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CPA
Intermediate Leval
Public Finance & Taxation November 2019
Suggested Solutions

Public Finance & Taxation
Revision Kit

QUESTION 1(a)

Q The Public Finance Management Act requires that all payments from the consolidated fund should be authorised and comply with certain general rules.

With reference to the above statement, outline two ways of authorising payments out of the consolidated fund.
A

Solution


➧ Budgetary Authorization: The first way of authorizing payments out of the consolidated fund is through the budgetary process. The government prepares an annual budget that outlines its revenue and expenditure plans for the fiscal year. This budget is approved by the legislature, and it serves as the legal authority for spending from the consolidated fund. Each expenditure item in the budget is allocated a specific amount of funds, and payments can be authorized based on these allocations. The budgetary authorization ensures that expenditures are planned, approved, and controlled within the limits set by the legislature.

➧ Treasury Approval: The second way of authorizing payments out of the consolidated fund is through treasury approval. Under this method, government departments and agencies submit requests for payment to the treasury or finance ministry. These requests include supporting documentation such as invoices, contracts, or other relevant evidence of the goods or services provided. The treasury reviews the requests and ensures that they comply with the general rules and regulations governing expenditure. If the requests meet the necessary criteria, the treasury grants approval for the payments to be made from the consolidated fund. This process helps to maintain financial discipline and accountability by ensuring that payments are properly verified before funds are disbursed.

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QUESTION 1(b)

Q According to the Public Procurement and Asset Disposal (PPAD) Act, open tendering should be the preferred procurement method for procurement of goods, works and services. The procuring entity may use an alternative procurement procedure only if that procedure is allowed and satisfies the conditions under the Act for use of that method.

(i) With reference to the above statement:
Explain three circumstances under which open tendering might not be appropriate.

(ii) Suggest four methods of procurement as provided under PPAD Act other than the open tendering process.
A

Solution


(i) Three circumstances under which open tendering might not be appropriate are:

➧ Emergency Procurement:

Open tendering may not be suitable in situations where there is an urgent need for goods, works, or services due to unforeseen circumstances such as natural disasters, public health emergencies, or security threats. In such cases, the procuring entity may need to expedite the procurement process to ensure the timely delivery of critical supplies or services. Emergency procurement procedures, which allow for quicker decision-making and procurement actions, may be more appropriate in these situations.

➧ Limited Sources of Supply:

Open tendering may not be feasible or practical when there are only a limited number of qualified suppliers available for a particular goods or services requirement. If the market for a specific product or service is highly specialized or restricted, the procuring entity may find it more appropriate to use a procurement method that targets a select group of potential suppliers. This could include methods such as restricted tendering or direct procurement from prequalified suppliers.

➧ Specialized Goods or Services:

Certain procurement requirements may involve specialized goods or services that require a high level of technical expertise or unique qualifications. In such cases, open tendering may not be appropriate as it may not effectively evaluate or attract suppliers with the necessary expertise. The procuring entity may choose to use a method like request for proposals (RFP) or quality and cost-based selection to allow for a more comprehensive evaluation of technical capabilities and qualifications of suppliers.

(ii) Methods of procurement as provided under the PPAD Act, other than the open tendering process, include:

➧ Restricted Tendering:

In restricted tendering, the procuring entity invites a limited number of prequalified suppliers to submit bids. This method is used when the procuring entity has already identified potential suppliers through a qualification process or when certain conditions allow for a limited number of suppliers to participate.

➧ Request for Proposals (RFP):

The RFP method is used when the procuring entity requires complex goods, works, or services that cannot be easily specified in the tender documents. The entity invites interested suppliers to submit detailed proposals, including technical and financial aspects, and evaluates them based on predetermined criteria. The RFP method allows for a more flexible and comprehensive assessment of proposals.

➧ Direct Procurement:

Direct procurement involves the procurement of goods, works, or services from a specific supplier without a competitive bidding process. This method may be used when there is only one known supplier available, or in cases of extreme urgency or specialized requirements where no other reasonable alternative exists. Direct procurement is subject to strict conditions and requires proper justification and documentation.

