income tax laws

265 Pages·2014·4.21 MB·English

ISBN 978-9976-78-074-1
Intermediate Level
9 789976 780833
B4

PUBLIC FINANCE AND
TAXATION I
STUDY TEXT
NBAA

FOREWORD
The National Board of Accountants and Auditors in Tanzania is a professional body in Tanzania, established
under the Auditors and Accountancy Registration Act No 33 of 1972 as amended by Act No 2 of 1995. The
Board has been charged among other things, the responsibility to promote, develop and regulate the accounting
profession in the country.
In fulfilling its role, NBAA has revised its national accountancy examination scheme and syllabi for students
aspiring to sit for Accounting Technician and Professional Examinations. For effective implementation of these
syllabi and improve examination results, the Board has prepared study materials for all subjects to assist both
examination candidates and trainers in the course of learning and teaching respectively.
The study guides have been prepared in the form of text books with examples and questions to enable the user
to have comprehensive understanding of the topics. The study guides cover the wide range of the topics in the
syllabi and adequately cover the most comprehensive and complete knowledge base that is required by a
leaner to pass the examinations.
These study guides for each subject from ATEC I to final Professional Level will ensure that learners
understand all important concepts, know all the workload involved and provide practice they need to do before
examinations. The guides have right amount of information with plain language -easy-to-understand, plenty of
practice exercises and sample examination questions which are set in a competence based approach.
Competency based study guides have been developed aiming at developing a competent workforce. The
guides emphasize on what the individual can do in a workplace after completing a period of training. The
training programme therefore is directly related to the expectations of the employer.
These study guides which have been developed under competence based approach are characterized by the
following features:-
1. Focus on outcome –The outcomes shown in every topic are relevant to employment industry
2. Greater workplace relevance – the guides emphasize on the importance of applying knowledge to the tasks
to be performed at a workplace. This is different from traditional training where the concern has been
expressed that theoretical or book knowledge is often emphasized at the expense of the ability to perform
the job.
3. Assessments as judgments of competence – The assessment will take into consideration the knowledge,
skills and attitudes acquired and the actual performance of the competency.
Study guides are also useful to trainers specifically those who are teaching in the review classes preparing
leaners to sit for the professional examinations. They will make use of these study guides together with their
additional learning materials from other sources in ensuring that the learners are getting sufficient knowledge
and skills not only to enable them pass examinations butmake them competent enough to perform effectively in
their respectively workplace.
NBAA believes that these standard study guides are about assisting candidates to acquire skills and knowledge
so they are able to perform a task to a specified standards. The outcomes to be achieved are clearly stated so
that learners know exactly what they have to be able to do, and on the other hand trainers know what training is
to be provided and organizations as well know the skills level acquired by their expected accountants.
The unique approach used in the development of these study guides will inspire the learners especially Board’s
examination candidates to acquire the knowledge and skills they need in their respective examinations and
become competent professional accountants in the labor market thereafter.
Pius A. Maneno
Executive Director
B4 – Public Finance and Taxation I
About the paper i - viii
Section A
Public Finance
1. Introduction to public finance 1 - 20
2. Public expenditure 21 - 30
3. Government Revenue 31 - 44
Section B
Tax Administration
1. Tax Law, Administration and Practice (General issues) 45 - 52
2. Procedures for Payment of Tax 53 - 66
3. Offences 67 - 70
4. Return of Income and Statement of Estimated Tax Payable by
71 - 94
Instalments
5. Types of Assessments 95 - 110
Section C
Income TaxLaws
1. Introduction to income taxation 111 - 120
2. Business income 121 - 150
3. Employment income 151 - 172
4. Investment income 173 - 184
Section D
Value Added Tax
1. An overview of the VATsystem 185 - 206
2. Administrative provisions under VATlaw 207 - 218
3. VATpayments and repayments 219 - 234
Section E
Customs
1. Customs 235 - 256
Index 1 - 2
Total Page Count: 266
STUDY GUIDE
A Public finance
1. Introduction to public finance
a) Define public finance.
b) Explain the functions of the government.
c) Differentiate between public goods and private goods.
2. Public expenditure
a) Identify the structure and composition of government expenditure.
b) Describe public sector expenditure management tools (budget, parliamentary process, and accounting and
audit).
3. Government Revenue
a) Examine the nature and types of non-tax government revenue.
b) Analyse the nature and the objectives of taxation.
c) Explain the principles of taxation.
d) Explain the concepts of economic efficiency and equity of taxation.
e) Explain the incidence of taxation.
B Tax Administration
1. Tax Law, Administration and Practice (General issues)
a) Analyse the role of the Tanzania Revenue Authority.
b) Examine the tax appeals machinery in Tanzania.
c) Distinguish between tax avoidance and tax evasion.
d) Explain the tax administration provisions relating to tax consultants in the Income Tax Act, 2004.
2. Procedures for Payment of Tax
a) Describe tax procedures for:
i. taxes payable by instalment (estimated taxes)
ii. tax payable on assessment
iii. tax payable by withholding agents
b) State due dates for payment of tax.
c) Calculate the penalty for not maintaining documents/records.
d) Calculate penalty for not filing a statement of estimated tax and return of income.
e) Calculate interest for late payment of tax.
f) Calculate interest for under estimating tax.
g) Describe procedures to recover unpaid tax.
3. Offences
a) Describe offences as provided for in Income Tax Law.
4. Return of Income and Statement of Estimated Tax Payable by Instalments
a) Identify persons liable to file return of income (ROI).
b) Establish due date for filing ROI.
c) Explain statement of estimated tax payable by instalments.
d) Explain consequences for non-filing.
