Topic: Tax planning

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  • 5 Marks

AT – Nov 2024 – L3 – Q3c – Automatic Stabilizers vs Discretionary Fiscal Policies

Explain the difference between automatic stabilizers and discretionary fiscal policies with examples.

Some commentators in Ghana have argued that economic policymakers should allow automatic stabilizers to shape and direct the destiny of the economy rather than discretionary fiscal policies since the latter has failed woefully.

Required:
Distinguish between automatic stabilizers and discretionary fiscal policies as economic tools. Illustrate with examples.

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  • 12 Marks

AT – Nov 2024 – L3 – Q3a – Tax Planning and Objection to Tax Assessment

Advise Poyooyo LTD on provisions in tax laws to challenge a disputed tax liability.

The Directors of Poyooyo LTD have heard of the Maxims of Tax Planning, which outline strategies for minimizing tax liabilities legally.

In a recent visit by the Domestic Tax Revenue Division of the Ghana Revenue Authority (GRA), the Large Taxpayers Office (LTO) in Accra conducted a tax audit on the company, resulting in tax assessments raised against Poyooyo LTD for settlement.

Management of the company, in their last meeting with the directors, presented the outcome of the tax audit and strongly argued that the assessment was erroneous. They claimed that the liabilities raised were based on legitimate tax planning strategies the company employed.

They believe that the company is in full compliance with the tax laws and should not be required to settle the tax liabilities assessed. However, payment of the liability would significantly impact the company’s cash flow and disrupt its operations.

Poyooyo LTD has approached your tax consulting firm for assistance and guidance.

Required:

Advise Poyooyo LTD on the provisions of the tax laws that could be taken advantage of to avert the payment of the liability.

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  • 4 Marks

TX – May 2019 – L3 – Q1b – Tax planning

Analyze the tax implications for an individual and employer on SSNIT and Provident Fund contributions.

Kofiga Kwame is 64 years old and has never worked as a salaried staff. He intends to take up an appointment with a Civil Society Organization called “We Care” because of his stance on anti-corruption. He approaches you to advise on his willingness to contribute towards Social Security and National Insurance Trust (SSNIT) of 5.5% and also 10% towards Voluntary Provident Fund (Tier 3) with an approved fund manager. It is hoped that his prospective employer would contribute 13% and 6.5% towards SSNIT and Tier 3 respectively to enhance his benefits when he retires from active employment at age 70.

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  • 5 Marks

TX – May 2019 – L3 – Q1d – Tax Planning

Discuss circumstances under which government should run state enterprises as business entities to increase revenue.

Some political analysts have often made the claim that governments over the world should create enabling environments for private businesses to flourish, including granting tax incentives as a way of creating jobs for the unemployed youth, and that governments should not directly engage in business. They sum this up often with the statement that “Government has no business doing business.” Others, however, hold a contrary view on this matter, making this an endless debate.

Required:

Under what circumstance would you encourage the running of state enterprises as business entities by the government to increase revenue as against the imposition of new taxes for the same purpose?
(5 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q1e – International Taxation

Evaluate the negative consequences of public debt on the economy of Ghana.

Public debt is an important source of revenue for a government to finance public spending where taxation capacity may be limited, or when the alternative would be to print money and compromise macroeconomic stability. There are, however, negative consequences of high public debt on the economy.

Required:

Evaluate FOUR (4) of such negative consequences of public debt on the economy of Ghana.
(4 marks)

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  • 13 Marks

TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

Agyemang Boateng has been working with Intellect Consult Limited (ICL) since 2010. At the beginning of January 2016, he was seconded to Accra Metropolitan Assembly (AMA) for a period of six months to be part of a team to spearhead a restructuring exercise and the review of the system of internal controls at the Revenue department of AMA.

Terms of the AMA engagement:

ICL was to be paid a one-off settlement of GH¢10,000 at the completion of the engagement as well as reimbursement of monthly operational expenses incurred based on submission of the relevant invoices.

Agyemang’s only entitlements from AMA were the following monthly allowances:

Inconvenience Allowance: GH¢300
Extra Duties Allowance: GH¢200
Agyemang’s secondment to AMA did not in any way affect his salary and other entitlements from his employer, ICL, as these continued to accrue to him during the period of the secondment.