➧ Two-Stage Bidding:

In two-stage bidding, the procuring entity conducts an initial qualification stage to shortlist suppliers based on their technical capabilities. Shortlisted suppliers are then invited to participate in the second stage, which involves the submission of financial bids. This method allows for a more rigorous evaluation of technical qualifications before considering the financial aspects, ensuring that only qualified suppliers proceed to the final bidding stage.

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QUESTION 1(c)

Q Discuss three roles played by the senate or equivalent institution in your country in relation to public finance management.
A

Solution


➧ Budget Oversight:

The Senate plays a crucial role in overseeing the budgetary process and ensuring the sound management of public finances. It reviews and scrutinizes the government's proposed budget, including revenue projections, expenditure allocations, and fiscal policies. The Senate assesses the budget's alignment with national priorities, fiscal sustainability, and compliance with relevant laws and regulations. Through its scrutiny and analysis, the Senate helps ensure that public funds are allocated effectively, efficiently, and in accordance with the country's financial goals and principles.

➧ Legislation and Approval:

The Senate is responsible for reviewing and approving financial legislation, including bills related to taxation, borrowing, and public expenditure. It examines proposed laws and regulations that impact public finance management, such as the Public Finance Management Act, fiscal responsibility laws, and procurement regulations. The Senate's involvement ensures that these laws are comprehensive, transparent, and promote accountability in the management of public funds. It also ensures that any financial decisions made by the executive branch align with legislative requirements and priorities.

➧ Oversight and Accountability:

The Senate plays a critical role in holding the government accountable for its financial decisions and actions. It conducts inquiries, hearings, and investigations into public finance matters, such as the use of public funds, budget execution, and the performance of government agencies. The Senate's oversight function helps identify any irregularities, inefficiencies, or mismanagement in public finance management. It can summon government officials, request reports, and provide recommendations for improvement. By exercising oversight, the Senate contributes to enhancing transparency, integrity, and responsible financial practices within the government.

➧ Examination of Audit Reports:

The Senate reviews and examines audit reports conducted by the country's supreme audit institution (such as the Auditor General's office). These reports provide an independent assessment of the government's financial statements, compliance with laws and regulations, and the effectiveness of internal controls. The Senate scrutinizes the audit findings and recommendations, seeking to ensure that appropriate actions are taken to address any identified financial irregularities, mismanagement, or inefficiencies. By examining audit reports, the Senate contributes to strengthening financial accountability and transparency within the public sector.

➧ Debt Management and Economic Policy Oversight:

The Senate often plays a role in overseeing the government's debt management practices and economic policies. It monitors the country's debt levels, borrowing plans, and debt servicing obligations. The Senate assesses the sustainability of the national debt and examines the government's strategies for managing debt risks. Additionally, the Senate may review and provide input on economic policies related to taxation, public expenditure, and revenue generation. Through its involvement in debt management and economic policy oversight, the Senate helps ensure that the government's financial decisions align with long-term fiscal stability and economic growth objectives.

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QUESTION 2(a)

Q Explain the meaning of "Appropriation Act" as provided under the Public Finance Management Act.
A

Solution


The "Appropriation Act" refers to a specific legislation or law enacted by the legislature that authorizes the government to spend funds from the consolidated fund or other sources for specific purposes outlined in the act. It is a key component of the budgetary process and is governed by the Public Finance Management Act or similar legislation in many countries.

The Appropriation Act serves several important functions in public finance management:

➧ Authorization of Expenditure:

The act provides legal authority for the government to incur expenses and make payments from the consolidated fund or other designated sources. It sets out the maximum amount that can be spent in total and specifies allocations for different government ministries, departments, agencies, programs, or projects. This ensures that expenditures are within the approved limits and that funds are allocated to the intended purposes.

➧ Budget Implementation:

The Appropriation Act is instrumental in translating the government's budgetary plans into action. It enables the government to execute its budget by allocating funds to specific activities, such as public services, infrastructure development, social programs, and administrative costs. It provides the framework for the efficient and effective implementation of the budgetary provisions in accordance with the government's policies and objectives.

➧ Financial Control and Accountability:

The Appropriation Act contributes to financial control and accountability by establishing a legal framework for the proper management of public funds. It sets out the rules and procedures for financial management, including the reporting and auditing requirements. The act ensures that expenditures are made in compliance with applicable laws and regulations, promoting transparency, accountability, and good governance in the use of public resources.

