Page 1 of 36 THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA (Chartered Institute by Act No. 76 of 1992) STUDENTS’ DELIGHT APRIL 2012 TAXATION TECHNICIAN SCHEME EXAMINATION TTS II QUESTION AND SUGGESTED SOLUTIONS
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THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA
(Chartered Institute by Act No. 76 of 1992)
STUDENTS’ DELIGHT APRIL 2012 TAXATION
TECHNICIAN SCHEME EXAMINATION TTS II
QUESTION AND SUGGESTED SOLUTIONS
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THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA
APRIL 2012: TAXATION TECHNICIAN SCHEME
PART 2: BUSINESS MANAGEMENT
ATTEMPT ALL QUESTIONS. TIME: 3 HOURS
1. a. One of the functions of management in an organization is control. Briefly discuss the three types of inventory in a manufacturing company on which management maintains effective
control. (12 marks)
b. Quality control is a common unit in a production oriented company. Enumerate the benefits of
quality control to a manufacturing company. (8 marks)
(20 marks)
Assessor’s Comment
There was no serious preparation by all candidates as shown in the poor mark obtained. It means the use
of syllabus is no longer relevant to do a serious preparation.
Solution to question 1:
1 a. The management of a manufacturing company will maintain effective control on the following items of inventory:
i. Raw Materials ii. Work – In – Progress iii. Finished Goods.
i. Raw Materials Stock: In order to take advantage of bulk – buying and also reduce the
wastage of materials needed for production, management will always install effective control
measures in the process of processing raw materials, storage and usage. It is important to note that
production process is continuous hence raw materials must always be available so that workers
can be kept busy at all times.
ii. Work – In – Progress: This is the buffer between production processes.
iii. Finished Goods Stock: Goods that are transferred from the production floor are
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normally documented while issuance from the warehouse is effectively monitored to ensure that
goods are normally available to meet customers‟ demands.
In all these types of inventory costs are always a concern to management.
b. The concept of quality depends on the perspective of those concerned. Quality control is an
important function in a product producing organization because it provides the following
benefits:
i. Reduction in cost occasioned by scraps or re-working.
ii. Reduction in complaints from customers.
iii. Enhances the reputation of the company.
iv. Provides a feedback to product designers and engineering staff about product
performance and the machines required to produce them.
2. a. What do you understand by the term Paperless Office? (5 marks)
b. Briefly identify three components of information technology. (5 marks)
c. The term telecommunication means communicating over a distance. State five means of
telecommunication. (5 marks)
d. Discuss the benefits derivable by a business organization from the use of email communication. (5 marks)
(20 marks)
Assessor’s Comment
Most of the students/candidates are not focused and lost steam. They answered questions as if they were
in lecture room. They have to realize that there is difference between lecture room and examinations.
This bow to unseriousness on the part of the students.
Solution to question 2:
2. a. A paperless office is an office driven by the use of electronic devices like computers,
telecommunication gadgets. It makes use of micro - electronic application for:
i. Data storage, retrieval and processing.
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ii. Industrial process control
iii. Electronic Funds Transfer
All these applications are integrated to avoid office routine activities
b. The three components of Information Technology are:
i. Computers
ii. Telecommunication
iii. The internet
c. Five means of telecommunication are:
i. Global system of Telecommunication /GSM
ii. Electronic –mail
iii. Radio phones
iv. Facsimile
d. Benefits derivable from e-mail communication
i. E-mails provide immediate exchange of information between the sender and the receiver.
ii. E-mails assist manpower in prompt decision making
iii. Documents can be sent as attachments through an e-mail.
iv. It can be used as tools for promoting business.
v. It provides a very cheap means of communicating.
vi. It is easy to use and simple to send to many people at the same time.
3. a. What do you understand by Market Research? (5 marks)
b. Outline the steps that a Research Officer would take in conducting a Marketing Research
(10 marks) c. Identify five roles of a Marketing Manager. (5 marks)
(20 marks)
Assessor’s Comment
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The performance was very poor. Candidates are not well prepared for the question. They cannot define
what is Market Research, the role of a Marketing Manager with the steps a research officer would take in
conducting Marketing Manager. They should watch out for such question in future.
Solution to question 3:
3. a. Market Research is any organized effort to gather information about markets or customers. It is a
very important component of business strategy.
Market Research which includes social and opinion research is the systematic gathering and
interpretation of information about individuals or organizations using techniques, statistical analytical
methods and techniques to gain insight or support decision making.
b. Steps to Marketing Research
Every company which hopes to compete in the market must consider conducting market research.
The following are the steps to take in Market Research.
i. Defining the problem
− Taking the product and service to the market.
− Find out how the product or service fits into the market place.
− Set the objectives of the research
ii. Developing the Research plan
− Identify the data that would be needed.
iii. Collect information
iv. The final report.
c. The Roles of a Marketing Manager
i. Research and reporting on external opportunities.
ii. Understand current and potential customers.
iii. Manage the customer journey (customer relationship management)
iv. Develop the market strategy for management
v. Ensure timely delivery of goods to customers.
vi. Assisting customers to remain focused in taking decision.
vii. Manage the marketing budget.
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4 a. Manpower planning is an essential part of a Human Resources Manager‟s work. Briefly state the
four major activities involved in Manpower Planning. (8 marks)
b. Job Satisfaction is aimed at productivity improvement through motivation.
What are the ways in which productivity can be enhanced in an organization? (6 marks)
c. Briefly discuss the followings:
i. Authority ii. Responsibility iii. Delegation (6 marks)
(20 marks)
Assessor’s Comment
This is generally a below average performance by all candidates. Majority of the candidates did not go
straight to the points relevant to the questions asked and answers given were mostly guessed and
irrelevant.
