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Sabina and Associates, a consultancy firm, provided vatable services to the following clients over the eight month period ended 31 August 2009. The terms of...

      

Sabina and Associates, a consultancy firm, provided vatable services to the following clients over the eight month period ended 31 August 2009. The terms of contract allowed clients to pay for the services either before or after the provision of service
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Determine VAT payable by (or refundable to) Sabina and Associates for each of the months shown above. Although VAT contributes significantly to government revenue, it has limitations which impact on the government, taxpayers and the economy at large.
Explain six of these limitations.

  

Answers


Wilfred
i. Many statutory records i.e. tax invoice, cash books, debit notes are to be maintained which is a complicated process.
ii. Most tax payers are semi-illiterate and they do not follow the required procedures.
iii. Enforcements of VAT require high caliber staff for cautionary audit.
iv. High tax avoidance and evasion where invoicing is not strictly enforced.
v. Where there is no price control traders will increase prices unreasonably, citing VAT as a reason.
vi. Where some goods and services are not vatable VAT is discriminatory.
vii. Proper accounting for VAT requires, proper functioning ETR machine, but in some case they can fail.
viii. VAT is a kind of a progressive tax since it‘s charged at a flat rate irrespective of the ability to pay
Wilfykil answered the question on February 15, 2019 at 09:09


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