Bureau of Internal Revenue (BIR) Commissioner Romeo D. Lumagui Jr. on Tuesday said he has directed the initiation of a tax fraud investigation targeting contractors involved in anomalous flood control projects, as identified by President Ferdinand “Bongbong” Romualdez Marcos Jr.

The Commissioner instructed all BIR offices to closely monitor developments in the President’s investigation and to conduct a parallel audit of the contractors concerned.

“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.

This directive aligns with Revenue Regulation No. 17-2024 (RR No. 17-2024), which requires government contractors to 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.

Failure to present the updated clearance will result in the suspension of the contract’s final settlement and the imposition of a tax lien over the contract amount in favor of the government, Lumagui added.

The enforcement mechanisms, provided under Sections 2 and 3 of RR No. 17-2024, aim to safeguard public funds from contractors who fail to comply with tax obligations. Additionally, Section 235 of the National Internal Revenue Code authorizes the BIR to conduct multiple audits within the same taxable year in cases involving fraud or irregularities—now applicable to the contractors under scrutiny.

“Sisiguraduhin ng BIR na nagbabayad ng tamang buwis ang lahat ng contractor sa bansa. 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,” Lumagui emphasized.

He 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.

“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.