Solution to question 4:
4. a. The four major activities in Human Resources Planning (Manpower Planning) are:
i. Analyzing the existing common resources situation
ii. Forecasting future demands for people
iii. Assessing the external labour market and forecasting the supply situations.
iv. Establishing and implementing human resources plans.
b. Ways of Productivity Enhancement
1. Effective delegation of authority.
2. Assigning responsibility
3. Job enrichment
4. Efficient reward system
5. Improved consultation between management and staff.
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6. Job Enlargement
c i. Authority is the right conferred on some members of an organization to act in a certain way over
others. Authority is rarely as arbitrary. Authority can be regarded as a defined amount of power
granted by an organization to selected members. etc.
ii. Responsibility is a concept that refers to the legitimate expectation of a level of performance that
a senior person has over his or her subordinates or team members. Another word for
responsibility is accountability which in some respects is a more helpful term since it implies that
one person is accountable to another on a given task.
iii. Delegation is essentially a power sharing process in which individual managers transfer part of
their legitimate authority to subordinate/team members but without passing on ultimate
responsibility for the completion of the overall task which has been entrusted to them by their
superiors.
5 a. Identify the relevant tax authority for the collection of the followings taxes: i. Property Tax
ii. Partnership Tax iii. Value Added Tax iv. Petroleum Profit Tax
v. Education Tax (10 marks) b. What is Tax Avoidance? (5 marks)
c. How can a taxing authority minimize the incidence of Tax Avoidance? (5 marks)
(Total: 20 marks)
Assessor’s Comment
I am not impressed with the candidates‟ way of answering questions. They always mix up the questions.
For example question (5) contains a, b, c, d, e, property tax, partnership tax, value added tax. They could
not differentiate the answers.
Solution to question 5:
5. a. Relevant taxing authority for the followings:
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i. Property Tax - State Internal Revenue Board
ii. Partnership Income - State Internal Revenue Board
iii. Value Added Tax - Federal Inland Revenue Service
iv. Petroleum Profit Tax - Federal Inland Revenue Service
v. Education Tax - Federal Inland Revenue Service
b. Tax Avoidance: This arises in situation where the tax payer arranges his financial affairs in
a form that would make him pay least possible amount of tax
c. A taxing authority will minimise the incidence of tax avoidance through the following ways:
i. Carrying out prompt examination of self -assessment returns.
ii. Sending tax queries to tax payers as soon as desk examination of returns has been
concluded.
iii. Carrying out back duty audit from time to time.
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THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA
APRIL 2012: TAXATION TECHNICIANS SCHEME PART 2: BUSINESS TAXATION
ATTEMPT ALL QUESTIONS. SHOW ALL WORKINGS TIME: 3 HOURS
1. Mr Owolowo established Tilapia Fisheries Limited in 2000 for the purpose of commercial fish
production. The company commenced business on 1st January 2001. Its accounting date is 31st
December each year while its adjusted profits for the first ten years are the following:
Trading Period Adjusted
Profits/(Losses) ₦ Year ended 31/12/2001 (100,000)
Year ended 31/12/2002 30,000 Year ended 31/12/2003 25,000
Year ended 31/12/2004 20,000 Year ended 31/12/2005 15,000 Year ended 31/12/2006 35,000
Year ended 31/12/2007 50,000 Year ended 31/12/2008 (40,000)
Year ended 31/12/2009 35,000 Year ended 31/12/2010 30,000
You are required to compute the assessable profits for the relevant years of assessment.
(Total: 20 Marks)
Assessor’s Comment
The questions were very okay at this level of examination, but the students lack the knowledge of basis
period in determining the relevant Assessable period for relevant years. Also, the students were not fully
prepared for the examination which led to bad failure in that particular paper.
Solution to question 1:
1.
TILAPIA FISHERIES LIMITED
YOA BASIS PERIOD ASSESSABLE ASSESSABLE PROFITS
2001 (1/1/2001 – 31/12/2001) – Actual Loss for year
ended 31/12/2001
(100,000)
NIL
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Loss c/f to 2002
(100,000)
2002 1st 12 Months – 1/1/2001 – 31/12/2001
Loss b/f from 2001 Loss c/f to 2003 restricted to actual loss sustained
(100,000)
(100,000) (100,000)
NIL
2003 Preceding year basis (1/1/2002 – 31/12/2002) Profit for year ended 31/12/2002
Loss b/f from 2002 Loss c/f to 2004
30,000
(100,000) (70,000)
NIL
2004 Preceding year basis (1/1/2003 – 31/12/2003)
Profit for year ended 31/12/2003 Loss b/f from 2003 Loss c/f to 2005
25,000 (70,000) (45,000)
NIL
2005 Preceding year basis Profit for year ended 31/12/2004 Loss b/f from 2004
Loss c/f to 2006
20,000 (45,000)
(25,000)
NIL
2006 Preceding year basis Profit for year ended 31/12/2005
Loss b/f from 2005 Loss c/f to 2007
15,000
(25,000) (10,000)
NIL
2007 Preceding year basis Profit for year ended 31/12/2006
Loss b/f from 2006
35,000
(10,000)
25,000
2008 Preceding year basis Profit for year ended 31/12/2007
50,000
50,000
2009 Preceding year basis
Loss for year ended 31/12/2008 Loss c/f to 2010
(40,000) (40,000)
NIL
2010 Preceding year basis
Profit for year ended 31/12/2009 Loss b/f from 2009 Loss c/f to 2011
35,000 (40,000) (5,000)
NIL
2011 Preceding year basis
Profit for year ended 31/12/2010 Loss b/f from 2010
30,000 (5,000)
25,000
Note
Since Tilapia Fisheries Limited is engaged in Commercial Fish Production, it qualifies to be regarded as
an Agro-Allied Business, and losses incurred by an Agro-Allied Business can be carried forward
indefinitely, that is, not restricted to four years.
2. Aanu John & Co. makes up accounts to 30th September every year acquired the following assets:
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₦ 1/11/2008 Plant 2,500,000
4/2/2009 Motor Vehicle 800,000 21/7/2009 Non-Industrial Building 5,000,000
The following additions were made during the year ending 30th September 2010.
₦
Plant 1,500,000 Motor Vehicle 1,000,000 Non-industrial Building 500,000
You are required to compute the Capital Allowances for the relevant years of assessment.
(Total: 20 Marks)
Assessor’s Comment
The question tests the computation of Capital Allowances for the relevant years for existing assets and
additions during the specific years.
