Taxation Questions

TAXATION CAT ONE

INSTRUCTION: ANSWER ALL QUESTIONS

QUESTION ONE

a) Explain any five purposes of taxation.                                                                               (10marks)

b)Mr. john kashujaa is employed by kimbo limited .during the year ended 31December 2013 . He earned the following income and benefits from employment: Basic pay sh.890, 000 p.a (P.A.Y.E 120,000 p.a)

He was provided with a house by the employer leased at sh.50, 000 p.m .He contributed 3% of his salary towards rent .During the year the employer paid the following to him

a) Telephone bills sh 30,000

b) School fees allowed in the income statement sh .80, 000

c) Grocery bills sh. 20,000

 d ) Watchman’s wages sh. 48,000

e   ) A house servant sh. 10,000

During the year the employer contributed sh.30, 000 to Mato Golf club

Required:            i) Compute the taxable income                                                                    (7marks)

ii) The tax payable                                                                                           (3marks)

QUESTION TWO

a) Explain the budgetary objectives                                                                                         (5marks)

b)Kimenyi Mjuaji was employed by Munyu industries at a basic salary of  sh.200,000 per  month (P.A.Y.E 40,000)

His other benefits include the following:

a) The employer contributed sh.26, 000 for him to unregistered pension scheme.

b) He contributed sh. 6,000 p.m to a registered home ownership savings plan.

c) His life assurance premiums amounting to sh. 80,000per annum were paid by the employer.

d) He was provided with a motor vehicle of 2000cc purchased at sh .1, 500,000

e) He was provided with a house leased by the company at sh . 50,000 per month.

Required:            i) Kimenyi  Mjuaji‘s  taxable income                                                         (10 marks)

ii)The tax payable for the year ended 31 December 2013                             (5marks)

QUESTION THREE

a) Explain the factors affecting the taxable capacity                                                         (8marks)

b) Onwong’a retired from the civil service on 1^stJanuary 2013 .He was paid sh.2, 000,000 as his retirement benefit

On second January he was employed by Ujenzi contractors as a chief engineer at a basic salary of sh.130,000 per month .

Required:            Compute his taxable income and the tax payable                             (12marks)

QUESTION FOUR

a) Briefly explain the advantages of direct taxes                                                                                (8 marks )

b) Makimende was employed by Thika industries ltd and he was provided with the following benefits.

a)Monthly basic salary sh.140,000 (P.A.Y.E 30,000 Per month )

b) His annual grocery bills amounting to sh 48,000 were settled by the employer.

During the year he worked out of the office for six days and was paid a night out allowance of sh.3, 500for each o f the 6 days.

Pension from the previous employer was sh.40, 000 per month.

He was provided with free mills amounting to sh 4,000 per month.

Required:            The taxable income for Makimende                                                        (8 marks)

The tax payable for the year ended 31 December 2013                             (4marks)

QUESTION FIVE

a) Enumerate any five sources of taxable income                                                             (5marks)

b) Explain the effects of tax                                                                                              (8 marks)

c) Identify the sources of public finance                                                                                (6marks)