➧ Legislative Oversight:

The Appropriation Act allows the legislature, including the Senate or equivalent institution, to exercise its oversight role by reviewing, scrutinizing, and approving the government's expenditure plans. The act provides an opportunity for parliamentary debate and discussion on the proposed budget, allowing lawmakers to assess the government's priorities, policies, and resource allocation decisions. The legislature's approval of the Appropriation Act reflects its role in ensuring that public funds are used in the best interests of the country and its citizens.

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QUESTION 2(b)

Q For the past few years, most of the counties revenue generation has stagnated or even declined although the economy's gross domestic product (GDP) has grown within the same period.

Propose four causes to which this underperformance in revenue collection by the counties or similar devolved units in your country could be attributed,
A

Solution


➧ Limited Tax Base:

One possible cause is a limited tax base within the counties. If the local economy is heavily reliant on a few sectors or industries, there may be a lack of diverse revenue sources. A narrow tax base limits the ability of counties to generate substantial revenue, especially if those sectors are not experiencing significant growth or if they face challenges such as declining productivity or competition.

➧ Weak Tax Administration:

Ineffective tax administration can hinder revenue collection efforts. Counties may lack the capacity or resources to implement efficient tax collection systems, enforce compliance, and combat tax evasion. Inadequate tax administration processes, including weak monitoring and enforcement mechanisms, can result in revenue leakage and reduced collection levels, even in the presence of economic growth.

➧ Tax Evasion and Informal Economy:

A significant portion of economic activity taking place in the informal sector can contribute to underperformance in revenue collection. Informal businesses often operate outside the formal tax system, leading to underreporting or evasion of taxes. Counties may struggle to capture revenue from these sources, resulting in a discrepancy between economic growth reflected in GDP and actual revenue collection.

➧ Inadequate Revenue Mobilization Strategies:

Counties may lack effective strategies to mobilize revenue from diverse sources. If revenue generation efforts are primarily reliant on traditional tax sources, such as property taxes or business permits, there may be limited exploration of alternative revenue streams. Counties need to explore innovative revenue generation approaches, such as public-private partnerships, user fees, or targeted sector-specific levies, to broaden their revenue base and capture a larger share of economic growth.

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QUESTION 2(c)

Q A value added tax (VAT) account for the month of March 2018 for Bandika Ltd
A

Solution


Bandika ltd VAT account for the month of March 2018
Input tax Sh Output tax Sh

05/03/18
08/03/18
12/03/18
23/03/18
28/03/18
28/03/18 		Opening inventory 9,200x85x16/116
Imports 10,000x80x1.2x16/100
Purchases 5,000x60x16/116
Furniture 40,000x16/116
Credit purchase (2,500x80-5%x200,000)x16/116
Electricity 15,000x16/116
Telephone 6,000x16/116 		107,862
153,600
41,379
5,517
26,207
2,069
828		 09/03/18 sales 6,000x90x16/116
18/03/18 National treasury (85x30,000)x16/116
20/03/18 Sales Uganda 2,500x90x0%
Goods appropriated 320,000x16/116



74,483
351,724
0
44,138
Total 337,462 470,345
Since Output tax is greater than Input tax,Bandika ltd has VAT payable
VAT payable = 470,345 - 337,462 = 132,883


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QUESTION 3(a)

Q Fiscal policy influences both the pattern of economic activities and also the level and growth of aggregate demand, output and employment.

Required:

Summarise four ways through which taxation could be used as a tool of fiscal policy in your country,
A

Solution


➧ Progressive Taxation:

Progressive taxation refers to a tax system where individuals or businesses with higher incomes are subject to higher tax rates. This approach aims to redistribute wealth and reduce income inequality. By implementing progressive tax rates, the government can collect more revenue from those who can afford to pay more, while providing tax relief to lower-income individuals and businesses. This can help stimulate aggregate demand by increasing the disposable income of lower-income groups, leading to higher consumption and economic growth.

➧ Tax Incentives:

The government may use tax incentives to promote specific economic activities or industries. By offering tax breaks, credits, or exemptions, the government encourages investment, job creation, and economic development in targeted sectors. For example, tax incentives may be provided for investments in renewable energy, research and development, or small and medium-sized enterprises (SMEs). These incentives aim to stimulate private sector participation, attract investments, and boost economic activity, which can lead to increased output and employment.

