Question Tag: Tax avoidance

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  • 15 Marks

AT – May 2016 – L3 – Q6 – Tax Audits and Investigations

Define tax avoidance and evasion, outline the differences, and explain key stages and objectives of a tax audit.

YASSAR LIMITED imports baby wears and has been in business for some years now. The company is doing very well, and the Directors are impressed with the growth. The company’s Managing Director, Chief Agbaegonkiti, is a member of Enugu Sports Club. On January 14, 2015, after the morning aerobics in the club’s gym, a friend of Chief Agbaegonkiti, who is also the Finance Director of a trading outfit, narrated how the company he works for was subjected to a Tax Audit by the Federal Inland Revenue Service (FIRS), which resulted in payment of additional tax liabilities totaling N10.5 million.

The Finance Director attributed their company’s ordeal to the Board’s poor understanding of key tax-related issues. Chief Agbaegonkiti, after listening to his friend, was highly worried about such a fate befalling his company. As a proactive move, he enquired for seasoned tax practitioners, and your firm, Cutting-Edge & Co, Chartered Accountants, was referred to him.

As the Managing Partner, you are to take action and address the following:

REQUIRED:

a. Briefly explain what you understand by the terms Tax Avoidance and Tax Evasion. (2 marks)

b. State FIVE differences between Tax Avoidance and Tax Evasion. (5 marks)

c. Outline the key stages in the Tax Audit process. (3 marks)

d. State SIX objectives of a Tax Audit exercise. (5 marks)

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  • 15 Marks

AT – Nov 2016 – L3 – SC – Q7 – Tax Planning and Management

Explain tax planning and anti-avoidance legislation, summarize tax evasion and double taxation provisions, and highlight non-tax investment factors.

You were invited as the Chairman of a Tax Summit at Ikeja, Lagos State. The topics for discussion were as follows:

i. Tax Planning, an Effective Method of Tax Avoidance
ii. Tax Evasion in a Growing Economy
iii. Double Taxation – The Provisions and the Impact
iv. Jurisdiction for Investment – Non-Tax Factors

As the Chairman, you had the opportunity to summarize the papers presented by the four paper presenters in just ten minutes.

You are required to:

a. Explain briefly, Tax Planning and Anti-Avoidance Legislations put in place by the Government (3 Marks).

b. Summarize situations that may involve Tax Evasion (4 Marks).

c. Explain Double Taxation Agreement – Provisions and the Main Objectives (4 Marks).

d. Summarize Non-tax factors that attract investors in choosing a business jurisdiction (4 Marks).

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  • 20 Marks

ATAX – May 2019 – L3 – Q2 – Tax Administration and Dispute Resolution

Discuss the distinction between tax evasion and avoidance, provide solutions, and evaluate Nigeria’s anti-avoidance legislation.

You have been approached by the managing director of a manufacturing company, Ojieaga Integrated Limited, for professional advice on tax evasion and tax avoidance and their challenges to an equitable tax system in Nigeria. Your report is expected to guide the operation of the business, having been subjected in the last three years to various forms of fines and penalties by the Federal Inland Revenue Service on confirmed cases of sharp business practices with their attendant loss of tax revenue to the government.

Required:
Having accepted the terms of engagement, you are to write a report to management for consideration at its next meeting, dealing with the following areas of concern:

a. Distinction between tax evasion and tax avoidance, highlighting THREE examples of each case. (6 Marks)
b. Seven solutions to the problem of tax evasion and tax avoidance. (7 Marks)
c. Comment on anti-avoidance legislations in Nigeria. (7 Marks)

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q7 – Tax Planning and Management

Summarizes key points on tax planning, tax evasion, double taxation agreements, and non-tax factors for investment.