Candidate performance was poor.
Candidate did not understand how to determine the capital allowances due.
This topic should be studied in depth because of its importance in Tax Computation.
Solution to question 2:
2.
AANU JOHN & CO. CAPITAL ALLOWANCE COMPUTATION
RATES PLANTS MOTOR
VEHICLES
NON-
INDUSTRIAL BUILDING
ALLOWA
NCE
I.A 50% 50% 15%
A.A 25% 25% 10%
₦ ₦ ₦ ₦
2010 Year of Assessment Cost 2,500,000 800,000 5,000,000
I.A. (1,250,00
0)
(400,000) (750, 000) 2,400, 000
A.A. (W1) (312,500) (100,000) (425,000) 837,500
TWDV 937,500 300,000 3,825,000 323,750
2011 Year of Assessment Additions
1,500,000 1,000,000 500,000 3,561,250
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2,437,500 1,300,000 4,325,000
I.A. (750,000) (500,000) (75,000) 1,325,000
A.A.(W2) (500,000) (225,000) (467,500) 1,192,500
TWDV 1,187,500 575,000 3,782,500 2,517,500
2012 Year of Assessment A.A.
(500,000) (225,000) (467,500) 1,192,500
687,500 350,000 3,315,000
Workings
Calculation of Initial and Annual Allowances
With effect from 1985 Year of Assessment, Annual Allowances were computed on a straight line basis as
follows:
W1 Plant Cost = ₦250,000
I.A. = 50% X ₦250,000
=₦125,000
A.A. = Cost – I.A. = 250,000 – 125,000 = ₦31,250 Useful life 4
Since the A.A. is 25%, then the useful life of the asset must be 4 years.
Motor Vehicle Cost = ₦80, 0000 I.A. = 50% X ₦80, 0000
= ₦40, 0000
A.A. = Cost – I.A. = 80, 0000– 40, 0000 = ₦10,000 Useful life 4
Since the A.A. is 25%, then the useful life of the asset must be 4 years.
Non-industrial Building Cost = ₦500,000
I.A. = 15% of ₦500, 0000 = ₦75,000
A.A. = Cost – I.A. = 500, 0000 – 75, 0000 = ₦42, 5000 Useful life 10
(W2) Plant Cost = 150, 0000
I.A. = 50% of ₦150, 0000 = ₦75, 0000
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A.A. = 150,000 – 75, 0000 = ₦18, 7500 4
Motor vehicle cost = ₦100, 0000 I.A. = 50% X ₦100, 0000 = ₦50, 0000
A.A. = 100, 0000 – 50, 0000 = ₦50, 0000 4 4 = ₦12, 5000.
Non-industrial Building Cost = ₦50,000
I.A. = 15% X ₦50,000 = ₦7,500
A.A. = ₦50, 0000 – 7, 5000 = ₦42, 5000 10 10 = ₦4, 2500.
3. a. In relation to the assessment procedures in Nigerian Taxation Administration, discuss the
following:
i. Types of assessment available to companies
ii. Time limit within which tax is to be paid
iii. Terms of payment
iv. Penalty for late pay (8 marks)
b. The Self-assessment system was introduced with effect from 1st January 1996 to run parallel
and in conjunction with the existing government assessment for both individual and corporate
tax payers.
How does it operate and what are the benefits? (6 marks)
c. In compliance with the provision of the Act, discuss the following with respect to filing of tax
returns by companies:
i. Content
ii. Timing
iii. Failure and Penalty (6 marks)
(Total: 20 Marks)
Assessor’s Comment
The question tests various topics viz:
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(a) Types of Assessment
(b) Self-Assessment
(c) Filing of Tax Returns.
About 40% of the students performed fairly, however, about 60% performed poorly.
The major pitfall is that some candidates could not remember these basic topics, hence were short of what
to write.
Candidates should not neglect any part of the syllabus, a thorough study of all areas is strongly
recommended.
Solution to question 3:
3. a. (i) Types of Assessment - Provisional Tax Assessment: This is a tax of an amount equal to what was paid in the
preceding year. (2/3 Mark) - Assessed Tax by Government: A Company‟s tax liability for the year is conveyed through
a notice of assessment in case of the existing government assessment(that is BOJ
assessment) (2/3 Mark)
- Self-Assessment System : This tax is assessed by the tax payers themselves
ii. Time of payment
- Provisional Tax – it must be paid before the end of March of any given year. It is due from
Corporate Tax payers within three months of each year of assessment
- Government Assessment: Is payable within two months from the date on the notice , and
the tax liability is after the payment of Provisional Tax credit for withholding taxes and
possible adjustments for overpayments.
- Self- Assessment system: same applies as for government assessment. Disputed
Assessment must be settled within one month from the date of Amended Assessment
Notice.
iii. Terms of Payment
Provisional or Government Assessment tax is payable in one lump sum. However, a tax
payer has the right of taxes under provisional, government and self- assessed tax.
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This arrangement is subject to Revenue Authority‟s approval and will be granted in cases
where there are reasonable grounds to believe that all avenues to obtain necessary funds to
pay the tax have been exhausted.
iv. Penalty for Rate payment
Failure to comply with the payment timetable will attract a penalty (1 Mark) at
Commercial rate of interest. The penalty (1 Mark) is in addition to the tax in default.
3b. OPERATION OF SELF ASSESSMENT SYSTEM
With effect from 1996 year of assessment, all companies with turnover of one million
naira and above must file their returns under self-assessment scheme. The choice of a
company within this turnover (2 Marks) range to file its return under government of Self-
assessment scheme has been removed.
Companies in this category should file their returns within 6 months of the accounting year-
end (1 Mark). Incentives enjoyed by companies under self- assessment scheme include:
- 1% tax rebate
- The right to pay current tax on instalmental basis will be granted – 6 equal monthly
instalments
- Provisional Tax will not be paid
Small Companies with turnover below 1 million naira are given 2 years (from 1996 year of
assessment) of grace during which period they have a choice, but thereafter, no more choice they
will be expected to file their returns under self-assessment.