➧ Consumption Taxes:

Consumption taxes, such as value-added tax (VAT) or sales tax, can be adjusted to influence consumer spending patterns and aggregate demand. The government can increase or decrease the tax rates on goods and services to encourage or discourage consumption. For instance, during periods of high inflation or excessive consumer spending, the government may raise consumption taxes to curb inflationary pressures and promote savings. Conversely, during economic downturns or sluggish demand, reducing consumption taxes can incentivize spending and stimulate economic activity.

➧ Taxation for Fiscal Stimulus or Stabilization:

Taxation can also be utilized as a fiscal policy tool for demand management and economic stabilization. During economic recessions or periods of low aggregate demand, the government may implement temporary tax cuts or tax rebates to stimulate consumer spending and business investment. These measures aim to boost aggregate demand, encourage economic activity, and mitigate the negative impact of a downturn. Conversely, during periods of high inflation or excessive demand, the government may increase taxes to reduce aggregate demand and control inflationary pressures.

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QUESTION 3(b)

Q (i) Taxable income of Beckham Atondo for the year ended 31 December 2017.

(ii) Tax payable (if any) from the income computed in (b)(i) above.
A

Solution


(i) Taxable income of Beckham Atondo for the year ended 31 December 2017.

Beckham Atondo computation of taxable income year of Income 2017

Basic salary 160,000 x 9/12
responsibility allowance 42,000×9
Bonus
Risk allowance 35,000×9
Electricity - Actual bill 22,000×9 = 198,000
- Prescribed amount = 18,000
} higher
Water - Actual bill 185,000×9 = 166,500
Prescribed amount = 6,000
} higher
Telephone bills 30% × 16,000 × 9
Insurance premium

Less: Contribution to home ownership saving plan:
- Actual contribution 18,000×9 = 162,000
- Set limit 48,000/12 x 9 = 36,000
} Lower
Total taxable employment income
Other incomes:
Pension income (1,580,000 - 600,000)
Tax: Business net income profit
Add: Disallowable expense
Depreciation
Parking fines
General provision for bad debts
Replacement of car engine
Less: Wear & Tear 25% x 260,000
Total taxable income
















980,000
120,000

60,000
42,000
26,000
260,000
(65,000)

 Sh.
1,440,000
378,000
250,000
315,000

198,000

166,500
43,200
320,000
3,110,700


(36,000)
3,074,700








1,423,000
4,497,700


(ii) Tax payable (if any) from the income computed in (b)(i) above.

Computation of tax payable
First 134,164 @ 10%
126,403 @ 60%
Surplus (4,497,700-513,373) 30%
Gross tax payable
Less: P.A.Y.E = 4,200×9
Insurance relief 15% x 320,00 = 48,000
- Set limit 60,000 / 12 x 9 = 45,000
} Lower
Personal relief
Net tax payable		 13,416.4
75,841.8
1,192,298.1
1,281,556.3
(378,000)

(45,000)
(15,360)
(843,196.3)


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QUESTION 4(a)

Q Highlight two reasons why an importer is required to fill in an import declaration form.
A

Solution


➧ Customs Control and Security:

Import declaration forms provide critical information to customs authorities about the imported goods, their origin, and their intended use. This information enables customs officials to conduct necessary inspections, verify the accuracy of the declared goods, and ensure compliance with import regulations. By requiring importers to provide detailed information on the import declaration form, customs authorities can better manage and control the flow of goods across borders, thereby enhancing security and preventing illegal or prohibited items from entering the country.

➧ Tariff Assessment and Revenue Collection:

Import declaration forms play a crucial role in determining the appropriate tariffs, duties, and taxes applicable to imported goods. The information provided by importers on the declaration form helps customs authorities classify the goods correctly according to the customs tariff schedule. This classification is essential for calculating the applicable customs duties, value-added tax (VAT), or other levies. Accurate and complete import declaration forms ensure that the correct amount of revenue is collected, contributing to the country's fiscal objectives and ensuring fair trade practices.

➧ Trade Statistics and Economic Analysis:

Import declaration forms serve as a valuable source of data for trade statistics and economic analysis. Governments and international organizations rely on this information to monitor trade patterns, track the volume and value of imports, and analyze the country's trade balance. The data collected from import declaration forms can provide insights into the country's economic performance, market trends, and the competitiveness of different industries. It aids in formulating effective trade policies, evaluating the impact of trade agreements, and assessing the overall health of the economy.

