October 25, 2011

HON.
Revenue District Officer
Bureau of Internal Revenue
Revenue District Office No. XX
A

Dear Sir:

With reference to the Benchmarking Letter Notice (BLN) dated October 21, 2011 which stated
that the Bureau of Internal Revenue (BIR) has adopted the Performance Benchmarking Method
(PBM) as one of the modes of enhancing voluntary compliance pursuant to Section 5(E) in
relation to Section 6(C) of the NIRC, as amended. Under the PBM, our Company’s data
captured in the Integrated Tax System (ITS) were profiled and analyzed to determine the
standard performance or tax compliance within the acceptable benchmarks for tax computations
established for the industry which is similar or identical to our business.

The result of your benchmarking of our Company showed that our averages and ranges of net
VAT due and Income Tax due to gross sales percentage rates fell below the benchmarks rates set
by the BIR for our industry. The BLN advised our Company to amend our VAT and Income
Tax Returns to rectify any possible commission of error/omission of taxable income.

On the outset, we would like to inform your good office that the VAT and Income Tax payments
we have made during the taxable year ended 2010 were faithfully and honestly computed in
accordance with the NIRC, and based on our knowledge and belief, we did not commit error or
omit taxable income. Thus, we are not amending our VAT and Income tax returns that we have
filed during the taxable year ended 2010.
We strongly commend the BIR’s intention of “instituting a systematic program that would level
the playing field among taxpayers engaged in similar line of industry”, however, PBM should
not be used as a means to compel honest taxpayers to pay more taxes than what is actually due. 
Our non-achievement of the benchmark should not be prima facie taken to mean that we did not
pay the correct amount taxes during the taxable year 2010.
There are many factors affecting the performance of a business, both on the supply side and the
demand side.  Even economic models acknowledge that businesses at different stages of
commercial operation would exhibit differences in profitability and cost structures.  Hence, even
our Company within same industry had different circumstances.  Our Company is a small player
in the industry which we belong, and our results of operations are below the performance level.
For this matter, non-achievement of the benchmarks must not necessarily have to be taken that
we have deficiency taxes. 
At most, benchmarking should only serve as an indicator of an industry’s over-all performance,
and not necessarily a particular taxpayer’s tax compliance.  Otherwise, taxpayers, like our
Company, who religiously pay the correct amount of taxes but were unable to achieve the
industry benchmarks because of our peculiar circumstances would be faced with a problem of
proving that we have not underpaid our taxes. 
Please be assured that our Company will do well to ensure proper tax compliance.
Best regards.

Very truly yours,