Tax Credit System — Reversion to Traditional System

December 12, 1979 BIR RULING NO. 108-79 Tax credit system reversion to traditional system This refers to your letter to Minister Cesar Virata of the Ministry of Finance dated October 18, 1978 appealing to him to recommend to the President of the Philippines to restructure the sales tax on bakery products by subjecting it to 10% but allowing the deduction of the cost of fuel, labor and materials used in baking from the gross sales before making tax computation. In reply, I have the honor to inform you that even before P.D. No. 1358 which adopted the tax credit system in the computation of the sales tax on manufactured products, the cost of fuel and labor was not deductible from the gross selling price of an article in arriving at the net taxable sales. And among the policy considerations in adopting the tax credit system in lieu of the traditional system of deducting the cost of raw materials is to eliminate the double taxation feature of the sales tax as regards raw materials used in the manufacture of articles. Under the circumstances, we are not inclined to recommend the reversion of the former system of deducting the cost of raw materials against the present tax credit system. aisa dc