As the Chairman of a Tax Summit in Ikeja, Lagos State, the discussion topics were:

  1. Tax Planning, an Effective Method of Tax Avoidance
  2. Tax Evasion in a Growing Economy
  3. Double Taxation – The Provisions and the Impact
  4. Jurisdiction for Investment – Non-Tax Factors

You are required to:

a) Explain briefly Tax Planning and Anti-Avoidance Legislations put in place by the Government. (3 Marks)
b) Summarize situations that may involve Tax Evasion. (4 Marks)
c) Explain Double Taxation Agreement – Provisions and the Main Objectives. (4 Marks)
d) Summarize Non-tax factors that attract investors in choosing a business jurisdiction. (4 Marks)

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q6 – International Taxation

Explains BEPS, its techniques, OECD initiatives, and implications for corporate tax strategies.

At a workshop on “Base Erosion and Profit Shifting (BEPS)” organized by the Federal Ministry of Industries, a resource person explained that BEPS is a corporate tax planning strategy used by multinational corporations to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions, thereby eroding the tax base of the higher-tax jurisdictions.

One of the participants, an engineer and the General Manager of a leading manufacturing outfit based in Jos, with a head office in a European country, struggled to understand the concepts discussed. After seeking clarification from other participants without success, he approached you as the company’s Tax Manager to explain BEPS and whether it would be beneficial for the company (in collaboration with the head office) to engage in such practices.

Required:

As the company’s Tax Manager, you are to draft a paper addressing the General Manager’s concerns, covering the following:

a. Distinction between base erosion and profit shifting. (3 Marks)
b. Techniques of base erosion and profit shifting. (4 Marks)
c. The six key action initiatives of the Organisation for Economic Co-operation and Development (OECD) against base erosion and profit shifting. (6 Marks)
d. The implications of engaging in base erosion and profit shifting. (2 Marks)

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  • 20 Marks

ATAX – Nov 2021 – L3 – Q3 – Tax Planning and Management

Analysis of tax planning, avoidance, thin capitalisation concepts, and strategies for Dragbat Limited to improve tax efficiency.

The board of directors of Dragbat Limited, Lagos, a medium-sized company, at its last meeting, deliberated on the company’s tax-related issues vis-à-vis one of its major competitors in the same line of business. The Managing Director presented the audited accounts of the two companies for the previous three years. He affirmed that their company has been paying more corporate and tertiary education taxes than their competitors, while returning lower profit before tax in each of the years under review. The board has since directed the Managing Director to do a thorough investigation on how competitors, according to the Chairman of the board, are having it easy with the tax authorities.

With the assistance of a former course-mate in the university, who works in the Finance unit of a competitor’s organisation, the Managing Director was informed that the competitor was involved in tax planning and tax avoidance activities, which have helped in reducing the company’s tax liabilities over the years.

Being an engineer with sparse knowledge of accounting and taxation, the Managing Director has contacted you as the company’s tax consultant to help explain some fundamental issues in tax planning and tax avoidance. To assist with this assignment, the Managing Director of Dragbat Limited provided you with the audited financial statements of the two competing companies for the last three years. He also informed you that the major difference between the two companies is that Dragbat Limited is servicing a loan facility of ₦120 million obtained five years ago, and the company is not finding it comfortable in implementing the terms of the loan, despite its increased profitability over the last three years.

The board will be meeting in a fortnight to consider the report on the preliminary investigation, and the Managing Director expects you to submit your report to him next week.

Required:

As the company’s tax consultant, you are expected to address and advise on the following issues in your report:

a. The concepts of tax planning, tax avoidance, and thin capitalisation. (9 Marks)
b. Tax planning activities and strategies. (6 Marks)
c. Tax implications for companies that practice tax planning, tax avoidance, and thin capitalisation. (5 Marks)

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  • 5 Marks

AT – May 2018 – L3 – SB – Q4a – Ethical Issues in Tax Practice

Differentiate between tax avoidance and tax evasion with key distinctions and implications.

The tax authorities view any case of tax evasion seriously. They are empowered to set aside tax avoidance schemes that result in artificial or fictitious transactions. Tax evasion is usually more prevalent when the tax system is perceived to be unfair.

