Oplan Kandado

In line with the government’s effort to boost collections, the Bureau of Internal Revenue (BIR) is
invoking the power of the Commissioner under the National Internal Revenue Code to suspend the
business operations of an erring taxpayer.

In Revenue Memorandum Order 3-2009, BIR set the guidelines for the implementation of Oplan
Kandado, a program that provides for the suspension and temporary closure of businesses due to non-
compliance with the necessary value-added tax (VAT) requirements. Since its inception, a considerable
number of establishments have been closed as the Bureau classifies Oplan Kandado as one of its priority
programs.

Despite this stern rule, taxpayers are not left without protection from undue arbitrariness. The
memorandum order fairly provides for guidelines on upholding the right of taxpayers to due process of
law. This is where we, as professional tax lawyers, can offer our services to the taxpayers.

The business establishment cannot automatically be closed down by BIR simply because of failure to pay
VAT. The taxpayer must be given ample time to rebut the findings of the BIR and explain his own
arguments. RMO 3-2009 provides that a taxpayer shall receive two notices: the 48-hour notice and the
five-day VAT compliance notice (VCN).

A 48-hour notice is issued to the taxpayer when a revenue officer recommends the suspension or
closure of the business. The taxpayer will then be required to explain why he should not be sanctioned
administratively, by suspension of his business or temporary closure of his establishment, and,
criminally, for violation of the Tax Code. At this point, we can extend our assistance to the taxpayers by
helping them file an “explanation under oath” within 48 hours from receipt of the notice. We could
attack the notice by contesting the factual and legal bases therein stated.

If upon submission of the said explanation, the BIR still decides to pursue administrative or criminal
action, the five-day VCN shall be issued to the taxpayer. At this point, we could assist the client by filing
a “response” or “protest” within two days from receipt of the five-day VCN. The notice can be assailed if
it does not provide the particular provision of the Tax Code that was allegedly violated. It is very
important to argue that the notice must not only contain the results of the surveillance by the BIR but
must also clearly indicate the basis of the findings. The BIR must give specific details as to how they
conducted their surveillance and explain the methods used in arriving at their estimates. Without these
explanations, the notices can be declared void.

Should the protest be denied, the taxpayer still has an available recourse by way of an appeal to the
Court of Tax Appeals. Unfortunately, our services are limited to representing the client in the
administrative proceedings before the BIR and do not extend to proceedings in the CTA.