➧ Regulatory Compliance and Risk Assessment:

Import declaration forms enable customs authorities to assess the compliance of importers with various regulatory requirements. By providing information on the imported goods, their safety standards, certifications, or licenses, importers demonstrate their adherence to the applicable regulations. This helps customs authorities identify potential risks, such as health and safety concerns, environmental hazards, or the importation of counterfeit or prohibited items. Import declaration forms allow for targeted risk assessment, enabling customs officials to allocate resources effectively and focus on high-risk consignments.

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QUESTION 4(b)

Q Morris Kwachu applied for a licence to commence manufacturing business dealing in excisable goods, The Commissioner refused to issue him with a licence.

Advise him on four grounds under which the Commissioner might refuse to issue the applicant with a licence as provided under the Excise Duty Act
A

Solution


➧ Failure to Meet Legal Requirements:

The Commissioner may refuse to issue a license if the applicant fails to meet the legal requirements outlined in the Excise Duty Act or related regulations. This could include failure to provide necessary documentation, meet specific qualifications or standards, or comply with procedural requirements for obtaining a license. If the applicant does not fulfill the prescribed legal criteria, the Commissioner has the authority to deny the license.

➧ Non-compliance with Excise Duty Regulations:

The Commissioner may refuse to issue a license if the applicant has a history of non-compliance with excise duty regulations or has been involved in activities that are contrary to excise duty laws. This could include previous convictions for tax evasion, smuggling, or other illicit activities related to excisable goods. The Commissioner's decision aims to ensure that licenses are granted to individuals or businesses with a good track record of compliance and adherence to the law.

➧ Insufficient Financial Capacity:

The Commissioner may refuse to issue a license if the applicant does not demonstrate sufficient financial capacity to engage in manufacturing business dealing with excisable goods. This could include inadequate capital resources, lack of financial stability, or inability to meet the financial obligations associated with excise duty compliance. The Commissioner may consider the applicant's financial records, creditworthiness, and ability to meet financial requirements as part of the licensing decision.

➧ Public Interest and Security Concerns:

The Commissioner may refuse to issue a license if granting the license is deemed to be against public interest or poses security risks. This could include situations where the applicant's proposed business activities may have adverse effects on public health, safety, or the environment. Additionally, if the Commissioner has reasonable grounds to believe that the applicant's business dealings may be associated with illegal or harmful activities that could threaten public security, a license may be denied to protect public welfare.

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QUESTION 4(c)

Q (i) The adjusted partnership profit or loss for the year ended 31 December 2017.

(ii) Distribution schedule of the profit or loss calculated in (c)(i) above.
A

Solution


(i) The adjusted partnership profit or loss for the year ended 31 December 2017.

Bernard Cosmas and Korir
Computation of taxable profit or year of income 2017

Reported net loss
Add: Disallowable deduction
Interest on capital (13,500+ 13,500 + 21,500)
Salaries to partners (400,000+ 320,000 + 576,000)
Office cabinet
Goodwill impairment
Loss on disposal of motor vehicle
Subscription - Wananchi golf club
Donations
Depreciation
Purchase of pickup
Transport personal 10,000×12
General provision for bad debts 390-330
Prepaid general repair
less: Omitted allowable expenses
Wear and Tear allowance
Adjusted profit		 Sh.
(2,542,000)

485,000
1,296,000
90,000
340,000
385,000
105,000
240,000
845,000
1,500,000
120,000
60,000
80,000

(1,236,000)
1,768,000


(ii) Distribution schedule of the profit or loss calculated in (c)(i) above.

Partners distribution schedule
Benard Cosmus Korir Total
Interest on capital
partners salary
Share of loss
Adjusted taxable Profit		 135,000
400,000
(5,200)
529,800		 135,000
320,000
(5,200)
449,800		 215,000
576,000
(2,600)
788,400		 485,000
1,296,000
(13,000)
1,768,000


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QUESTION 5(a)

Q State four conditions that must be fulfilled for donations to be allowable deduction for tax purposes.
A

Solution


➧ Donations to Approved Charitable Organizations:

In many jurisdictions, donations are only allowable deductions if they are made to approved charitable organizations or institutions. These organizations are typically registered or recognized by the tax authority as eligible to receive tax-deductible donations. Donations made to individuals, political organizations, or certain types of nonprofits that do not qualify as charitable may not be eligible for tax deductions.

