue district office, two examiners should likewise be assigned to one taxpayer. However, the revenue district officer should assign a taxpayer for investigation only if he is a manufacturer, importer, contractor or wholesaler for purposes of this revenue memorandum order. A list indicating the names of the taxpayers, names of examiners assigned to investigate and the number of the letters of authority issued should be forwarded to the Office of the Commissioner. In view of the urgency of this undertaking, Letters of Authority to investigate (LAs) may be issued and audit may be commenced immediately even without the tax returns as an exemption to existing procedures. However, as much as it is feasible, the revenue enforcement officer should secure the duplicate copy of the sales and/or percentage tax return for the first half of 1986 as reference. F. Jurisdiction to investigate. Letters of authority to investigate for purposes of this Revenue Memorandum Order should be issued strictly in accordance with Revenue Memorandum Order No. 20-85 defining the jurisdiction of the audit divisions of the National Office and the Revenue District Offices in the Regions, notwithstanding delistings made thereafter. G. Submission of reports. Data to be reported in the forms prescribed herein should be submitted to the Chief of Division/Revenue District Officer not later than January 5, 1987. The Chief of the Audit Division/Revenue District Officer should in turn forward the same to the Revenue Service Chief, Management and Planning Service, not later than January 10, 1987 for evaluation and analysis. The final report of investigation may be submitted later if the investigation cannot be terminated within the same period. casia H. Effectivity. This Revenue Memorandum Order shall take effect immediately. (SGD.) BIENVENIDO A. TAN, JR. Commissioner