Required: Differentiate between Tax Avoidance and Tax Evasion. (5 Marks)

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  • 6 Marks

AT – April 2022 – L3 – Q1b – Tax planning

Differentiate between tax avoidance and aggressive tax avoidance.

“Bending the law without breaking it is said to be the way to go by businesses”. This concept of tax administration has caught up with so many businesses that they now engage experts to help shape their business transactions to create this impact for them.

Required:
How is tax avoidance different from aggressive tax avoidance?

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  • 4 Marks

AT – Aug 2022 – L3 – Q1c – Tax administration in Ghana

Circumstances under which the Commissioner-General can re-characterise transactions to protect revenue.

In tax administration, the Commissioner-General has the mandate to protect revenue collected and collectible. As part of ensuring the protection of revenue, the Commissioner-General has the mandate to re-characterise or disregard any transaction that has the effect of eroding tax gains.

Required:
In accordance with the tax provision, under what circumstances will the Commissioner-General re-characterise any transaction?
(4 marks)

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  • 20 Marks

AT – May 2020 – L3 – Q3 – Tax Planning

Prepare a report explaining tax planning, its objectives, and tax planning maxims with examples for a manufacturing company's Board of Directors.

“Tax planning involves anticipating a set of circumstances and the identification of opportunities to minimize or defer tax liabilities within the law”.

You have been appointed as a Tax Consultant to Ken Group Ltd, a manufacturing company, having issues with Ghana Revenue Authority on tax evasion and avoidance. Your first assignment is to meet the Board of Directors to brief them on various issues governing tax planning and how to take advantage of the provisions in the taxation laws to avoid the payment of certain taxes and possibly defer certain tax liabilities.

Required: Write a report explaining the following:
a) Tax planning and its intended objectives. (10 marks)
b) Tax planning maxims or variables with appropriate examples. (10 marks)

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  • 15 Marks

AT – May 2016 – L3 – Q6 – Tax Audits and Investigations

Define tax avoidance and evasion, outline the differences, and explain key stages and objectives of a tax audit.

YASSAR LIMITED imports baby wears and has been in business for some years now. The company is doing very well, and the Directors are impressed with the growth. The company’s Managing Director, Chief Agbaegonkiti, is a member of Enugu Sports Club. On January 14, 2015, after the morning aerobics in the club’s gym, a friend of Chief Agbaegonkiti, who is also the Finance Director of a trading outfit, narrated how the company he works for was subjected to a Tax Audit by the Federal Inland Revenue Service (FIRS), which resulted in payment of additional tax liabilities totaling N10.5 million.

The Finance Director attributed their company’s ordeal to the Board’s poor understanding of key tax-related issues. Chief Agbaegonkiti, after listening to his friend, was highly worried about such a fate befalling his company. As a proactive move, he enquired for seasoned tax practitioners, and your firm, Cutting-Edge & Co, Chartered Accountants, was referred to him.

As the Managing Partner, you are to take action and address the following:

REQUIRED:

a. Briefly explain what you understand by the terms Tax Avoidance and Tax Evasion. (2 marks)

b. State FIVE differences between Tax Avoidance and Tax Evasion. (5 marks)

c. Outline the key stages in the Tax Audit process. (3 marks)

d. State SIX objectives of a Tax Audit exercise. (5 marks)

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  • 15 Marks

AT – Nov 2016 – L3 – SC – Q7 – Tax Planning and Management

Explain tax planning and anti-avoidance legislation, summarize tax evasion and double taxation provisions, and highlight non-tax investment factors.

You were invited as the Chairman of a Tax Summit at Ikeja, Lagos State. The topics for discussion were as follows:

i. Tax Planning, an Effective Method of Tax Avoidance
ii. Tax Evasion in a Growing Economy
iii. Double Taxation – The Provisions and the Impact
iv. Jurisdiction for Investment – Non-Tax Factors

As the Chairman, you had the opportunity to summarize the papers presented by the four paper presenters in just ten minutes.