➧ Documentation and Receipts:

Adequate documentation is usually required to support a donation as an allowable deduction. Tax authorities typically require donors to obtain and retain receipts or acknowledgement letters from the charitable organization, stating the amount of the donation and confirming that it is tax-deductible. The documentation serves as evidence of the donation and helps ensure transparency and accuracy in claiming deductions.

➧ Monetary or In-Kind Contributions:

Donations can take the form of monetary contributions or in-kind donations, such as goods or services. However, the tax regulations may specify conditions for each type of donation to qualify as allowable deductions. For monetary donations, proof of payment, such as bank statements or receipts, is usually required. In the case of in-kind donations, the fair market value of the donated goods or services must be determined and supported by appropriate documentation.

➧ Compliance with Donation Limits and Thresholds:

Tax authorities often impose limits or thresholds on the amount of allowable deductions for donations. Donors must ensure that their total donations do not exceed the prescribed limits to qualify for tax benefits. These limits can be based on a percentage of the donor's income, a fixed monetary cap, or other criteria specified in the tax regulations. Exceeding the limits may result in a partial deduction or disqualification of the donation for tax purposes.

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QUESTION 5(b)

Q Outline circumstances upon which the Commissioner of Domestic Tax may accept a late notice of objection from a tax payer.
A

Solution


➧ Reasonable Cause or Excusable Delay:

The Commissioner may consider accepting a late notice of objection if the taxpayer can demonstrate a reasonable cause or excusable delay for the delay in submitting the objection.

Example:

A taxpayer was involved in a serious accident shortly before the objection deadline and was hospitalized for an extended period. The taxpayer could not submit the notice of objection on time due to their medical condition and recovery process. Upon providing medical records and evidence of the accident, the Commissioner may accept the late notice of objection, considering the reasonable cause for the delay.

➧ Genuine Mistake or Misunderstanding:

If the taxpayer can show that the late submission was due to a genuine mistake or misunderstanding of the objection procedures or timelines, the Commissioner may exercise discretion and accept the late notice. This may apply if the taxpayer can provide evidence that they were genuinely unaware of the deadlines or procedural requirements and made a good faith effort to submit the objection as soon as they became aware of the error.

Example:

A taxpayer mistakenly believed that the objection deadline was one week later than it actually was. As soon as they realized the error, they promptly submitted the objection. If the taxpayer can demonstrate that the late submission resulted from a genuine misunderstanding of the timeline and can provide evidence of their prompt action upon realizing the mistake, the Commissioner may exercise discretion and accept the late notice of objection.

➧ Administrative Errors or Delays:

In cases where the delay in submitting the notice of objection is attributable to administrative errors or delays on the part of the tax authority, the Commissioner may be more inclined to accept a late notice. For example, if the taxpayer can prove that they submitted the objection within a reasonable timeframe but due to administrative mishandling or delays, it was not processed or acknowledged in a timely manner.

Example:

A taxpayer submitted their notice of objection through the official online platform within the prescribed time frame but did not receive any acknowledgment or response from the tax authority. Upon inquiry, the taxpayer discovered that there was an administrative error, and their objection was not properly registered. In this case, the Commissioner may accept the late notice of objection due to the administrative delay on the tax authority's part.

➧ Merits of the Objection: In exceptional cases, the Commissioner may accept a late notice of objection if the content and merits of the objection are compelling and require further consideration. This could occur if the late submission raises substantial legal or factual issues that deserve attention, and the Commissioner deems it necessary to ensure fairness and equity in the tax assessment or dispute resolution process.

Example:

A taxpayer filed their objection within the specified deadline, but the objection was initially based on incomplete information or lacked a comprehensive argument. After the deadline had passed, the taxpayer obtained additional relevant evidence or expert advice that significantly strengthens their case and supports the objection. If the taxpayer can demonstrate that the late submission contains substantial evidence or arguments that were not available at the time of the original deadline and have a direct impact on the merits of the objection, the Commissioner may accept the late notice to ensure a fair and thorough review of the objection.

