EXAMINATION : INTERMEDIATE LEVEL
SUBJECT : PUBLIC FINANCE AND TAXATION
CODE : B4
EXAMINATION DATE : TUESDAY, 22ND AUGUST, 2023
TIME ALLOWED : THREE HOURS (09:00 A.M. – 12:00 NOON)
------------------------------------------------------------------------------------------------------------
GENERAL INSTRUCTIONS
1. There are TWO Sections in this paper. Sections A and B which comprise a total
of SIX questions.
2. Answer question ONE in Section A.
3. Answer ANY FOUR questions in Section B.
4. In total answer FIVE questions.
5. Marks are shown at the end of each question.
6. Calculate your answers to the nearest two decimal points where necessary.
7. Show clearly all your workings in respective answers where applicable.
8. Applicable tax rates are provided in Appendices on page 8 of 8.
9. This question paper comprises 8 printed pages.
_________________
Questions and Answers August, 2023 Page 39 of 141
----------------------------------------------------------------------------------------------------------
SECTION A
Compulsory Question
----------------------------------------------------------------------------------------------------------
QUESTION 1
(a) Mr. Maokoto is a South African who is working in Mtwara as an expert in ports
issues where Tanzania Port Authority (TPA) was planning to expand its Port. His
Company, the Wateule Co. Ltd has an experience for about 20 years of port
expansion and marine activities. He came to Tanzania in year 2021 for 83 days and
went back to South Africa. In 2022, he worked the entire year in Tanzania and
earned the following income:
(i) The company paid rent for his house where he lives, the amount per month
was TZS.400,000 but market rental value of the premises was TZS.800,000
per month. He was contributing TZS.150,000 from his salary per month to
the rent paid.
(ii) He was given loan (with free interest) TZS.3,400,000 payable in three
months.
(iii) He received transportation allowance TZS.400,000 per month.
(iv) Basic salary per month was TZS.10,660,000.
(v) The company gave him the car for facilitating him to work smoothly. The
type of the car was Prado VX with a 3,000cc brand new with driver who was
paid TZS.700,000 per month. The car was full used for official duties only.
(vi) He received rent TZS.4,000,000 from the house he owned, the house is
situated in Durban city - South Africa.
(vii) He has bank account where he received interest amounting to TZS.1,080,000
in July 2022.
(viii) He received dividend from KAMARA Mining company a non-resident entity,
registered at New York Stock Exchange, amounting to TZS.1,920,000 in
October 2022.
(ix) In June 2022, he travelled to Durban South Africa for special assignment
where he was paid USD 8,000 and received USD 500 for assisting one client
to build a house in the sea water.
(x) The employer contributes 20% of his basic salary to pension fund based in
South Africa on his behalf.
(xi) He was given TZS.550,000 for lunch per month, this was given to all
employees on non-discriminatory basis.
(xii) Due to more duties he had for the whole year he received USD 2,000 as
overtime payments.
Note: Exchange rate is USD/TZS.2,300.
Questions and Answers August, 2023 Page 40 of 141
REQUIRED:
Calculate Mr. Maokoto taxable income for the year 2022. (Ignoring any item which
is exempt or excluded in taxable computation calculations). (12 marks)
(b) In the context of Income Tax Act (Cap.332), explore Section 66, which elucidates
the process of determining the residential status of a taxpayer for tax purposes.
Provide a concise explanation of how an individual can acquire the status of a
“Resident” for tax purposes. (2 marks)
(c) One of the tax incentives proposed by the stakeholders during post covid recovery
phase is cutting down taxes. However, economists are against such rate reduction
claiming that it is economically unhealthy.
REQUIRED:
Being a public finance guru, give three (3) strong arguments against rate reductions
as a stimulant to post covid economic recovery. (3 marks)
(d) “ATCL is booming”. This was the headlines used by various newspapers and
social media bloggers to welcome the first cargo aircraft owned by ATCL after
more than 2 decades without such aircraft in Tanzania. However, the expectation
from the Government is quite different from what citizens think about the need to
have such aircraft.
REQUIRED:
Being an expert in public finance and government expenditure, give three (3)
reasons as to why there is a need for a Tanzania government to invest into cargo
aircraft. (3 marks)
(Total: 20 marks)
Questions and Answers August, 2023 Page 41 of 141
---------------------------------------------------------------------------------------------------------
SECTION B
There are FIVE questions. Answer ANY FOUR questions
----------------------------------------------------------------------------------------------------------
QUESTION 2
Dodoma Enterprises is a medium-sized technology business that provides software
solutions to various industries. The business is owned by Salehe Mtumzima and its product
offerings include both software sales and software maintenance services. Below it is a
Statement of Profit or Loss for the year 2022.
Statement of Profit or Loss for the year 2022
Details TZS.