You are required to:

a. Explain briefly, Tax Planning and Anti-Avoidance Legislations put in place by the Government (3 Marks).

b. Summarize situations that may involve Tax Evasion (4 Marks).

c. Explain Double Taxation Agreement – Provisions and the Main Objectives (4 Marks).

d. Summarize Non-tax factors that attract investors in choosing a business jurisdiction (4 Marks).

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  • 20 Marks

ATAX – May 2019 – L3 – Q2 – Tax Administration and Dispute Resolution

Discuss the distinction between tax evasion and avoidance, provide solutions, and evaluate Nigeria’s anti-avoidance legislation.

You have been approached by the managing director of a manufacturing company, Ojieaga Integrated Limited, for professional advice on tax evasion and tax avoidance and their challenges to an equitable tax system in Nigeria. Your report is expected to guide the operation of the business, having been subjected in the last three years to various forms of fines and penalties by the Federal Inland Revenue Service on confirmed cases of sharp business practices with their attendant loss of tax revenue to the government.

Required:
Having accepted the terms of engagement, you are to write a report to management for consideration at its next meeting, dealing with the following areas of concern:

a. Distinction between tax evasion and tax avoidance, highlighting THREE examples of each case. (6 Marks)
b. Seven solutions to the problem of tax evasion and tax avoidance. (7 Marks)
c. Comment on anti-avoidance legislations in Nigeria. (7 Marks)

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  • 15 Marks

ATAX – Nov 2016 – L3 – Q7 – Tax Planning and Management

Summarizes key points on tax planning, tax evasion, double taxation agreements, and non-tax factors for investment.

As the Chairman of a Tax Summit in Ikeja, Lagos State, the discussion topics were:

  1. Tax Planning, an Effective Method of Tax Avoidance
  2. Tax Evasion in a Growing Economy
  3. Double Taxation – The Provisions and the Impact
  4. Jurisdiction for Investment – Non-Tax Factors

You are required to:

a) Explain briefly Tax Planning and Anti-Avoidance Legislations put in place by the Government. (3 Marks)
b) Summarize situations that may involve Tax Evasion. (4 Marks)
c) Explain Double Taxation Agreement – Provisions and the Main Objectives. (4 Marks)
d) Summarize Non-tax factors that attract investors in choosing a business jurisdiction. (4 Marks)

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  • 15 Marks

ATAX – Nov 2021 – L3 – Q6 – International Taxation

Explains BEPS, its techniques, OECD initiatives, and implications for corporate tax strategies.

At a workshop on “Base Erosion and Profit Shifting (BEPS)” organized by the Federal Ministry of Industries, a resource person explained that BEPS is a corporate tax planning strategy used by multinational corporations to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions, thereby eroding the tax base of the higher-tax jurisdictions.

One of the participants, an engineer and the General Manager of a leading manufacturing outfit based in Jos, with a head office in a European country, struggled to understand the concepts discussed. After seeking clarification from other participants without success, he approached you as the company’s Tax Manager to explain BEPS and whether it would be beneficial for the company (in collaboration with the head office) to engage in such practices.

Required:

As the company’s Tax Manager, you are to draft a paper addressing the General Manager’s concerns, covering the following:

a. Distinction between base erosion and profit shifting. (3 Marks)
b. Techniques of base erosion and profit shifting. (4 Marks)
c. The six key action initiatives of the Organisation for Economic Co-operation and Development (OECD) against base erosion and profit shifting. (6 Marks)
d. The implications of engaging in base erosion and profit shifting. (2 Marks)

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  • 20 Marks

ATAX – Nov 2021 – L3 – Q3 – Tax Planning and Management

Analysis of tax planning, avoidance, thin capitalisation concepts, and strategies for Dragbat Limited to improve tax efficiency.

