For the year ended December 31, 2018, Parach Services Ltd. a haulage company has a profit before tax of $77 million after charging/crediting the following.

Donations to University of the West Indies 950,000

Bad Debts 3,500,000

Foreign Travel 1,500,000

Interest Income (5,000,000)

Depreciation 1,720,000

Legal Fees 4,500,000

Audit Fees 2,400,000

Additional Information:

i. Bad debts include advances to staff who is no longer with the company $560,000; Estimated bad debt $1,650,000 and debtors totalling $1,290,000.

ii. Foreign Travel includes $740,000 for the Financial Controller’s family

iii. Legal fees include court cases related to collecting bad debt $2,000,000 and the balance related to defending a GCT matter iv. Interest Payable at 31st December 2017 was $1,500,000 and at the end of the current year it was $1,150,000

v. Gross Interest of $2,600,000 receivable at 31st December 2017 was received in 2018 and at the end of the current year interest receivable is $8 million

vi. Capital allowances are as follows

1. Initial allowance $1,000,000

2. Annual allowance $2,960,000

3. Balancing allowance $1,500,000

4. Balancing charge $ 290,000

vii. Parach paid estimated taxes for 2018 in the amount of $2,780,000

viii. Tax deducted at source from interest income during the year was $1,000,000

Required:

A. Calculate the Income Tax Payable for Parach Services for 2018.

B. Calculate the effective tax rate.