PAPER NO. 10 TAXATION

GENERAL OBJECTIVE

To provide the candidate with knowledge on the theory and practice of taxatin

10.0 SPECIFIC OBJECTIVES

A candidate who passes this paper should be able to:
  • Explain the theory of taxation
  • Discuss the legal framework governing the tax system
  • Apply principles and concepts of taxation
  • Compute tax and file tax returns for individuals and incorporated businesses
  • Outline taxation administration
  • Design tax plans and systems for organisations
  • Outline taxation administration
  • Design tax plans and systems for organisations
  • Undertake tax management of organisations
  • Discuss current developments relating to taxation

CONTENT

10.1 Theory of taxation

- Why governments levy taxes
- Principles of an optimal tax system
- Classification of taxes
- Incidence of a tax
- Taxable capacity
- Budgetary objectives
- Role of taxation in achieving budgetary objectives
- Fiscal policy reforms and their impact on government revenue, expenditure and economic activities
10.2 Taxation of income of persons

- Sources of taxable incomes
- Non taxable incomes
- Taxable and not taxable persons and institutions
- Tax rates: Relief and withholding taxes
- Taxation of individuals, partnerships and body corporates
- Allowable and non-allowable deductions
- Tax deficits
- Tax computations
- Incomplete records
- Application of case law
10.3 Capital deductions

- Investment deduction: Ordinary manufacture, manufacture under bond, shipping investment deductions
- Industrial buildind deductions
- Wear and tear allowances
- Farm works deductions
- Other deductions
- Application of case law
10.4 Tax administration

10.4.1 Administration of income tax (Cap. 470)

- Income Tax Act, finance bills and their provisions
- Identification of new taxpayers
- Tax assessments, self-assessment, additional assessments and estimated assessment
- Remittance of tax: Installment tax and final tax
- Turnover tax
- Operation of PAYE systems
- Tax compliance and tax audit notices
- Objection, appeals and relief of mistake
- Appellant bodies
- Collection and recovery of taxes
- Refund of taxes and waivers
- Offences, fines, penalties and interest
- Application of case law
10.4.2 Administration of value added tax (Cap. 476)

- Introduction and development of VAT ina country
- Classification of taxable goods and services
- Exempt supplies
- Registration and de-registration of taxable persons
- Rights and previleges of a VAT registered person
- Accounting for VAT, taxable value, time of supply
- Charge to tax, deduction of input tax, apportionment method of input tax
- VAT records
- VAT due for payment/credit
- Remission, rebate and refund of VAT
- Collection and recovery of tax
- Offences, penalties and interest
- Requirements of objections and appeals
- Compliance management; reconciliation of returns and compliance checks
- Tax audits; normal audit, in depth audit
10.4.3 Administration of customs taxes and excise taxes (Cap. 472)

- Customs procedures
- Tax powers and rights to revenue
- Import and export duties
- Goods subject to customs control
- Valuation of imports and exports
- Prohibitions and restriction measures
- Transit goods and bond securuties
- Excisable goods
- Ruls of origin and their economic consequences
- East African Community Customs Management Act
10.5 Taxation of specific sources of income

- Dividends
- Interest
- Rent
- Royalties
- Pension
- Annuities
- Other gains or profits
10.6 Other revenue sources

- Miscellaneous revenue sources, inspection charges, trade licenses, airport taxes, stamp duties, property rates, petroleum levys, sugar levy, betting and gaming tax
- New taxes, levies and charges.
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