Agyemang’s earnings and entitlements from ICL for the year of assessment ended 31 December 2016 are as follows:

Basic Salary: GH¢46,000
Bonus: GH¢9,500
Fuel allowance: GH¢1,750
Entertainment allowance: GH¢7,500
Additional Information:

Agyemang stays in a fully furnished ICL bungalow at East Legon in Accra. ICL charges him a rent of GH¢150 per month.
Agyemang makes use of ICL’s company vehicle, driver, and fuel for official use only.
On 1 January 2016, Agyemang successfully applied for a GH¢10,000 loan from his employer, ICL. His employer charged him interest of 2% per annum on the loan. During this period, Bank of Ghana policy rate was 15%. The loan was repayable within ten months.
On 1 October 2016, Agyemang commenced part-time lecturing in Accounting at a local private Senior High School. He was paid monthly for his services, and the total amount received for the three months ended 31 December 2016 was GH¢5,000 gross.
Agyemang’s other non-employment-related income received during the year ended 31 December 2016 were:

Net royalties received for his Accounting textbook: GH¢21,250
Gross local company dividends (Unquoted Company shares): GH¢13,000
Interest on Bank deposits from local financial institutions: GH¢10,000
Gross lottery winnings: GH¢12,000
Required:

i) Calculate Agyemang’s taxable income for the year ended 31 December 2016. (10 marks)

ii) State AMA’s tax obligation when making the disbursement of GH¢10,000 to ICL. (1 mark)

iii) What are the tax implications to Agyemang with respect to the following:

Part-time lecturing
Royalty
Dividends
Interest on bank deposit (2 marks)
iv) What is the tax implication of the loan taken by Agyemang? (1 mark)

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  • 7 Marks

TX – May 2019 – L3 – Q3B – Tax planning

Discuss the tax implications of finance lease arrangements, particularly concerning the eligibility for capital allowance under the Income Tax Act 2015 (Act 896).

b) At a tax seminar organised by The Institute of Chartered Accountants (Ghana) in December 2016, the issue of tax implications for finance lease arrangement dominated the discussion. The facilitator said that both the lessor and the lessee shall be denied capital allowance under the tax law.

The facilitator intimated that capital allowance is granted to persons who acquire assets and own them and use such to generate business income. Both the lessor and the lessee, consequently do not qualify for capital allowance under the Income Tax Act (Act 896), 2015 and its regulations, he added.

Required:
As a tax advisor, submit a response to the above based on the tax provisions. The response is to be published in the Institute’s Journal. (7 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q3C – Tax Planning

Discuss the tax benefits associated with investing in farming and agro-processing businesses in Ghana.

c) Your senior brother has stayed in the United Kingdom for more than 20 years and would like to return to Ghana and establish a business. He is confused as to which area to invest to maximise the benefits from tax planning.

He has been told that you are undertaking a course in Taxation and would like to have your explanation and the tax benefits, if any, from investing in the following areas:

i) Farming (2 marks)
ii) Agro-Processing Business (2 marks)

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  • 5 Marks

TF – May 2018 – L3 – Q1b – Tax planning

Explain five goals of government spending as a fiscal policy instrument.

One of the factors that helps determine the country’s economic direction is fiscal policy. Government uses fiscal policy to influence the economy by adjusting revenue and spending levels.

Required:
Identify and explain FIVE goals of government spending as a fiscal policy instrument.
(10 marks)

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  • 6 Marks

TF – May 2018 – L3 – Q3b – Tax planning

Briefly explain tax holiday, tax exemptions, tax reliefs, and tax rebates.

Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency, with the elements of the financial plan working together in the most tax-efficient manner possible.

Required:
Briefly explain the following terms with respect to tax planning:
i) Tax holiday
ii) Tax exemptions
iii) Tax relief
iv) Tax rebates/refund
(6 marks)

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  • 5 Marks

AT – Nov 2024 – L3 – Q3c – Automatic Stabilizers vs Discretionary Fiscal Policies

Explain the difference between automatic stabilizers and discretionary fiscal policies with examples.

