Question

b) A tax is a compulsory levy imposed by a public authority against which tax payers cannot claim anything. TABLE.2 TAX SCHEDULE TAX RATE VAT 16% PAYE 3300 AND BELOW 0% 3300.1-4200 4200.1-6200 25% 30% 37.5 6200.1 AND ABOVE CORPORATE TAX 35% 1 ii. Mr. Notulu gets paid a gross salary of k15, 000. Calculate how much his net salary is going to be. Select the appropriate tax to use from the table above. State the type and classification where the tax you. have chosen falls. [8 marks] Unilus made profits worthy k5,000,000 in 2017 and K7,000,000 in 2018. Choose the appropriate tax that Unilus profits are subject to and calculate the amount of taxes due for each year. State the type and classification where the tax you have chosen falls. [4 marks] From table one it's clear that some goods and services are not subject to VAT payment. Provide four reasons that government might have for not charging VAT on certain goods and services. [4 marks] ill.

Answer 1

Answer (i):

As Mr. Notulu falls under the category of individual and his annual gross salary is above k6,200.1 so the tax rate applicable is 37.5%

Net Salary = Gross Salary - Tax

Net Salary = k15,000 - 37.5% of k15,000 = k9,375

Answer (ii):

Unilus falls under the category of corporate, so the tax rate applicable is 35%

For 2017: Tax Payable = k5,000,000 * 35% = k1,750,000

For 2018: Tax Payable = k7,000,000 * 35% = k2,450,000

Answer (iii):

Since Table 1 is missing in the information given here, I won't be able to comment on the applicability of VAT.

In General, the government might not charge VAT on certain goods & services due to the following reasons:

1) The government wants to promote export or encourage the use of such goods & services

2) Sometimes government enters into agreement with other unions or states to mutually exempt certain goods from taxes

Thanks