Tax Avoidance Administration Society Demerits VAT in GCC Countries Discussion

ubmission Deadline Marks and Feedback Before 6pm on: 15 working days after deadline (All Levels) 15th May, 2020 29th April 2020 Module title & code BLT & AC 14-2 Assignment number and title 2 & WR – I Assessment type Individual Report Weighting of assessment 50% Module learning outcomes 1. Knowledge and understanding Be aware with the provisions of various commercial laws and the tax system applicable in Oman. 2. Skills and abilities Apply provisions of various laws to analyse a given scenario/case and apply relevant tax rules of Oman to calculate corporate and capital gain tax. What am I required to do in this assignment? Task 1: Al Umaima Trading LLC is a registered Company in Muscat Securities Market, Sultanate of Oman doing business in manufacturing industry since 1990. It has the following financial information for the year ended 31 st December 2019. Sales during the year are Omani Rials 1,250,450 with 50,040 Omani Rials as Return Inwards. The total Cost of goods for the year were estimated as follows: Total Purchases are 745,354 Omani Rials; Opening Inventory (01.01.2019) 35,700 Omani Rials and Closing Inventory as on 31.12.2019 had been estimated as Omani Rial 81,990. The following expenses have been incurred during the financial year: Maintenance and repairs 8,970 Omani Rials ; Tax consultants fee 4,470 Omani Rials ; Provision for Obsolete stock 6,781 Omani Rials ; Salaries and Wages 50,980 Omani Rials; Telephone expenses 8,640 Omani Rials; Accountant fee 10,400 Omani Rials; Depreciation on Heavy equipment @15% 10,460 Omani Rials; Depreciation on Equipment @ 33.33% 9,460 Omani Rials; Advertisements 12,580 Omani Rials; Bad debts 87,000 Omani Rials; Donations paid to listed organisations specified by the Ministry of Finance 21,000 Omani Rials; Directors remuneration 36,950 Omani Rials; Provision for Obsolete stock 6,781 Omani Rials; Provision for doubtful debts 22,650 Omani Rials. During the financial year the company had purchased the following assets; Equipment 19,450 Omani Rials ; Furniture 19,369 Omani Rials; Buildings 250,000 Omani Rials (First Class category); The following additional information has been extracted from the books of accounts: Further provision for bad debts have been identified at Omani Rial 5,000; Outstanding Advertisement expenses are measured at Omani Rial 9,540; The loss brought forward from the past two years are Omani Rial 55,000; Gain on exchange transactions are at Omani Rial 4,000. Prepaid rent is Omani Rial 3,500; outstanding salaries and wages are identified at Omani Rial 12,800; Sponsorship fee paid in total at Omani Rial 35,790; Al Umaima Trading LLC has paid advance Tax of Omani Rial 1,900 to tax authorities. Required: • As a qualified accountant, identify those items that are not allowable and partly allowable expenses for taxation purpose in accordance with The Law of Profit Tax on Commercial and Industrial Establishments Royal Decree No.77/89, amended by Royal Decree 9/2017. Briefly explain your reasons using the tax tables’ applicable. • Compute the Corporation Tax payable for the year ending 31st December 2019. Task 2: Muscat Shipping SAOG Company operates business in Sultanate of Oman and has registered with Muscat Securities Market. According to the Income Tax Act RD No 9/2017 of Chapter IV, Article (112) the establishment must pay Capital gain tax of 15%. The firm had disposed-off the following assets during the year ending 31st December 2019. • Furniture & Fixture were purchased on 01/07/2017 for worth of Omani Rials 35,000 and sold out for Omani Rials 5,000. • Ship was purchased on 30/09/2014 for Omani Rials 115,540 and disposed-off for Omani Rials 55,900. • Pre-fabricated Buildings were purchased on 01/10/2015 for worth of Omani Rials 860,000 and later soldoff for Omani Rials 900,000. • Vehicles purchased on 01/01/2019 for Omani Rials 75,000 and sold out for Omani Rials 45,000. • Cranes & Tractors were purchased on 30/06/2017 for Omani Rials 62,000 and sold out for Omani Rials 2 20,000. Required: a. As a qualified accountant, calculate capital gains tax payable by Muscat Shipping LLC for the year ended 31st December 2019. b. Discuss and elaborate on the provisions concerning to the disposal of capital assets according to Sultanate of Oman’s Income Tax Law. Task 3: “A value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.” Required: As a student of Law & taxation, what do you think, If Sultanate of Oman implements VAT in its territory, what are the prospects and challenges it will receive out of it? Elucidate Task 4: We have allowed the word avoidance to gain too much respectability. It is just a smarter form of evasion. – Pravin Gordhan, South African Minister of Finance, Nov 2009 Required: Write a brief report on how to confront such Tax evasion and Tax avoidance in any society in general, and Sultanate of Oman in particular. APPENDIX 1: Depreciation rates applicable for Tax year 2019/2020. Permanent Buildings 4% First Class buildings 5% Prefabricated buildings Bridges, platforms, pipelines, permanent way, and railway lines 15% 10% Heavy equipment, Tractors, digging equipment, and any other similar heavy equipment 33.33% Motor vehicles 33.33% Furniture and fixtures 33.33% Aircraft and ships 15% Other equipment and tools 15% Hospital buildings and educational establishments 100% Scientific research equipment 100% 3 GUIDELINES It is an individual report writing. Task 1 1. You are required to identity the non-allowable and partly allowable expenses according to Income tax of Oman and briefly explain your reasons by using tax tables in Annexure. 