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CHARTERED INSTITUTE OF TAXATION, GHANA

PROFESSIONAL EXAMINATION

AUGUST, 2020

FINAL LEVEL 2

PAPER 12 –TAX PRACTICE ADMINISTRATION & ETHICS

ATTEMPT ALL QUESTIONS.

TIME ALLOWED: 3 HOURS

Question 1

Mr. Joojo Mensah is a fresh graduate from the University of Ghana who studied Political Science and Linguistics in 2017. He has finished his national service but has since been unemployed. His 70 year old father died in 2019 and bequeathed him GHS100,000.

He has decided to start his own stationery store business with the GHS100,000.

His friends have told him that he has to register with Ghana Revenue Authority before he starts his business and pay income tax. He does not agree with them because in his view, he is about to start the business and so must be given at least one year to settle before any consideration is given to registration and payment of taxes.

One of his friends who insists that he must register and pay taxes is your nephew and has come to you with Joojo for advice.

Required:

Brief them on the obligations of Joojo by explaining:

Why he must register to pay Income Tax (4 Marks)

When he must register (4 Marks)

How to register for Income Tax, the documents needed to register

and how long it takes to get registered (4 Marks)

The next step after registration and how to get help (4 Marks)

The consequence of not registering with Ghana Revenue Authority (4 Marks)

TOTAL 20 MARKS

Question 2

The Government has recently announced various tax incentives in support of taxpayers against the COVID-19 pandemic. The managing director of one of your clients (Ebeye Yie Company limited) has approached you to ask for clarification on the incentive package and how to benefit from them. The company deals in building materials and hardware and has registered for VAT and Company Income Tax. The company has 100 employees.

You are required to brief the managing director on the scope of the incentives (allowance), the eligibility criteria and the procedure to follow in benefiting from:

i. Waiver of income tax on withdrawals from tier three (3) provident funds and personal pension schemes before maturity as a result of permanent loss of employment or capital.

(4 Marks)

ii. VAT/NHIL/GETFUND relief on donations toward the fight against the COVID-19 pandemic. (8 Marks)

iii. Donations in support of COVID 19 pandemic. (4 Marks)

iv. Waiver of penalties to taxpayers as a result of COVID -19 pandemic (4 Marks)

TOTAL 20 MARKS

Question 3

Mr. James Obour Jnr, is one of your clients who operates a pharmacy shop. He has come to your office to seek your advice on issues bothering him. He has told you that he is in sore state because he cannot meet tax payment deadlines and cannot file tax returns by the due dates. He also confided in you that maintenance of documents is a big problem for him.

You are required to address his concerns by briefing him on the following:

i. Extension of time for the filing of tax returns (8 Marks)

ii. Extension of time for the payment of taxes (8 Marks)

iii. Penalty for failing to maintain documents (4 Marks)

TOTAL 20 MARKS

Question 4

a) Your friend, Mr. Cudjoe, is a tax manager with a firm of chartered accountants and a member of the Chartered Institute of Taxation, Ghana. He is a lay preacher in his church. His church elders heard what he does for a living and they asked him to prepare the church’s financial statement and check that they were ‘doing their tax right’. (His church also operates a guest house and runs a transport business). He agreed to do this on a voluntary basis and received no payment. Some of his friends now tell him that it was a dangerous thing to do as he could be sued if he makes an error. He however thinks that as long as he did not charge for the services he could not be held liable for the consequences of any error made by him.

You are required to advise your friend Mr. Cudjoe. (10 marks)

b) “A member of the Chartered Institute of Taxation, Ghana (CITG) is required to make a proper professional record of all his dealings in connection with his client”.

You are required to explain the above statement to twenty newly qualified members of the CITG who have been assigned to your unit in your firm Hope Consulting emphasising the following points:

i. Reasons why proper records of dealings with the client must be kept

ii. Information that must be included in the record

iii. How should such records be organized

(10 Marks)

TOTAL 20 MARKS

Question 5

Ahomka Company Limited has faced tax compliance issues which resulted in the payment huge interests and penalties to the Ghana Revenue Authority in the recent past. The Board of Directors of Ahomka Company Limited at its annual review meeting on the 30th December, 2019 resolved to take the necessary steps to avoid the risk of being penalised by the Ghana Revenue Authority. The company intends to handle its tax compliance issues in-house.

The Managing Director of Ahomka Company Limited approached the Managing partner of Truthconsult, a firm of Chartered Tax Consultants, to help Ahomka Company Limited comply with the resolution of the Board of Directors. You are a Chartered Tax Consultant in the employment of Truthconsult and the Managing partner has directed you to address the concerns of Ahomka Company Limited.

Required:

Prepare a briefing note to the Managing Director of Ahomka Company Limited and:

a) Explain to him what is tax compliance and compliance audit and the consequences of not complying with the tax laws. (12 Marks)

b) Design a tax compliance schedule for the perusal of the Managing director (8 Marks)

TOTAL 20 MARKS

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