Some commentators in Ghana have argued that economic policymakers should allow automatic stabilizers to shape and direct the destiny of the economy rather than discretionary fiscal policies since the latter has failed woefully.

Required:
Distinguish between automatic stabilizers and discretionary fiscal policies as economic tools. Illustrate with examples.

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  • 12 Marks

AT – Nov 2024 – L3 – Q3a – Tax Planning and Objection to Tax Assessment

Advise Poyooyo LTD on provisions in tax laws to challenge a disputed tax liability.

The Directors of Poyooyo LTD have heard of the Maxims of Tax Planning, which outline strategies for minimizing tax liabilities legally.

In a recent visit by the Domestic Tax Revenue Division of the Ghana Revenue Authority (GRA), the Large Taxpayers Office (LTO) in Accra conducted a tax audit on the company, resulting in tax assessments raised against Poyooyo LTD for settlement.

Management of the company, in their last meeting with the directors, presented the outcome of the tax audit and strongly argued that the assessment was erroneous. They claimed that the liabilities raised were based on legitimate tax planning strategies the company employed.

They believe that the company is in full compliance with the tax laws and should not be required to settle the tax liabilities assessed. However, payment of the liability would significantly impact the company’s cash flow and disrupt its operations.

Poyooyo LTD has approached your tax consulting firm for assistance and guidance.

Required:

Advise Poyooyo LTD on the provisions of the tax laws that could be taken advantage of to avert the payment of the liability.

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  • 4 Marks

TX – May 2019 – L3 – Q1b – Tax planning

Analyze the tax implications for an individual and employer on SSNIT and Provident Fund contributions.

Kofiga Kwame is 64 years old and has never worked as a salaried staff. He intends to take up an appointment with a Civil Society Organization called “We Care” because of his stance on anti-corruption. He approaches you to advise on his willingness to contribute towards Social Security and National Insurance Trust (SSNIT) of 5.5% and also 10% towards Voluntary Provident Fund (Tier 3) with an approved fund manager. It is hoped that his prospective employer would contribute 13% and 6.5% towards SSNIT and Tier 3 respectively to enhance his benefits when he retires from active employment at age 70.

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  • 5 Marks

TX – May 2019 – L3 – Q1d – Tax Planning

Discuss circumstances under which government should run state enterprises as business entities to increase revenue.

Some political analysts have often made the claim that governments over the world should create enabling environments for private businesses to flourish, including granting tax incentives as a way of creating jobs for the unemployed youth, and that governments should not directly engage in business. They sum this up often with the statement that “Government has no business doing business.” Others, however, hold a contrary view on this matter, making this an endless debate.

Required:

Under what circumstance would you encourage the running of state enterprises as business entities by the government to increase revenue as against the imposition of new taxes for the same purpose?
(5 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q1e – International Taxation

Evaluate the negative consequences of public debt on the economy of Ghana.

Public debt is an important source of revenue for a government to finance public spending where taxation capacity may be limited, or when the alternative would be to print money and compromise macroeconomic stability. There are, however, negative consequences of high public debt on the economy.

Required:

Evaluate FOUR (4) of such negative consequences of public debt on the economy of Ghana.
(4 marks)

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  • 13 Marks

TX – May 2019 – L3 – Q2a – Taxable Income Calculation and Obligations

Calculate the taxable income and assess the tax obligations for a secondment and other income.

Agyemang Boateng has been working with Intellect Consult Limited (ICL) since 2010. At the beginning of January 2016, he was seconded to Accra Metropolitan Assembly (AMA) for a period of six months to be part of a team to spearhead a restructuring exercise and the review of the system of internal controls at the Revenue department of AMA.

Terms of the AMA engagement:

ICL was to be paid a one-off settlement of GH¢10,000 at the completion of the engagement as well as reimbursement of monthly operational expenses incurred based on submission of the relevant invoices.

Agyemang’s only entitlements from AMA were the following monthly allowances:

Inconvenience Allowance: GH¢300
Extra Duties Allowance: GH¢200
Agyemang’s secondment to AMA did not in any way affect his salary and other entitlements from his employer, ICL, as these continued to accrue to him during the period of the secondment.