3c. FILING OF TAX RETURNS BY COMPANIES
Every Company is required to file a tax return in a prescribed form with the Federal Inland
Revenue Service once every fiscal year.
(i) Content – The tax returns for the tax payers include the following:
- Completed tax IR3C, which is a declaration of income and other relevant information by
the tax payer.
- The audited accounts of the business for the relevant year of assessment which must
meet the statutory requirements of the Companies and Allied Matters Decree 1990. The
Statement of Accounting Standards issued by NASB and other relevant Acts/Decrees
governing the operation of that particular line of trade.
The Capital allowance computations and tax liability.
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(ii) Timing: Tax returns must be filed with the appropriate Area Office of the Revenue
Authority;
- Within 3 months of every year of assessment, failing which provisional tax becomes
applicable, especially for tax payers who are not filing self-assessment returns.
- Not later than six months after the close of the companies‟ accounting year, for all
corporate tax payers, including those that becomes liable to provisional tax.
- In the case of newly incorporated company, within 18 months from the date of
commencement of business.
(iii) Failure and Penalty: It is a serious offence for a tax payer not to file tax return
annually under the Nigerian tax laws.
- Besides viewing the failure when discovered, as a serious case of tax fraud and
evasion, the board will determine the appropriate assessment for all years on its best of
judgement (BOJ) and penalize the offender severely in accordance with the tax laws.
- A company which fails to file tax return is liable to a penalty of ₦2,500 for the first
month and ₦5,000 for every additional month of default.
- The previous concession of waiving this penalty by the Authorities on the grounds of
special appeals will be exercised only in special cases by the Chairman FIRS.
- Pre-operational levy: Every company which is yet to commence business is liable
to a pre-operational levy of ₦25,000 for the first year and ₦20,000 for every subsequent
year such company comes forward to obtain Tax Clearance Certificate on the grounds
that it has not commenced business.
4. a. What do you understand by the term Capital Allowances? (4 marks)
b. List five categories of Capital expenditure that qualify for grant of Capital Allowances.
(3 marks)
c. Enumerate the various categories of fixed assets classified as Industrial Building or Structure
for Capital allowances purposes as contained in Companies Income Tax Act, 2004.
(3 marks)
d. Jungle Nigeria Limited has been in business for several years making up account to 31st March each
year. For the year ended 31st March, 2009 the company failed to file annual tax returns and a best of
judgement assessment was raised as follows:
N Turnover 36,000,000 Assessable Profit 7,800,000 Income tax at 30% 2,340,000 Education Tax at 2% 156,000
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As the Company‟s Tax Consultant, you were informed that during the year the company
acquired assets worth 2.6 million on which Capital Allowance should be granted. You are
required to advise the company on what to do, particularly on the failure to grant Capital
allowances? (10 marks)
(Total: 20 Marks)
Assessor’s Comment
Part c of this question (industrial buildings) was a major challenge for the candidates. There was a
general display of lack of knowledge in this area. Also, the candidates did not know that the advice to
Jungle Nigeria Limited should be communicated in the form of a letter properly addressed to the
Managing Director.
Solution to question 4:
4. (a) Capital Allowance is a form of relief that is granted to any person who incurred
qualifying capital expenditure during a basic period in respect of assets in use for the
purpose of a trade or business at the end of the basis period.
The term Capital allowances covers initial, annual, investment and balancing
allowance.
- Initial allowance is a relief that is granted in the year assessment in the basic period of
which the qualifying capital expenditure was incurred.
- It is granted in full irrespective of when the asset was acquired.
- Annual allowance on the other hand is granted every year on the residue of
expenditure of an asset until fully written off.
- Balancing allowance is the excess of TWDV over and above the sale proceeds on
eventual disposal of an asset.
- Investment allowance: is an additional allowance which is granted on plant and
equipment used for a business at the rate of 10% of the cost Investment allowance is
also available to businesses located in areas that are more than 20km away from normal
facilities such as: electricity, tarred road, pipe borne water and telephone.
(b) Categories of qualifying Capital Expenditure.
Five (5) categories of Capital expenditure that qualify for granting of capital
allowance are as follows:
- Qualifying industrial and non- industrial building expenditure
- Qualifying mining expenditure
- Qualifying plant expenditure
- Qualifying furniture and fittings expenditure
- Qualifying Motor vehicle expenditure
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(c) Industrial Building: An industrial building or structure as categorised under
paragraph 5 of schedule 2 of CITA 1979 as amended is any building or structure in
regular use.
(i) as a mill, factory, mechanical workshop or other similar building or as a structure
used in connection with any such buildings.
(ii) as a dock, port, wharf, pies, jetty or other similar building structure.
(iii) for the operation of a railway for public use of water or electricity undertaking
for the supply of water or electricity for public consumption.
4d. The Managing Director
Jega Limited APO Avenue
Tundunwada Abuja.
Dear Sir,
RE: BEST OF JUDGEMENT ASSESSMENT
We refer to your letter on the above subject matter and like to comment and
advice on the best of judgement assessment raised by the Federal Inland
Revenue Services as follows:
(a) All companies are required to file tax returns at the tax office within
six months after the year end. The returns should include the
following information:
- The audited financial statements
- The computation of Capital Allowance
- The computation of Income and Education taxes
- Claim for capital allowances and schedule of assets
acquisition and disposal during the year
- Properly completed Self-assessment form and evidence of
payment of the tax.
(b) Failure to file the tax returns gives the tax authority the right to assess the
company on best of judgement basis.
(c) Since Capital allowance is not granted automatically, that is, a claim must
be made by the company, it is usually not considered when raising best of
judgement assessment.
(d) The company is advised to immediately file the tax returns without further
delay so as to have a basis of objection to the best of judgement
assessment raised.
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(e) A notice of objection to the BOJ assessment must be made within 30 days
of the date of services of the notice of assessment otherwise, the
assessment shall become final and conclusive. Failure to pay will attract
penalty at 10% and interest rate at the ruling rate.
In conclusion, if you require further explanation or clarification on the
above, please contact the undersigned
Thank you and best regards.
