Press Release
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.
“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,” Lumagui said in a news release on Tuesday.
“Should any contractor be found to have underpaid or evaded taxes, the BIR will not issue an updated tax clearance to them. The contractor will be disqualified from participating in future government procurements, and the final settlement of their existing government contracts will be suspended.”
This directive aligns with the provisions of Revenue Regulation No. 17-2024 (RR No. 17-2024), which mandates that government contractors must 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 shall result in suspension of the final settlement of the relevant government contract, and 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 are intended to safeguard public funds from contractors who fail to comply with tax obligations.
Section 235 of the National Internal Revenue Code (NIRC) also 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.
“Sisiguraduhin ng BIR na nagbabayad ng tamang buwis ang lahat ng contractor sa bansa (BIR will ensure that all contractors in the country pay the correct taxes),” Lumagui said.
“Kumikita sila sa mga proyektong pinopondohan ng buwis mula sa milyon-milyong Pilipino at mga negosyo—hindi katanggap-tanggap kung hindi sila magbabayad ng tamang buwis. Kung may kilala kayong contractor na hindi nagbabayad ng tamang buwis, isumbong agad sa BIR (They profit from projects funded by taxes from millions of Filipinos and businesses—it is unacceptable if they do not pay the correct taxes. If you know of a contractor who is not paying the correct taxes, report it to the BIR immediately).”
Lumagui also addressed reports of “ghost” flood control projects—projects that were fully paid for by the government and reported as completed, but which, upon verification, were never actually constructed.
Upon receipt of official certification from the relevant government 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 said. (PR)