Agyemang’s earnings and entitlements from ICL for the year of assessment ended 31 December 2016 are as follows:

Basic Salary: GH¢46,000
Bonus: GH¢9,500
Fuel allowance: GH¢1,750
Entertainment allowance: GH¢7,500
Additional Information:

Agyemang stays in a fully furnished ICL bungalow at East Legon in Accra. ICL charges him a rent of GH¢150 per month.
Agyemang makes use of ICL’s company vehicle, driver, and fuel for official use only.
On 1 January 2016, Agyemang successfully applied for a GH¢10,000 loan from his employer, ICL. His employer charged him interest of 2% per annum on the loan. During this period, Bank of Ghana policy rate was 15%. The loan was repayable within ten months.
On 1 October 2016, Agyemang commenced part-time lecturing in Accounting at a local private Senior High School. He was paid monthly for his services, and the total amount received for the three months ended 31 December 2016 was GH¢5,000 gross.
Agyemang’s other non-employment-related income received during the year ended 31 December 2016 were:

Net royalties received for his Accounting textbook: GH¢21,250
Gross local company dividends (Unquoted Company shares): GH¢13,000
Interest on Bank deposits from local financial institutions: GH¢10,000
Gross lottery winnings: GH¢12,000
Required:

i) Calculate Agyemang’s taxable income for the year ended 31 December 2016. (10 marks)

ii) State AMA’s tax obligation when making the disbursement of GH¢10,000 to ICL. (1 mark)

iii) What are the tax implications to Agyemang with respect to the following:

Part-time lecturing
Royalty
Dividends
Interest on bank deposit (2 marks)
iv) What is the tax implication of the loan taken by Agyemang? (1 mark)

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  • 7 Marks

TX – May 2019 – L3 – Q3B – Tax planning

Discuss the tax implications of finance lease arrangements, particularly concerning the eligibility for capital allowance under the Income Tax Act 2015 (Act 896).

b) At a tax seminar organised by The Institute of Chartered Accountants (Ghana) in December 2016, the issue of tax implications for finance lease arrangement dominated the discussion. The facilitator said that both the lessor and the lessee shall be denied capital allowance under the tax law.

The facilitator intimated that capital allowance is granted to persons who acquire assets and own them and use such to generate business income. Both the lessor and the lessee, consequently do not qualify for capital allowance under the Income Tax Act (Act 896), 2015 and its regulations, he added.

Required:
As a tax advisor, submit a response to the above based on the tax provisions. The response is to be published in the Institute’s Journal. (7 marks)

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  • 4 Marks

TX – May 2019 – L3 – Q3C – Tax Planning

Discuss the tax benefits associated with investing in farming and agro-processing businesses in Ghana.

c) Your senior brother has stayed in the United Kingdom for more than 20 years and would like to return to Ghana and establish a business. He is confused as to which area to invest to maximise the benefits from tax planning.

He has been told that you are undertaking a course in Taxation and would like to have your explanation and the tax benefits, if any, from investing in the following areas:

i) Farming (2 marks)
ii) Agro-Processing Business (2 marks)

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  • 5 Marks

TF – May 2018 – L3 – Q1b – Tax planning

Explain five goals of government spending as a fiscal policy instrument.

One of the factors that helps determine the country’s economic direction is fiscal policy. Government uses fiscal policy to influence the economy by adjusting revenue and spending levels.

Required:
Identify and explain FIVE goals of government spending as a fiscal policy instrument.
(10 marks)

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  • 6 Marks

TF – May 2018 – L3 – Q3b – Tax planning

Briefly explain tax holiday, tax exemptions, tax reliefs, and tax rebates.

Tax planning is the analysis of a financial situation or plan from a tax perspective. The purpose of tax planning is to ensure tax efficiency, with the elements of the financial plan working together in the most tax-efficient manner possible.

Required:
Briefly explain the following terms with respect to tax planning:
i) Tax holiday
ii) Tax exemptions
iii) Tax relief
iv) Tax rebates/refund
(6 marks)

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