2. Calculate the corporation tax to be paid for the year ending 31st December 2019. Provide notes wherever needed. Task 2 1. You are required to calculate the capital gain tax payable by considering the depreciation rates given for each asset in the table provided in Annexure as “Depreciation rates applicable”. 2. Write a discussion on capital gain tax provisions which are available in Income Tax of Sultanate of Oman. Task 3 1. Discuss what is the significance of Value added Tax. 2. Write brief discussion about its identified merits and demerits in general especially in GCC countries. 3. Present a discussion on the application of VAT in Oman: problems and prospects. Task 4 1. Discuss what is Tax evasion and Tax avoidance 2. Narrate what are its impact on the tax administration on any society 3. Discuss how to tackle such crimes? What are the plans does Sultanate of Oman have to overcome this? Deliverables Submission: It is an Individual report. Submission of the individual report will be done via Turnitin Link on MOVE. At the time of submission, you need to make sure that the assignment is your own and all the sources have been acknowledged. Is there a word limit (Number of Words ± 10%)? 2000 What do I need to do to pass? (Threshold Expectations) In order to pass the assignment: • You should be able to understand what corporation tax is and how to calculate tax to be paid to state. • Capital gain tax and its computation • Basic understanding about VAT and Tax evasion and Tax avoidance. 4 How do I produce high quality work that merits a higher grade? • • • • • • Wide range of information search is needed on Corporation tax and its implication. Rules applicable while computing corporation tax to be paid. Knowledge on provisions concerning to the disposal of capital assets according to Sultanate of Oman’s Income Tax Law. Capital gain tax computation with the application of depreciation table for tax purposes. Valued added Tax and its implications in Oman Critical understanding on the concepts of Tax evasion and Tax avoidance and its impact. How does assignment relate to what we are doing in scheduled sessions? During the practice sessions, guidance and assistance will be provided relating to the conceptual framework. And also, the class room teachings will be used to develop the essential knowledge and skills needed to do the assignment effectively. 5 How will my assignment be marked? Your assignment be marked according to the threshold expectations and the criteria on the following page. You can use them to evaluate your own work and estimate your grade before you submit. N o Criterion Weighing (%) Sub Standard / No Attempt (0 Marks) There is no evidence for information search/ Tasks are incomplete. Information and Research 1 Completion of Tasks, Detailed information search 20 Poor (20 Marks) Sources not used to support substantive assertions or argument. Information search is not adequate. Very limited resources are used to discuss the tasks. Limited and uncritical use of a restricted range of sources Satisfactory (40 Marks) Information search is evident. There is an attempt to address some tasks. All the tasks lack proper focus in discussion. Although the information supports the task, some of them are not properly analysed and lack paraphrasing at some areas. Good (50 Marks) Relevant informatio n search is evident, but not adequate. There is a good attempt to address the tasks. All the tasks are discussed but one or two tasks lack focus or clarity. Very Good (60 Marks) Excellent (70 Marks) Very good usage of variety information from various sources. Contents are properly paraphrased. The usage of information can be better if it relates to the context. All tasks discussed properly. are Excellent application of the relevant information from variety of sources. Excellent usage and quoting of the literature at relevant discussions. All the tasks are discussed astutely with proper focus. Use of a wide range of appropriate sources, indicating critical awareness of their status Outstanding (100 Marks) Exceptional use of a wide range of appropriate and current sources, focusing on research based reviews indicating personal research and critical awareness of their status and relevance. and relevance. 2 Understanding of Issues. Reference to appropriate theoretical background, illustrations 3 Limited evidence of understanding the issues. General understanding of the various issues. Some reference to related theoretical background is evident. Good understan ding of the various issues. Majority of the tasks show evidence of good understan ding of related appropriat e theoretical backgroun d. Evidence of very good understanding of relevant theory and research in all tasks. Lack of analysis of information. No discussion is evident. The discussed tasks are completely out of focus. Use of a range of appropriate sources. but without critical evaluation, or missing some significant items There is good evidence for critical analysis and reasoning in some areas. Use of a wide range of appropriate sources with some critical awareness of their status and relevance 20 Application and Analysis Detailed discussion on the tasks involved and critical awareness No evidence of understanding the issues. 