Yours faithfully,
OMA Global Consultants
5. Write short notes on the following:
a. The Composition of the Federal Inland Revenue Service Board. (5 marks)
b. Capital Allowance as it relates to second hand building. (3 marks)
c. Duties of the Joint Tax Board. (6 marks)
d. Power of Distrain by the Tax authority. (6 Marks)
(Total:20 Marks)
Assessor’s Comment
The question is okay, but the students misunderstood the composition of Federal Inland Revenue Board
to Federal Inland Revenue Service, while capital allowance on second hand building was not understood
by the students. Also, the power of detrain by the Tax Authority was not understood by the students.
Solution to question 5:
5. (a) Federal Inland Revenue Service (Establishment) Act, 2007, Section 3(1) established the
Federal Inland Revenue Service Board and composed as follows:
(i) An Executive Chairman ,who shall be experienced in taxation matters, appointed by the
President and subject to the confirmation of Senate
(ii) Six members with relevant qualifications and expertise who shall be appointed by the
President to represent each of the six geo-political zones
(iii) A representative of the Attorney-General of the Federation
(iv) The Governor of the CBN or his representative
(v) A representative of the Minister of Finance not below the rank of a Director
(vi) The Chairman of the Revenue Mobilization Allocation and Fiscal Commission or his
representative who shall be any of the Commissioners representing the 36 State of the
Federation
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(vii)The Group Managing Director of NNPC or his representative who shall not be below the
rank of a Group Executive Director of the Corporation or its equivalent
(viii) The Comptroller-General of the Nigerian Custom Service or his representative not
below the rank of Deputy Comptroller-General
(ix) The Registrar-General of CAC or his representative not below the rank of a Director; and
(x) The Chief Executive Officer of the National Planning Commission or his representative not
below the rank of a Director.
. 5(b) Capital Allowance as it relates to second hand building.
(i) Where a building is acquired second-hand, both initial and annual allowances may be claimed on such a building if the original owner did not previously use it for business.
(ii) On the other hand, if the original owner has used it for business and has hence claimed Capital allowance on it, no initial allowance may be claimed. The annual allowance to be claimed must be based on the lower of the original cost and the new purchase price.
5(c) Duties of Joint Tax Board
(i) This body is more or less a platform that allows the Federal and the State tax authorities to meet. Essentially, it can be posited that the Joint Tax Board is an avenue that ensures uniformity in the taxation law and practice in Nigeria.
(ii) Exercising the powers and duties conferred on it by the express provisions of the law (Decree) and any other powers and duties arising from the law which may be agreed by the
Government of each of the territories exercised by the Board. (iii)Exercising powers and perform duties conferred on it by any enactment of the Federal
Government imposing tax on the income and profits of companies
(iv) Advising the Federal Government on request, in respect of double taxation arrangement concluded or under consideration with any other country, and in respect of rates of Capital
allowances and other taxation matters having effect throughout Nigeria. (v) Using its best endeavour to promote uniformity both in the application of the decree and in the
incidence of tax on individuals throughout Nigeria.
(vi) Imposing its decisions on matters of procedures and interpretation of this decree on any state for the purposes of conforming to agreed procedure or interpretation.
5 (d) Power to Distrian by the Tax Authority.
(i) Where an assessment has become final and conclusive, and a demand note has been served on the
tax payer, then if payment is not effected within the time given by the demand note, the tax authority may in the prescribed form, for the purpose of enforcing payment of the tax due
distrain the tax payer by his goods or other chattels, bonds or securities, land, premises or places owned by the tax payers.
(ii) For the purpose of levying any distress, an officer of the tax authority, authorised in writing may
execute any warrant or distress and if necessary break open any building or place in the day time for the purpose of levying the distress and he may call for his assistance any police
officer and it shall be the duty of that police officer when so required to aid and assist in the execution of the warrant of distress and in levying the distress.
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(iii)The goods distrained upon will be kept for 14 days at a cost to the tax payer after which the items may be sold. Out of the proceeds of sale, the cost or charges of and incidental expenses to the
sale and keeping of the distress and disposal will be settled, next the tax due will be settled while the balance, if any shall be payable to the tax payer upon demand being made by him or
on his behalf within one year of the date of sale.
THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA APRIL 2012: TAXATION TECHNICIANS SCHEME
PART 2: MANGEMENT INFORMATION SYSTEM ATTEMPT ALL QUESTIONS. TIME: 3 HOURS
1. As an information technology student who has acquired considerable knowledge of the subject,
discuss the following :
i. e- tax card
ii. ALU
iii. Flash Disk
iv. ROM
v. Data base (Total: 20 marks)
Solution to question 1:
1 i. e-tax Card- A computer plastic card containing tax holder information that can be read
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by a card reader and display on the system.
ii. ALU- Stands for arithmetic and logic unit and is a part of the CPU of the computer where
all processing in the system take place.
iii. Flash Disc- A mobile, small auxiliary storage device used to store data, programmes and
other files. Usually use USB ports for connection to the computer.
iv. Rom- Rom stands for Read Only Memory, which means Information stored in it can only
be read and not modified. It is a type of computer memory
vi. Database- An organized collection of data. Data base may be network, mechanical, or
relational. Relational data bases are more popular. Example includes, Microsoft Access,
Oracle etc.
2. a. How would you define a system under the general systems theory? (2 marks)
b. What are the three components of general systems theory? (3 marks)
c. What do you understand by „Open‟ and „closed‟ system? (5 marks)
d. Explain five systems that are classified by behaviour. (10 marks)
(Total: 20 marks)
Solution to question 2:
2. a.
A system is an organized method for accomplishing a business functions or task.
A system is combination of interrelated elements or sub-systems organized in such a way
to ensure the efficient functioning of the system as a whole, necessitating a high degree of
co-ordination with the sub-systems each of which is designed to achieve a specified
purpose e.g. business organization.
A system consists of components or parts which possess the following elements:
b. Inputs, process, outputs, control, feedback and constraints or limitations.
General Systems Theory and long term planning
General Systems Theory and policy making
General Systems Theory and principles of management.
c.
An open system is a system connected to and interacting with its environment. It takes in
energy or influences from its environment and also influences this environment by its
behavior.
