Mmabia University has written to a financial consultancy firm you work for requesting for a clarification in respect of the taxability or otherwise of its profits. The Financial Controller Bubu Moon signed the letter. It indicated that per the University’s understanding, Mmabia is not liable to tax as Government has amended the laws exempting private universities from payment of taxes.
The Financial Controller indicated in his letter that the response from your firm would be shared with other universities to take note also.
The Manager in charge of tax has invited you as his team member to respond to this request for clarification on the matter as expressed by Mmabia University to help clarify the matter better.
Required:
Write a response on the clarification setting straight the tax provision on the matter and also, comment on the decision to share the response with other universities. (10 marks)
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Hope Firm
Box 22
Accra
Date
FINANCIAL CONTROLLER
MMABIA UNIVERSITY
ACCRA
Sir,
REQUEST FOR CLARIFICATION ON THE TAX STATUS OF PRIVATE UNIVERSITY
- Introduction
Reference your letter on the above issue dated 12th June, 2019, I furnish below the tax implication of profit made by privately-owned universities. - Issue
The tax provisions (Act 2017, Act 956) state that privately-owned universities shall be exempt from tax when they plough back a hundred percent of their profit-after tax into the business - Implication of the provision
With the way the law is crafted, it requires the Privately-owned universities to pay the taxes unless they are able to provide proof of ploughing back their profits. - Sharing information with others
Our clarification is in response to your request and it shall not be shared with others. - Conclusion
On the strength of the above, it is our hope that your company shall act accordingly so as to remain in compliance with the tax laws. Thanks
Jojo Small (5 points @ 2 marks each = 10 marks)