a)(i)Distinguish between a direct and indirect tax. ( 4 marks)
(ii)Is Value Added Tax (VAT) a direct or indirect tax? Explain ( 2 marks)
(b)What are the rules governing the payment of VAT? Specify the additional tax that may arise from failure to comply with those rules. ( 6 marks)
(c)(i)Mr. Mali Mingi is a hardware merchant. He purchases cement from Athi Cement Ltd. which
he then sells to his customers. Both Mali Mingi and Athi Cement Ltd. require a profit margin of 20% on cost. Cement attracts 18% VAT. If the cost of production by Athi Cement Ltd. is Sh.220 per bag of 50Kg. At what price should Mali Mingi sell a bag of cement including VAT? ( 5 marks)
(ii)What VAT is payable to the Collector of VAT by Mr. Mali Mingi per 50 Kilogramme bag?(3 marks)
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