e) Describe the concept and application of single instalments payer.
f) Explain returns from withholding agents.
g) Describe the application of returns to skills and development levy (SDL).
5. Types of Assessments
a) Explain the concept and types of assessment (self-assessment, jeopardy assessment, adjusted
assessment).
b) Apply the principles of assessment on interest and penalties.
C Income tax laws
1. Introduction to income Taxation
a) Define the concepts underlying income taxation in Tanzania.
b) Explain the concept of total income.
c) Explain presumptive income taxation and itsapplication in Tanzania.
2. Business income
a) Identify items included in calculation of chargeable income from business.
b) Identify items excluded in calculation of chargeable income from business.
c) Explain the rules relating to realisation of assets and liabilities.
d) Determine the incomings and cost of assets and liabilities.
e) Describe the general principle of deductions in computing business income.
f) Identify the allowable deductions.
g) Identify the non-allowable deductions.
h) Establish business chargeable income.
3. Employment income
a) Identify items included in calculation of chargeable income from employment.
b) Identify items excluded in calculation of chargeable income from employment.
c) Identify the allowable deductions.
d) Describe the general principle of deductions in employment income.
e) Establish income from employment.
4. Investment income
a) Identify items included in calculation of chargeable income from investment.
b) Identify items excluded in calculation of chargeable income from investment.
c) Identify the allowable deductions.
d) Identify the non-allowable deductions.
e) Establish investment chargeable income.
D Value added tax
1. An overview of the VATsystem
a) Explain the nature and characteristics of Value Added Tax (VAT).
b) Describe the Tanzanian VAT System.
c) Provide historical background of VAT.
d) Explain the concept of consideration for supply.
e) Describe supply made within the scope of VAT.
f) Distinguish between composite and multiple supplies.
g) Describe the scope and coverage of VAT.
h) Apply the Registration and deregistration rules.
2. Administrative provisions under vat law
a) Describe returns, notices and other records under VAT.
b) Describe the consequences of not meeting the filing and payment requirements.
c) Describe the offences and penalties under the VAT Act 1997.
d) Describe the electronic fiscal devices system, its benefits and the possible revenue risks involved.
e) Mention the statutory records to be maintained by VAT registered traders.
3. Vat payments and repayments
a) Apply the provisions of VAT Act and regulations in computation of input tax.
b) Apply the provisions of VAT Act and regulations in computation of output tax and VAT liabilities.
c) Explain the concept of partial exemption.
d) Compare and contrast the methods of apportionment of input tax.
e) Classify VAT repayment claims.
f) Describe the refund procedures to diplomats and other relieved persons.
E Customs
1. Customs
a) Describe source of customs tax laws.
b) Explain customs entry and clearance procedures for imports.
c) Explain the customs entry and clearance procedures for exports.
d) Differentiate between prohibited and restricted goods.
e) Explain thecustoms valuation methods.
f) Calculate duties and taxes collected through customs.
g) Explain customs procedures for prevention of smuggling.
h) Determine offences in customs operations.
i) Explain techniques for enforcement of customs laws.
j) Describe recovery measures used to collect unpaid duties.
Features of the book
‘The book covers the entire syllabus split into various chapters (referred to as Study Guides in the book). Each
chapter discusses the various Learning Outcomes as mentioned in the syllabus.
Contents of each Study Guide
(cid:2) ‘Get Through Intro’: explains whythe particular Study Guide is important through real life examples.
(cid:2) ‘Learning Outcomes’: on completion of a Study Guide, students will be able to understand all the learning
outcomes which are listed under this icon in the Study Guide.
The Learning Outcomes include:
(cid:3) ‘Definition’: explains the meaning of important terminologies discussed in the learning Outcome.
(cid:3) ‘Example’: makes easy complex concepts.
(cid:3) ‘Tip’: helps to understand how to deal with complicated portions.
(cid:3) ‘Important’: highlights important concepts, formats, Acts, sections, standards, etc.
(cid:3) ‘Summary’: highlights the key points of the Learning Outcomes.
(cid:3) ‘Diagram’: facilitates memory retention.
(cid:3) ‘Test Yourself’: contains questions on the Learning Outcome. It enables students to check whether they
have assimilated a particular Learning Outcome.
(cid:2) Self Examination Questions’: exam standard questions relating to the learning outcomes given at the end
of each Study Guide.
EXAMINATION STRUCTURE
The syllabus is assessed by a three hour paper based examination. 5 conventional questions of 20 marks each
need to be solved.
The examination will consist of two sections.
Section A One compulsory question
Section B Four questions out of Six
A1

A
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O PUBLIC FINANCE
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STUDY GUIDE A1: INTRODUCTION TO
PUBLIC FINANCE

Public finance is an important branch of economics which deals with the functions and responsibilities of the
government in the economy. It evaluates the role of the government in the areas of income, expenditure,
administration and control of public authorities with a view to benefit the public.

According to The Ministry of Finance (MoF) of the United Republic of Tanzania, the Ministry of Finance and
Economic Affairs manages the overall revenue, expenditure and financing of the government of the United
Republic of Tanzania. It also provides advice to the government on the financial affairs of Tanzania, which helps
in supporting the government’s social and economic objectives. The ministry also oversees budget preparation
and execution and is responsible for formulating and managing revenue policies and legislations. It reports
directly to the Parliament.

This Study Guide explains the meaning of public finance describes the functions of the government and
discusses the difference between public goods and private goods.

Knowledge of public finance is very important as after qualifying, whether you are engaged in the public sector
or the private sector, you will be able to comply with tax laws and principles effectively.

a) Define public finance.
b) Explain the functions of the government.
c) Differentiate between public goods and private goods.