Sales 1,752,578,000
Other income 163,500,000
Total income 1,916,078,000
Less: cost of goods sold 982,000,000
Gross profit 934,078,000
Less: Expenses
Administrative Expenses
Salaries and wages 150,300,000
Contributions to ZOA Pension fund 160,400,000
Travelling expenses 13,422,000
Repair and maintenance 12,100,000
Rent 33,400,000
Stationery and office consumables 55,430,000
Training expenses 21,150,000
Depreciation 61,010,000
Motor car expenses 23,400,000
Electricity and water 51,100,000
Fines and penalties 61,500,200
Office expenses 35,000,000
Selling expenses 23,030,000
Interest on loan 6,780,000
Audit fees 45,000,000
General expense 87,890,000
Legal fees 76,780,000
Total expenses 917,692,200
Profit before tax 16,385,800
Additional information:
i. General expenses include the following:
A. TZS.25,000,000 which was the amount donated to Education Fund Aid.
B. TZS.3,490,000 being interest paid as a penalty for late payments of the pension
fund contributions.
C. Contributions to Watoto wadogo club, where a director’s son plays TZS.
2,500,000.
Questions and Answers August, 2023 Page 42 of 141
ii. It is estimated that ¼ of the motor car expenses represents the cost of car expenses
incurred in the year 2021.
iii. Training expenses included the amount of TZS.8,570,000 which was in respect of
cost of training staff for a sister company situated in Njombe.
iv. Legal fees including TZS.14,250,000 being legal fees incurred during purchase of the
House at Tegata for business deal they got this year.
v. The purchase cost included TZS.2,340,000 which was in respect of the non-
returnable containers.
vi. Interest expenses on loan include the following:
(a) TZS.2,400,000 being the amount on interest for the loan used to buy a
business house which is used by directors.
(b) TZS.1,130,000 being the interest on the loan taken to buy office furniture.
vii. The business owns the following assets:
(a) Toyota Harrier brand new motor vehicle with 3,000cc TZS.46,700,000
(b) Chairs and tables TZS.62,000,000
(c) Air conditioner (AC) for the office TZS.34,000,000
(d) Seven tonnes delivery van for TZS.23,000,000
(e) Building where the office is situated TZS.52,000,000
(f) Computer and accessories TZS.21,000,000
(g) Minibus to be used by staff for home-office trips TZS.36,000,000
REQUIRED:
(a) Calculate the depreciation allowance. (7 marks)
(b) Calculate the taxable income as well as the amount of income tax of the
business for the year of income 2022. (13 marks)
(Total: 20 marks)
QUESTION 3
Karosho is a business engaged in a mixed business account which experienced failure
primarily due to poor knowledge and expertise in managing this specific business segment.
The case revolves around an enterprise that combined different business venture under one
umbrella, but the account handling this diversity lacked the necessary understanding and
expertise to achieve desired outcomes. The business uses calendar year from 1st January to
31st December for accounting purpose.
In a tax case, the business failed to submit their 2021 statement of estimated tax on time.
Instead, they submitted it on 30th November 2021, with a taxable income of
TZS.450,000,000. On that date, Karosho paid all the tax due on that date and also made
timely payments for the remaining instalments. After the end of the year, the business hired
accountant who prepared the financial statements which showed a taxable income of
TZS.523,000,000. It did pay the taxes, when income tax return was submitted on 2nd
August 2022.
REQUIRED:
Compute the taxes paid including interests and penalties where applicable in respect of
2021 year of income. (20 marks)
Questions and Answers August, 2023 Page 43 of 141
QUESTION 4
As a financial advisor to the Minister for Finance of a country, you have been tasked with
addressing a range of economic challenges, such as slow economic growth, elevated
unemployment rates, and inflationary pressures. The Minister seeks your guidance in
crafting a well-structured tax policy that can effectively aid the budget preparation process
while harmonizing with the overarching goals of fiscal and monetary policy. Also, you
should provide comprehensive advice on how to achieve this alignment and ensure the tax
policy’s effectiveness in navigating the country’s current economic landscape.
REQUIRED:
(a) Briefly explain what is all about monetary policy. (3 marks)
(b) Describe any six (6) objectives of monetary policy in the economy. (6 marks)
(c) Describe any six (6) tools or instruments used by central banks to
stabilize the economy. (6 marks)
(d) Describe five (5) instruments chargeable with stamp duties. (5 marks)
(Total: 20 marks)
QUESTION 5
(a) In the year 2022, a business entity encountered a significant problem with their
Value Added Tax (VAT) returns due to the departure of their company accountant.
The accountant cited a poor working environment as the reason for leaving, leading
to a failure in filing VAT returns for six months from June to November. During
this time, the company had various sales transactions and issued sales invoices, but
the VAT returns were not filed as required by the tax authorities until December
2022 when all was submitted and tax paid.
The sales and purchases (all standard rated) for the months were as follows:
Months/Period Sales (TZS.) Purchases (TZS.)