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A closed system is a system which is isolated from its environment and independent of it,
so that no environmental influence affects the behavior of the system.
d.
Planning System: This is a system that plans for the operations of other systems e.g.
budget unit
Mechanistic or Organic system: This is a system that is very rigid in structure. It observes
standard rules and regulations e.g. machines
Deterministic system: This is a system that possesses no difference in behavior. Output
from the system can be predicted without error based on an input.
Probabilistic system: This is a system that operates on chances from the internal and
external environment. Output from the system may be 0 or 1, positive or negative, good or
bad. They are stochastic in nature.
Adaptive or Self Organising System: This is a system that adapts to a changing
environment by adjusting itself on a self-organizing basis. The system changes as a result
of measuring its output e.g. animals, human beings.
3. a. State the rules used for naming files in DOS/Windows. (5 marks)
b. Write short notes on index files, sequential files and direct access files. (9 marks)
c. Give the advantages and disadvantages of each of the files in (b) above. (6 marks)
(Total: 20 marks)
Solution to question 3:
3. (a)
It must not use special characters such as,
Can be a mixture of characters, numerals
It is made up of two parts: first part is the file name and second part associates it to an
application.
In DOS the maximum length of the filename is 8 characters and in WINDOWS 128
characters
(b) Index files: A file which stores keys and an index into another file. The inde x file may
have additional structure. An index file is helpful if record are large; the keys and indexes can be
extracted, sorted, and the original file accessed faster than the original file could be re-arranged
into sorted order. Also if the file needs to be accessed by different keys at the same time, it cannot
be sorted by all of them. An index file is maintained for each different key.
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Sequential file: it contains records written in a defined sequence according to the record
keys.
Direct access files: These are file which provide fast and efficient direct access. These
files can be accessed without accessing physically previous files stored on a device. They
are normally random file with one of a number of appropriate addressing methods.
(c) Index files:
Reduces time to locate a file.
Information can be obtained without accessing the main file
Each changes to the index requires a recompilation of the index file
Requires additional space when accessing the files.
Sequential file:
Ability to access the “next” record quickly
Simplicity of design
Useful for sorting and searching large volumes
Performance becomes bad when file searched for is not “next” record
Retrieval may be low
Transaction must be sorted in a particular sequence
Direct access files:
Mapping is very simple to implement
No processing time is required to determine the records location on a device
User must know how the records are stored physically
It is device dependent
Reorganization means new addresses thus it is address-space dependent
4. a. Draw and state the functions of five program flowchart symbols. (10 marks)
b. Draw a program flowchart to calculate the total daily sales of a salesman who sold 200 items.
(10 marks) (Total: 20 marks)
Solution to question 4:
4. 13 (a)
Symbol Name Function
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Terminator Used to START, or STOP, or to INTERRUPT a procedure
Process To show the process of calculation
Input/output
To READ a file or WRITE a record
Decision box To choose between two options
Connector To show the continuation of a flow chart
(b)
READ SALES
TOTAL=TOTAL + SALES
COUNT = COUNT + 1
IS
COUNT
= 200?
START
TOTAL= 0
COUNT = 0
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5. a. Describe in brief, the generation of computers. (10 marks)
b. Differentiate between the following types of direct input methods
i. OCR
ii. OMR
iii. MICR
iv. Bar codes (10 marks)
(Total: 20 marks)
Solution to question 5:
5. (a)
Zeroth Generation- Mechanical Computers (1642 – 1945): A calculating machine was
built by Blaise Pascal that could only add and subtract. Baron Gottfried Wilhelm built a
machine that could add, subtract, multiply, and divide. Then Charles Babbage attempted
to mechanize sequences of calculations, eliminating the operator and designing a machine
that would perform all the necessary operations in a predetermined sequence. He built the
difference engine and designed the analytical engine.
First Generation – Vacuum Tubes(1945-1955): In 1943 S. P. Eckert and J.W. Mauchly, of
the Moore school of Engineering of the University of Pennsylvania, started the Eniac,
PRINT TOTAL
STOP
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which used electric components (primarily vacuum tubes) and therefore faster, but which
also used switches and a wired plug board to implement the programming of operations.
Later Eckert Mauchly built the Edvac, which has its program stored in the computer
memory, not depending on external sequencing. This was an important innovation, and a
computer that stores its list of operations, or program, internally is called a stored –
program computer.
Second Generation- Transistors (1955-1965): Quite a few vacuum-tube electronic
computers were available and in use by the late 1950s, but an important innovation in
electronics appeared –the transistor. The replacement of large, expensive (hot) vacuum
tubes with small, inexpensive, reliable, comparatively low heat-dissipating transistors led
to what are called second generation computers. The size and importance of the computer
industry grew at amazing rates, while the costs of individual‟s computers drops
substantially.
Third Generation: - Integrated Circuits (1965-1980): by 1965 a third generation of
computer was introduced. The IBM corporation, in introducing the 360 series, used the
term third generation as a key phrase in their advertising, and it remains a catchword in
describing all machines of this era. The machines of this period began making heavy use
of integrated circuit in which many transistors and other components are fabricated and
packaged together in a single container. The low prices and high parking densities of this
circuits plus lessons learned from previous machines led to some differences in computer
system design, and these machines proliferated and expanded the computer industry to its
present multibillion-dollar size.
Fourth Generation:- personal computers and VLSI (1980-?): The manufacture of
integrated circuits has become so advanced as to incorporate hundreds of thousands of
active components in volumes of fraction of an inch, leading to what is called large scale-
integration (LSI) and very large scale integration (VLSI). This has led to small- size,
lower cost, large memory, ultra- fast computers called personal computers.
b.
OCR (Optical Character Reader): OCR devises can read printed or typed characters
directly into a computer system by recognizing the shape of different characters. They
work by scanning the text and measuring the amount of light reflected from each
character.
OMR (Optical Mark Reader): this technics is used when information is given as marks on
paper such as those in questionnaires and multiple choice tests. Some OMR device rely on
the conductivity of graphite to recognize a mark, thus marks are made in pencil. Other
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works by recognizing the amount of light reflected from the surface of the surface and can
thus accept marks made by pen as well as pencil.