35 Task are not properly addressed. Limited evidence critical of Evidence of a general critical stance. Evidence of limited critical evaluation in Evidence of critical evaluation Very good application of the information to the case. Evidence of excellent understanding of relevant theory and research. Reference to appropriate theoretical background provides support to the discussion. Some illustrations that support the theoretical background are evidenced in the discussions. Excellent analysis of the information and precise application to the case. Critical reasoning is evident while discussion of all the tasks. Evidence Evidence of exemplary understandin g of relevant theory and research. Reference to appropriate theoretical background provides support to the discussion. Illustrations are provided that amplify the theoretical background. Critical reasoning is consistently evident across the discussions. The tasks have exemplary discussion and detailed narration. of 7 evaluation of material. Poor analysis of information. Although there is evidence for some discussion, they are discrete and lacking focus. It does not reflect critical application of the concepts to the case. Presentation and structure: 4 Clear introduction, logical structure, reference to appropriate theoretical background, illustrations, good use of the limited number of words 15 The report is unorganized to the point of being virtually unreadable. Lacks cohesion and orderly flow. The assignment has unacceptable failings in structuring and / or clarity of written expression The report is difficult to some areas, with some lost opportunities or misunderstandin gs. in some areas, although some material not evaluated. There is evidence for indepth analysis of data. However, all tasks are not consistent in analysis and can be presented in a better manner. Evidence good of thorough critical appreciation and evaluation of relevant theory and research and a systematic and creative attempt to relate it to the topic critical appreciation and evaluation of Though discussion of the ideas is clear, a coherent flow of thought is not evident. The report is unorganized, but can be read. Poor flow of the report structure. The assignment Evidence for a coherent presentati on is evident, but lacks uniformity throughou t the essay. relevant theory and research and a systematic attempt to relate it to the topic The report is well organized. There is orderliness in the structure. Coherence is also evident but there is still scope for improvement. The report is somewhat A generally well-structured and expressed The report is well organized with a cohesive discussion. The structure of the report is excellent. An assignment whose clear The structure is exemplary. Execution is excellent. Discussions are free of grammar or writing errors. A clear layout augments the presentation. Excellent overall 8 allowed, clear layout, overall organisation of the report. read due to overwhelming errors or misspellings has failings in structuring and / or clarity of written expression, which impair its capacity to communicate Frequent compositional errors or misspellings, but the report can be read organized. The flow is not coherent and needs improvem ent. While the assignmen t has some failings in structuring and / or clarity of written expression, these do not impair its capacity to communic ate. assignment, that communicate clearly. Well executed. Few grammar or writing errors. Reads easily. Is fairly well organized structure and expression significantly enhances its argument organisation of the report. Reads easily. Is well organized More than occasional errors or misspelling s. 5 References 10 The references do not clearly comply with the basic requirements of HARVARD STYLE format. The references do not clearly comply with the basic requirements of HARVARD STYLE format. The report shows some compliance to HARVARD STYLE referencing, but shows many errors. The report demonstra tes a basic level of HARVARD STYLE referencin g, but still The report demonstrates a solid understanding of the basic elements of HARVARD STYLE formatting. In- The report demonstrates excellent HARVARD STYLE formatting skills. In-text citations are Accurate use of Harvard Referencing style. Student recognizes the concept 9 The references are inadequate to support the literature used in the report. Sources used show limited relevance and currency. Very few references quoted which are inconsistent with the amount of literature used in the report. Some sources of information are relevant while others are dated. contains major deficiencie s. No sophisticati on is evident i.e. Websites do not follow Harvard Referencin g style. Majority of the sources are relevant and current. ➢ text citations if presented at relevant areas will lend more appropriatenes s to the report. Sources used to support the discussions are relevant and current. presented at relevant areas. Consistent use of relevant and current sources that enhance the discussions. of intellectual property, can defend him / herself if challenged, and can properly incorporate the ideas / published works of others into their own work building upon them. Skillful use of credible, relevant and current sources of information that augments quality of discussion. 10 …
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