The (Almost) Impossible Privilege

Section 27(A) of the NIRC offers a tax privilege to local corporations as well as foreign ones that are based in this country if they are capable to meet certain requirements. Rather than the usual 32% rate on net income, a corporation will be taxed at 15% of its gross income if the president gives it the option -but only if recommended by the Secretary of Finance. This is known as the Gross Income Tax Method, or Gross Income Tax Option. The requirements, however, make it very difficult. After looking at the requirements, go over all the other taxes corporations are supposed to pay, then it becomes next to impossible:

1.) The Tax Ratio Effort must be at least 20% of the Gross National Product

2.) The ratio of income tax collection to total taxes revenues must be at least 40%

3.) The VAT tax effort must be 4% of the GNP

4.) The Consolidated Public Sector Financial Position ratio to GNP must be 9%

5.) A maximum ratio of 55% cost of sales to gross sales or receipts from all sources

Once granted, the privilege is irrevocable for 3 years if the corporation chooses to use the privilege.

Looks difficult until you think of what to do in order to get that privilege -and then it looks almost impossible.