Manila: Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. has directed the initiation of a tax fraud investigation targeting contractors involved in anomalous flood control projects, as identified by President Ferdinand R. Marcos Jr. Lumagui has instructed all BIR offices to closely monitor developments in the President's investigation and conduct a parallel audit of the concerned contractors.
According to Philippines News Agency, Lumagui stated, "The BIR will undertake a parallel investigation of contractors implicated in irregular flood control projects. We will support the President's crusade by auditing the tax returns and payments of these entities." He added that any contractor found to have underpaid or evaded taxes would not receive an updated tax clearance, resulting in disqualification from future government procurements and suspension of the final settlement of existing government contracts.
This directive aligns with Revenue Regulation No. 17-2024 (RR No. 17-2024), which mandates that government contractors secure an updated tax clearance from the BIR before the final settlement of any government contract. The clearance must certify that the contractor has no outstanding tax liabilities and has duly filed and paid all applicable taxes. This updated clearance is distinct from the initial tax clearance required during the eligibility phase of the procurement process.
Failure to present the updated tax clearance will result in the suspension of the final settlement of the relevant government contract and the imposition of a tax lien over the contract amount in favor of the government. These enforcement mechanisms are provided under Sections 2 and 3 of RR No. 17-2024 and aim to safeguard public funds from contractors who fail to comply with tax obligations.
Section 235 of the National Internal Revenue Code (NIRC) authorizes the BIR to conduct multiple audits within the same taxable year in cases involving fraud or irregularities, as determined by the Commissioner. This provision applies to the contractors under scrutiny in connection with the anomalous flood control projects.
Lumagui emphasized the importance of tax compliance, stating, "BIR will ensure that all contractors in the country pay the correct taxes." He further urged people to report contractors who do not pay the correct taxes, highlighting the unacceptable nature of profiting from taxpayer-funded projects without fulfilling tax obligations.
Lumagui also addressed reports of 'ghost' flood control projects, which were fully paid for by the government and reported as completed but were never constructed. Upon receiving official certification from the relevant agencies confirming the non-existence of such projects, the BIR will issue deficiency tax assessments against the contractors involved.
"If the BIR, through certification or endorsement from the appropriate government agencies, confirms that a flood control project is a ghost project, we will disallow all related cost and expense claims. No project means no deductible expense. A tax deficiency assessment will be issued accordingly," Lumagui stated.