MICR (Magnetic Ink Character Readers): These devices can read characters which are
printed in special typeface and with a special magnetic ink. They work by recognizing the
magnetic pattern produced by each character. The codes across the bottoms of cheque are
printed in magnetic ink and it is expensive.
Bar codes: The bar code consists of a number of vertical black stripes on a white
background. Special bar code readers in the form of light pens are able to interpret the
stripes and convert them into character codes. Bar codes provides a relatively cheap and
reliable method of capturing data.
THE CHARTERED INSTITUTE OF TAXATION OF NIGERIA APRIL 2012: TAXATION TECHNICIANS SCHEME
PART 2: PERSONAL TAXATION ATTEMPT ALL QUESTIONS. SHOW ALL WORKINGS TIME: 3 HOURS
1. a) What is balancing allowance as it relates to capital allowance? (3 marks)
b) The following data relate to Sadiq Enterprises for three years of assessment
2008 2009 2010
N N N
Adjusted profit 1,287,500 7,141,000 8,648,000 Capital allowances 4,337,500 4,337,500 4,337,500
Loss brought forward 3,471,000 - - Balancing allowance 271,000 - - Balancing charge 1,624,500 - -
Required: Compute the chargeable income of the business for the relevant years of
assessment (17 marks)
(Total: 20 marks)
Solution to question 1:
1 a. Balancing allowance is the excess of tax written down value over and above the sale proceeds
on disposal of fixed asset which had enjoyed Capital Allowance. The implication of
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balancing allowance is that the total capital allowances already granted to the taxpayer is less
than the value of fixed asset used up in the production of income for the taxpayer.
b. SADIQ ENTERPRISE
COMPUTATION OF CHARGEABLE INCOME FOR 2008, 2009 AND 2010 YEARS OF
ASSESSMENT.
2008 Year of Assessment N N
Assessable Profit 1,287,500
Balancing Charge 1,624,500
2,912,000
Loss Brought Forward 3,471,000
Loss Absorbed 1,287,500 (1,287,500)
Loss Carried Forward 2,183,500
Chargeable Profit (1,624,500)
Capital Allowance 4,337,500
Balancing Allowance 271,000
Capital Allowance c/fwd 4,608,500
2009 Year of Assessment N N
Assessable Profit 7,141,000
Loss Brought Forward 2,183,500
Loss Absorbed 2,183,500 (2,183,500)
4,957,500
Capital Allowance b/fwd 4,608,500
Capital Allowance for the
year
4,337,500
8,946,000
Capital Allowance Utilized 4,957,500 (4,957,500)
Chargeable Profit NIL
2010 Year of Assessment N N
Assessable Profit 8,648,000
Capital Allowance b/fwd 3,988,500
Capital Allowance for the
year
4,337,500
8,326,000
Capital Allowance Utilized (8,326,000)
322,000
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2. Samuel Lawson commenced business on 1st July, 2006 and made up his final accounts to 28th
February in subsequent years. The adjusted profits of the business for relevant years are as
follows:
Required:
i. Compute the tax assessment to be raised by the relevant tax authority for relevant years of
assessment on both normal basis and election basis.
ii. Advise Samuel Lawson on whether or not to make election.
Show all workings. (Total: 20 marks)
Solution to question 2:
NORMAL BASIS ELECTION BASIS
Year Basis Period Assessable
Profit
Basis Period Assessable
profit
2006 1/7/2006 – 31/12/2006 1/7/2006 – 31/12/2006
6/8 X N3,200,00 2,400,000 6/8 X N3,200,000 2,400,000
2007 1/7 2006- 30/6/2007 1/1/2007- 31/2/2007
N3,200,000+4/2X N3,000,000
4,200,000 (2/8X3,200,000) 3,300,000
2008 1/7/2007- 28/2/2008 4,200,000 1/12008-31/12/2008
(2/12X300,000)+(10/12X 240,000
2,500,000
2009 1/3/2007- 28/2/2008 3,000,000 1/3/2007- 28/2/2008 3,000,000
2010 1/3/2008 – 28/2/2009 2,400,000 1/3/2008- 28/2/2009 2,400,000
RIGHT OF ELECTION
YEAR NORMAL BASIS (N) ELECTION BASIS
2007 4,200,000 3,300,000
2008 4,200,000 2,500,000
TOTAL 8,400,000 5,800,000
Difference in Assessable Profit N8,400, 000 –N5,800, 000 = N2,600, 000
From 1/7/2006 to 28/2/2007 N3,200,000
From 1/3/2007 to 28/2/2008 N3,000,000
From 1/3/2008 to 28/2/2009 N2,400,000
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Comment: It is advisable for Samuel Lawson to apply for election, because by doing so he will have a
tax savings of N2,600, 000
3. a) Indicate, with reasons, the relevant tax authority in Nigeria to which the following taxes
should be remitted when deducted
i. PAYE tax on salaries (3 marks)
ii. Withholding tax on rent paid to a resident individual by a corporate body
(3 marks)
iii. Partnership income (3 marks)
iv. Withholding tax on rent paid to a corporate body by a corporate body.
(2 marks)
v. Withholding tax on bank saving interest due to a limited liability company
(2 marks)
b.) List the required information to be submitted to the relevant tax authority when remitting
withholding tax deducted from rent. (5 marks)
c) Mrs. Jemila Adamu rented an apartment from Gains Properties Limited. In paying her annual
rent to the company in January 2011, she deducted withholding tax and paid the net to the
company. Justify her action. (2 marks)
(Total: 20 marks)
Solution to question 3:
3 a
(i) PAYE Tax on Salaries and Wages, the relevant tax authority is the Internal Revenue
Authority of the State in which the recipient is deemed to be resident in the year of
assessment. For tax purposes, a person is deemed to be resident in a state where he has his
residence on the 1st January of the year of assessment.
(ii) Withholding tax on rent paid to a resident individual by a corporate body, the relevant tax
authority is the Internal Revenue Authority of the state in which the recipient is deemed to be
resident in the year of assessment. For the purposes, a person is deemed to be resident in a
state where he has his residence on the 1st January of the year of assessment.