➧ Lack of Prejudice to the Tax Authority:

If the late submission of the notice of objection does not cause prejudice or harm to the tax authority's ability to address the objection effectively, the Commissioner may exercise discretion and accept the late notice. This may apply if the delay does not result in any significant negative impact on the tax assessment process or the administration of tax affairs.

Example:

A taxpayer missed the objection deadline by a few days, but their objection was relatively straightforward and did not involve complex issues or significant financial implications. Since the late submission did not cause any harm to the tax authority's ability to address the matter adequately, the Commissioner may decide to accept the late notice of objection.

➧ Supporting Evidence or New Information:

The Commissioner may accept a late notice of objection if the taxpayer provides substantial supporting evidence or new information that was not available at the time of the original deadline. If the additional evidence or information has a direct bearing on the tax issue in question and could potentially alter the outcome of the objection, the Commissioner may consider accepting the late submission to ensure a fair and comprehensive review of the matter.

Example:

A taxpayer submitted their objection within the prescribed time frame but later discovered crucial supporting documents that could substantially change the outcome of the objection. If the taxpayer can demonstrate that the new evidence was not available earlier and is directly relevant to the objection, the Commissioner may accept the late notice of objection to ensure a comprehensive review of the case.

➧ Legal or Procedural Changes:

In some cases, the Commissioner may accept a late notice of objection if there have been subsequent changes in tax laws, regulations, or procedural requirements that were not known or anticipated at the time of the original deadline. If the taxpayer can demonstrate that the late objection is a result of the need to comply with new legal or procedural obligations, the Commissioner may show flexibility and accept the late submission.

Example:

After the original objection deadline passed, the tax authority introduced new regulations that impact the taxpayer's objection case. The taxpayer, upon learning about the changes, promptly submits the objection, citing compliance with the new legal requirements. In this scenario, the Commissioner may accept the late notice of objection considering the unforeseen legal changes that affected the taxpayer's objection rights.

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QUESTION 5(c)

Q Capital allowances due to Chemtech Ltd. for the year ended 31 December 2017.
A

Solution


INVESTMENT DEDUCTION
Asset Qualifying Cost Rate @ 100%
Factory building
Drainage system
Store perimeter wall
Processing machinery
Generator
Heating plant
Conveyor belts
Packaging machines
Water pumps
Borehole
Loading bay
Factory extension		 2,600,000
350,000
1,200,000
1,800,000
420,000
830,000
650,000
800,000
480,000
450,000
450,000
225,000		 2,600,000
350,000
1,200,000
1,800,000
420,000
830,000
650,000
800,000
480,000
450,000
450,000
225,000
10,255,000


INDUSTRIAL BUILDING ALLOWANCE
Asset Qualifying Cost Rate Bal c/f
Staff canteen
Labour quarters
Godown
sports pavilion 		8400,000
1,800,000
890,000
1,200,000		 10% => 49,000
10% => 10,500
10% => 22,250
10% => 30,000		 791,000
1,695,000
867,750
1,170,000
206,250


WEAR & TEAR
Class I
37.5%		 II
30%		 III
25%		 IV
12.5%
W.D.V. 01/01/2017
Additions
Distribution van
Furniture and fittings
Mercedes Benz
Pick up
Fax machines
Computers
Lorries
Photocopier machine
Forklift
Laptop computer
Disposal
Mercedes Benz (W2)
Net Asset
WTA







4,000,000

960,000



4,960,000
(1,860,000






320,000

120,000

260,000


700,000
(210,000)

2,300,000

2,000,000
1,200,000







(1,764,706
3,735,294
(933,823.5)


860,000


180,000
250,000






1,040,000
(130,000)
3,100,000 490,000 280,470.5 910,000


Workings

W1

Staff canteen 10 / 100 x 840,000 × 7/12 = 49,000
Labour quarters 10 / 100 x 1,800,000 x 7/12 = 105,000
Godown 10 / 100 x 890,000 × 3/12 = 22,250
Sports pavilion 10 / 100 x 1,200,000 x 3/12 = 30,000

W2

Disposal Mercedes = Dispocal proceeds / Original cost x Residual value

3,000,000 / 3,400,000 x 2,000,000 = 1,764,706


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