The Bureau of Internal Revenue (BIR) has moved to strengthen its audit and enforcement measures against contractors linked to anomalous flood control projects, following President Ferdinand Marcos Jr.’s directive to root out irregularities in public works.

BIR Commissioner Romeo Lumagui Jr. has instructed all regional and district offices to conduct parallel tax investigations on contractors implicated in the President’s probe. The effort is seen as both a governance and fiscal safeguard, ensuring that companies benefiting from state-funded projects are fully compliant with their tax obligations.

“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. 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,” Lumagui said.

The enforcement initiative is anchored on Revenue Regulation No. 17-2024, which requires government contractors to secure an updated tax clearance before the final settlement of contracts. Contractors unable to present such clearance face suspension of payments and the imposition of tax liens in favor of the government.

Lumagui stressed that the BIR is empowered under the National Internal Revenue Code (NIRC) to conduct multiple audits in cases involving fraud. He said the agency will exercise this authority in investigating flood control contractors.

“BIR will make sure that all contractors in the country are paying the correct taxes. They earn from projects funded by taxes collected from millions of Filipinos and businesses – it is unacceptable if they fail to pay their share,” Lumagui said, urging the public to report delinquent contractors.

The commissioner also confirmed that the BIR will issue deficiency tax assessments against contractors found to have engaged in so-called “ghost projects” – infrastructure projects declared completed and paid for by the government but never built.

“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,” he explained.

By linking tax compliance with government procurement, the BIR’s latest directive is expected to add another layer of accountability in public infrastructure spending, while shoring up state revenues.