(iii) Partnership Income, the relevant tax authority is the tax authority of the territory or Internal
Revenue Authority of the State in which the principal office or place of business of the
partnership in Nigeria situated on the first day of the year of assessment or is first established
during that year of assessment.
(iv) Withhold tax on rent paid to corporate body by a corporate organization, the relevant tax
authority shall be the Federal Inland Revenue Service.
(v) Withholding tax on banks savings interest due to a limited liability company, the relevant tax
authority shall be the federal Inland Revenue Service.
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(b). Relevant information to be submitted to the relevant tax authority when withholding taxes on rent
are:
i. The gross amount of the payment;
ii. The name and address of the recipients;
iii. The amount to tax withheld; (i.e. Gross amount)
iv. The address or accurate description of the location of the property;
v. The period which the rent covers.
(c). The amount of the withholding tax deducted by Mrs, Jemila Adamu when paying her rent to
Gains Properties Ltd will be paid to the Federal Inland Revenue Service. She will obtain
necessary withholding tax receipt and form and send to Gains Properties Ltd.
4. Chigozie Maijangali has been in business for many years in the name of Maijangali Enterprise and
made up accounts to 30th September each year, but decided to change to 30th June as follows:
N
Year to 30/9/2005 2,520,000 Year to 30/9/2006 5,040,000 Year to 30/0/2007 4,200,000
9 months to 30/6/2008 5,880,000 Year to 30/6/2009 8,400,000
Required
i. Compute the assessable profits for 2006 to 2010 years of assessment
ii. Prepare a summary of assessments and briefly comment on it (20 marks)
Solution to question 4:
CHIGOZIE MAIJANGALI
COMPUTATION OF ASSESSABLE PROFITS
Old Accounting Date New Accounting Date
Year Basis Period Assessable
Profit (N)
Basis period N Assessable profit
N
2006 1/10/2004 – 30/9/2005 2,520,000 1/10/2004 – 30/9/2005 2,520,000
2007 1/10/2005 – 30/9/2006 5,040,000 1/7/2005 – 30/6/2006 4,410,000
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(3/12 X 2,520,000) +(9/12X5,040,000)
2008 1/10/2006 – 30/9/2007 1/7/2006- 30/6/2007
M420,000+(3/12X588,000) 5,670,000 (3/12X504,000)+420,000 5,460,000
2009 1/10/2007 – 30/9/2008 1/7/2007 – 30/6/2008
(9/12X588,000)
+(3/12X840,000
6,510,000 5,880,000
2010 1/102008 – 30/9/2009 8,400,000 1/7/2008- 30/6/2009 8,400,000
SUMMARY OF ASSESSMENT
YEAR Old Accounting Date(N) New Accounting Date
(N)
2007 5,040,000 4,410,000
2008 5,670,000 5,460,000
2009 6,510,000 5,880,000
TOTAL 17,220,000 15,750,000
Comment: The tax authority will raise assessments based on the old accounting date for 2007, 2008, and
2009 years of assessment as a result of higher tax payable by Chigozie Manjangali.
5. Akpabio Love Modern Beauty and Barbing Salon owned by Madam Okoleyanmijemo has traded
for many years in Oshogbo, Osun State. The results of the business for the year ended 31 st October
2010 are as follows:
N N
Income derived from hair dressing business 2,250000 Income derived from hair barbing business 750,000 3,000,000
Less: Cost of Goods sold - 1,875,000 1,125,000
Deduct Administrative Expenses Salaries and wages 153,750 Rent and Rates 75,000
Security 66,000 Transport 93,750
Cleaning 42,000 Miscellaneous Expenses 152,700 Telephone 15,300
Repairs and Maintenance 64,500 Entertainment 36,000
Insurance 30,000 Electricity 24,000 753,000
Net profit for the year 372,000
Additional information:-
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i. One fifth of the amount indicated as Salaries and Wages was paid to the Domestic workers of
madam Okoleyanmijemo.
ii. The sum of N15,000 spent in transporting the children of the Properties was included in
Transport and Travelling Expenses.
iii. Fifty per cent of the Telephone Bill was consumed by the Proprieties‟ Husband.
iv. Part of the Entertainment Expenses included a sum of N21,000 spent on the domestic food
consumed.
v. Capital Allowances of N18,750 was agreed with the Tax office.
vi. Madam Okoleyanmijemo is married to a Chartered Accountant who is currently on paid
employment and the marriage is blessed with seven children. All the children are under 16
years of age and attending full tie educational institutions in England.
vii. Madam Okoleyanmijemo is responsible for the up keep of her aged parents – in law who
reside at the village.
viii. She has a life policy that is on a premium of N24,000 per annum.
You are required to compute the personal tax liabilities of madam Okoleyanmijemo for the relevant
year of assessment.
(20 marks)
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Solution to question 5:
AKPEBIO LOVE MODERN BEAUTY AND BARBING SALON
COMPUTATION OF INCOME TAX LIABILITY OF OKOLEYANMIJEMO FOR 2010 YEAR
OF ASSESSMENT
N N
Net profit per accounts 372,000
Add: Disallowed Expenses
Salaries and Wages 30,750
Transport and Travelling 15,000
Telephone 7,650
Entertainment 21,000 74,400
Adjusted Profit 297,600
Capital Allowance for the year 18,750
Capital Allowance Relieved (18,750) (18,750)
Statutory Total Income 278,850
Deduct:
Personal Allowance 60,770
Dependant Relative Allowance 4000
Life Assurance Policy Premium 24000 88,770
TAXABLE INCOME 190,080
Tax Payable
1st N30,000 5% 1,500
2nd N30,000 10% 3,000
3rd N50,000 15% 7,500
4th N50,000 20% 10,000
5th N30,000 25% 7,520
TOTAL 29,520
WORKINGS
1. Personal Allowance
i.e. ₦5,000 +20% of E.I
= ₦5,000 + 20/100 X ₦278,850 = ₦60,770
2. Disallowed Salaries & Wages:
1/3 X ₦153,750 = ₦30,750
3. Telephone (Disallowed)