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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  • 4 Marks

AT – NOV 2021 – L3 – Q1c – Tax Planning

Outlines tax planning measures that can be used to reduce tax liability for a sole proprietorship business.

Evaluate FOUR (4) tax planning measures that you can adopt in your desire to form a sole proprietorship business. (4 marks)

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  • 10 Marks

AT – Nov 2020 – L3 – Q5a – Tax planning

A draft paper outlining the types of worthwhile causes and donations available, circumstances for accessing them, and their benefits for Gona Jon Ltd.

You have been engaged by Kaek Consult, a tax consulting firm as an intern to be confirmed when you complete the final level of the ICAG examinations.

Your first assignment is to draft a paper to Gona Jon Ltd, who intends to take advantage of contributions and donations to a worthwhile cause. Your write-up should classify the types of worthwhile causes and donations available, the circumstances under which they can be accessed, and their benefits.

Required:
Write a draft paper for your manager’s consideration, which will be reviewed and finalized for Gona Jon Ltd on the worthwhile causes, benefits, and how to access them.

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  • 10 Marks

AT – Nov 2020 – L3 – Q2b – Tax planning

Tax implications for a Singaporean investor looking to establish shoe or juice manufacturing companies in Ghana.

Following the government’s commitment to build one factory in each district in Ghana and its desire to ensure food sufficiency through the planting for food and jobs program, an investor from Singapore intends to invest in a shoe manufacturing company to be located at Accra in the Greater Accra Region of Ghana. He also considers starting a juice manufacturing company at Nsawam in the Eastern Region of Ghana in response to the investment drive of the government.

As part of the investment, he intends to incur the following cost and start operations in 2018 on either proposal, which is the shoe manufacturing company or the juice manufacturing company.

Description Amount (GH¢)
Building 7,200,000
Plant and Machinery 11,700,000
Furniture and Fittings 180,000
Computers 180,000

Additionally, he intends to recruit fresh graduates from the All Nations University College of Ghana. It is further projected that in the first three years, 2018, 2019, and 2020, it will incur GH¢36,000, GH¢32,400, and GH¢18,000 losses, respectively. The investor hopes to start making profit from the year 2021. He intends to borrow at 20% interest from his USA associate, amounting to the equivalent of GH¢100,000,000. The equity he intends to start with is GH¢36,000,000.

Required: As a tax adviser, evaluate the proposed investment by the Singaporean investor and the tax implication on the various activities highlighted in the scenario.

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  • 10 Marks

AT – Nov 2020 – L3 – Q2a – Tax planning

A presentation on five objectives of international taxation treaties.

You are a partner in a Tax Consulting firm. Your firm has recently employed 5 new staff and they have to be trained on a number of issues.

Required:
Prepare a presentation on international taxation with emphasis on FIVE (5) objectives or goals of international taxation treaties.

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  • 8 Marks

AT – Dec 2023 – L3 – Q2b – Tax planning

Discussing tax planning opportunities available to sole proprietorships that are not available to limited liability companies.

Tax planning opportunities are available to all persons. All business units may not have the same tax planning opportunities, hence the need to carefully select a business unit that may provide the intended benefits to the owner or owners.

Required:
Discuss FOUR (4) tax planning opportunities available to sole proprietorships which may not be available to limited liability companies.

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  • 4 Marks

AT – Dec 2023 – L3 – Q3b – Tax planning

Discussing the tax implications and benefits available to companies engaged in farming and agro-processing sectors in Ghana.

Adom Ltd intends to commence business in the following areas:

  • Farming
  • Agro-processing

The management of Adom Ltd has indicated that it wants to conduct the business in the most ethical manner possible but at the same time make the maximum possible profit with minimum tax liability.

Required:
Discuss the tax implications in these sectors of the economy.

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  • 8 Marks

AT – Dec 2023 – L3 – Q2a – Tax Planning

Computation of tax implications under thin capitalization rules and definition of exempt persons in corporate taxation.

Scenario:
Papana Ltd, a resident company in Ghana, has cash flow challenges after a major customer ceased business dealings. Dawadawa Ltd, another resident company, negotiated with Papana Ltd and acquired 52% of its underlying ownership. As part of this arrangement, Dawadawa Ltd secured a loan facility of GH¢100 million for Papana Ltd at an interest rate of 4% above the average rate of 25%. The total interest paid in 2021 was GH¢2 million. Dawadawa Ltd is exempt from tax on all its income.

The capital structure of Papana Ltd for the 2021 year of assessment is as follows:

Required:
i) Compute the tax implications of the above arrangement.
ii) What constitutes an exempt person?

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  • 10 Marks

AT – July 2023 – L3 – Q5b – Tax administration in Ghana

Explaining the purposes and differences of private rulings, class rulings, and practice notes in tax administration.

Private rulings, class rulings, and practice notes do not serve the same purpose.

Required:
Write a memo to the Tax Manager of your company as a Tax Intern explaining how each is used and their effect on tax administration.

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  • 10 Marks

AT – July 2023 – L3 – Q5a – Tax planning

Computing the tax payable for group companies and identifying applicable tax incentives.

ABG Ltd is a Free Zone Enterprise established in the year 2011. The company is part of Akafina Group of Companies with subsidiaries located in Accra, Kumasi, Ayanfuri, Tema, and Bodie. The following information is relevant to the operations of Akafina Group of Companies:

Taxable Profit for the Year Ended 31 December 2022 Location Activity GH¢ million
ABG Ltd Accra Manufacturing 28
Adooso Ltd Tema Manufacturing 13
Brefa Ltd Kumasi Manufacturing 14
Crame Ltd Bodie Manufacturing 22
Didie Ltd Ayanfuri Manufacturing 33
Frankaa Ltd Accra Manufacturing 14
Greda Ltd (established since 2010) Agriculture 20

Required:
Compute the tax payable by each company and explain the type of tax incentives they may enjoy.

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  • 10 Marks

AT – July 2023 – L3 – Q3a – Tax planning

Analyzing the tax implications of providing assets as equity or loan and determining the best option for tax purposes

Kinky Ltd is a manufacturing entity resident in Ghana. Mr. Andre Camil, a citizen and resident of France, owns 90% of the company’s shares. Mrs. Claude Camil, a citizen and resident of France and wife of Mr. Andre Camil, also owns 5% of the shares of the company. Mr. Francois Camil, the son of Mr. Andre Camil, holds the remaining 5% of the shares in the company.

As at 1 June, 2021, the company had a share capital of GH¢400,000. A report submitted by the management to the Board of Directors indicated that the company needs to acquire a plant valued at GH¢1,000,000 to enable the company to increase its production capacity. Mr. Andre Camil, the majority shareholder, has offered to finance the purchase of the plant for the company but his challenge is whether to provide the asset to the company as a loan or as equity.

Required:
Advise Mr. Andre Camil on:

  1. The income tax treatment of providing the asset to the company as equity contribution.
  2. The income tax treatment of providing the asset to the company as a loan.
  3. The preferable option for providing the asset to the company in order to derive the maximum tax benefits.

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