June 1,479,063,209.00 1,083,250,567.20
July 1,261,667,414.00 1,387,834,155.40
August 1,059,121,360.00 847,297,088.00
September 4,250,512,593.00 3,400,410,074.40
October 1,925,787,391.00 1,540,629,912.80
November 237,331,999.00 189,865,599.20
REQUIRED:
Calculate VAT amount payable in respect of each month. All figures are VAT
inclusive. (6 marks)
(b) Value Added Tax in Tanzania is a consumption tax that is levied on every stage of
production where value is added to a product until it is ready for sale. VAT
application starts from the purchase of raw materials to the production of the end
product. At every stage, the supplier, producer, or wholesaler adds a particular
percentage of VAT as applicable according to the Value Added Tax Act, Cap.148.
However, not every business is eligible for VAT in Tanzania. VAT exemption is
applicable in many cases as per the Value Added Tax Act, Cap. 148.
Questions and Answers August, 2023 Page 44 of 141
REQUIRED
Elaborate six (6) activities exempted from VAT in Tanzania as per Value Added
Tax (VAT) Act, Cap.148. (6 marks)
(c) The major changes in the Finance Act, 2023 with respect to Value Added Tax
(VAT) Act 2014, is the increasing of the VAT registration threshold to TZS.200
million.
REQUIRED:
Elucidate any three (3) advantages and any three (3) disadvantages of such changes.
(6 marks)
(d) Describe methods of charging excise taxes. (2 marks)
(Total: 20 marks)
QUESTION 6
(a) Assume that you are an experienced customs officer in a fictional country called
“Noviland”. Noviland is a thriving national with a diverse range of imports and
exports, making customs valuation an essential process. As a Senior Customs
Officer, you are responsible for ensuring the accurate assessment of customs duties
on imported goods. However, there have been recent concerns about the
inconsistency in applying customs valuation methods, leading to disputes with
importers and potential revenues losses for the government.
REQUIRED:
Briefly explain the six (6) valuation methods as per East Africa Community
Customs Management Act. (12 marks)
(b) Wazungu Co. Ltd is a successful company that specializes in importing electronic
gadgets from various countries and distributing them locally. They have been
importing goods through their preferred customs port for several years. However,
the customs department has recently tightened its inspection procedures due to
increased concerns about counterfeit goods and undeclared imports. Last month, a
shipment of electronic gadgets from Wazungu Co. Ltd arrived at the customs port.
The customs officers decided to subject this shipment to a thorough inspection
based on their risk assessment. The company director raised a complain that the
process causes a delay to them.
REQUIRED:
As expert in taxation assist the Director to understand any five (5) functions of the
Customs department. (8 marks)
(Total: 20 marks)
Questions and Answers August, 2023 Page 45 of 141
Appendices
(1) Applicable resident individual income tax rates:
Monthly income Tax rate
Where total income does not exceed NIL
TZS.270,000
Where total income exceeds TZS.270,000 9% of the amount in excess of TZS.270,000
but does not exceed TZS.520,000
Where total income exceeds TZS.520,000 TZS.22,500 plus 20% of the amount in excess
but does not exceed TZS.760,000 of TZS.520,000
Where total income exceeds TZS.760,000 TZS.70,500 plus 25% of the amount in excess
but does not exceed TZS.1,000,000 of TZS.760,000
Where total income exceeds TZS.1,000,000 TZS.130,500/ plus 30% of the amount in
excess of TZS.1,000,000
(2) Applicable presumptive income tax rates:
Annual turnover Tax payable when Tax payable when section
section 80 is not 80 is complied with
complied with
Where turnover does not exceed NIL NIL
TZS.4,000,000
Where turnover exceeds TZS.4,000,000 but TZS.100,000 3% of the turnover in excess
does not exceed TZS.7,000,000 of TZS.4,000,000
Where turnover exceeds TZS.7,000,000 but TZS.250,000 TZS.90,000 + 3% of the
does not exceeds TZS.11,000,000 turnover in excess of
TZS.7,000,000
Where turnover exceeds TZS.11,000,000 but TZS.450,000 TZS.230,000 + 3% of the
does not exceed TZS.14,000,000 turnover in excess of
TZS.11,000,000
Where turnover exceeds TZS.14,000,000 but Not applicable TZS.450,000 + 3.5% of the
does not exceed TZS.100,000,000 turnover in excess of
TZS.14,000,000
(3) Car benefit quantification table as per the 5th Schedule
QUANTITY OF PAYMENT PER YEAR
ENGINE SIZE OF VEHICLE Vehicle up to 5 years old Vehicle more than 5 years
old
Not exceeding 1000cc TZS.250,000 TZS.125,000
Above 1000cc but not exceeding
2000cc TZS.500,000 TZS.250,000
Above 2000cc but not exceeding
3000cc TZS.1,000,000 TZS.500,000
Above 3000cc TZS.1,500,000 TZS.750,000
(4) Statutory rate to be used is 5%
(5) 1 currency point = TZS.15,000
(6) Standard rate of VAT = 18%
(7) Capital gain rates for resident is 10% and for non-resident is 20%
(8) Unless otherwise specified, corporate tax rate = 30%
___________▲____________
Questions and Answers August, 2023 Page 46 of 141