The board of directors of Dragbat Limited, Lagos, a medium-sized company, at its last meeting, deliberated on the company’s tax-related issues vis-à-vis one of its major competitors in the same line of business. The Managing Director presented the audited accounts of the two companies for the previous three years. He affirmed that their company has been paying more corporate and tertiary education taxes than their competitors, while returning lower profit before tax in each of the years under review. The board has since directed the Managing Director to do a thorough investigation on how competitors, according to the Chairman of the board, are having it easy with the tax authorities.

With the assistance of a former course-mate in the university, who works in the Finance unit of a competitor’s organisation, the Managing Director was informed that the competitor was involved in tax planning and tax avoidance activities, which have helped in reducing the company’s tax liabilities over the years.

Being an engineer with sparse knowledge of accounting and taxation, the Managing Director has contacted you as the company’s tax consultant to help explain some fundamental issues in tax planning and tax avoidance. To assist with this assignment, the Managing Director of Dragbat Limited provided you with the audited financial statements of the two competing companies for the last three years. He also informed you that the major difference between the two companies is that Dragbat Limited is servicing a loan facility of ₦120 million obtained five years ago, and the company is not finding it comfortable in implementing the terms of the loan, despite its increased profitability over the last three years.

The board will be meeting in a fortnight to consider the report on the preliminary investigation, and the Managing Director expects you to submit your report to him next week.

Required:

As the company’s tax consultant, you are expected to address and advise on the following issues in your report:

a. The concepts of tax planning, tax avoidance, and thin capitalisation. (9 Marks)
b. Tax planning activities and strategies. (6 Marks)
c. Tax implications for companies that practice tax planning, tax avoidance, and thin capitalisation. (5 Marks)

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  • 5 Marks

AT – May 2018 – L3 – SB – Q4a – Ethical Issues in Tax Practice

Differentiate between tax avoidance and tax evasion with key distinctions and implications.

The tax authorities view any case of tax evasion seriously. They are empowered to set aside tax avoidance schemes that result in artificial or fictitious transactions. Tax evasion is usually more prevalent when the tax system is perceived to be unfair.

Required: Differentiate between Tax Avoidance and Tax Evasion. (5 Marks)

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  • 6 Marks

AT – April 2022 – L3 – Q1b – Tax planning

Differentiate between tax avoidance and aggressive tax avoidance.

“Bending the law without breaking it is said to be the way to go by businesses”. This concept of tax administration has caught up with so many businesses that they now engage experts to help shape their business transactions to create this impact for them.

Required:
How is tax avoidance different from aggressive tax avoidance?

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  • 4 Marks

AT – Aug 2022 – L3 – Q1c – Tax administration in Ghana

Circumstances under which the Commissioner-General can re-characterise transactions to protect revenue.

In tax administration, the Commissioner-General has the mandate to protect revenue collected and collectible. As part of ensuring the protection of revenue, the Commissioner-General has the mandate to re-characterise or disregard any transaction that has the effect of eroding tax gains.

Required:
In accordance with the tax provision, under what circumstances will the Commissioner-General re-characterise any transaction?
(4 marks)

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  • 20 Marks

AT – May 2020 – L3 – Q3 – Tax Planning

Prepare a report explaining tax planning, its objectives, and tax planning maxims with examples for a manufacturing company's Board of Directors.

“Tax planning involves anticipating a set of circumstances and the identification of opportunities to minimize or defer tax liabilities within the law”.

You have been appointed as a Tax Consultant to Ken Group Ltd, a manufacturing company, having issues with Ghana Revenue Authority on tax evasion and avoidance. Your first assignment is to meet the Board of Directors to brief them on various issues governing tax planning and how to take advantage of the provisions in the taxation laws to avoid the payment of certain taxes and possibly defer certain tax liabilities.

Required: Write a report explaining the following:
a) Tax planning and its intended objectives. (10 marks)
b) Tax planning maxims or variables with appropriate examples. (10 marks)

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