BIR goes after erring accountants

ABS-CBN News

Posted at Aug 11 2010 12:42 PM | Updated as of Aug 11 2010 08:42 PM

MANILA, Philippines - This time, the Bureau of Internal Revenue (BIR) is going after independent certified public accountants (CPAs), threatening to cancel the professional licenses of erring practitioners.

BIR Commissioner Kim Henares on Wednesday said the agency began issuing "show cause letters" to CPAs it found issuing unqualified opinions in the audit reports of their clients’ financial statements in cases where there were validated and verified material misstatements.

This move is expected to further improve tax compliance and ensure the payment of the appropriate taxes, Henares said.

"This development was brought about by big understatements of declared sales and revenues and consequently, underpayment of taxes, as discovered through the BIR’s Third Party Information System," Henares said.

Records of the BIR show that while the Auditors’ Report stated that the financial statements present fairly the financial position of the taxpayer, a comparison of the declared income of a taxpayer (per income tax return) and data gathered from third party sources, like purchases from suppliers, showed a different picture.

The BIR cited one taxpayer who declared gross sales of P397 million as certified by an independent CPA, but third party sources revealed purchases amounting to P645 million.

"Obviously, in this example, the sales data that should have been declared would have been higher in the normal course of business," said Henares.

The show cause letters reprimanded these erring CPAs, telling them that had they applied generally required audit procedures, they could have easily uncovered probable big understatements of sales and consequently, tax liabilities.

The CPAs concerned were given 10 days from receipt of the show cause letter to explain in writing their responses to the findings of the BIR.

The administration of President Benigno Aquino III is stepping up its drive against tax cheaters and smugglers to shore up government's cash-strapped coffers
and address a budget deficit that is projected to reach P325 billion this year.

In July alone, the Bureau of Customs filed cases against 8 customs brokers and 2 "dummy" companies found to have illegally brought in assorted imported products over the last 6 months, depriving the government of more than P300 million in taxes and duties.

The BIR's most high-profile case so far involves the owner of the Villarica Pawnshop, William Villarica, who is now contesting the charges of tax evasion and challenged the revenue agency to show more proof and evidence.