Public Finance and Taxation Revision Kit – Kasneb Past Papers With Answers

 

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INTRODUCTION

Following our continued effort to provide quality study and revision materials at an affordable price for the private students who study on their own, full time and part time students, we partnered with other team of professionals to make this possible.

This Revision kit (Questions and Answers) contains kasneb past examination past papers and their suggested answers as provided by a team of lecturers who are experts in their area of training. The book is intended to help the learner do enough practice on how to handle exam questions and this makes it easy to pass kasneb exams.

 

 

KASNEB SYLLABUS

PAPER NO. 12 PUBLIC FINANCE AND TAXATION

 UNIT DESCRIPTION

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply public financial management principles, implement public financial management regulations at middle management levels and to prepare non-complex tax computations for individuals and corporates.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Apply public financial management requirements in practice in non-complex environments in both the public and private sectors
  • Compute taxes for various individuals and entities
  • Apply the written taxation laws in addressing various tax issues
  • File tax returns
  • Undertake non-complex tax reviews.

CONTENT

  1. Introduction to Public Financial Management
  • Nature and scope of public finance
  • Sources of public finance
  • Objectives of the Public Financial Management Act and Financial regulations
  • Budget process for national, county and public entities, Development plan preparation, Treasury circulars, Cash flow projections, Budget estimates and revenue raising measures.
  • Role of the National Treasury and County Treasuries with respect to the management and control of public finance.
  1. Relationship between National and County Governments on budget and economic matters
  • The process of sharing revenue between national and county governments and among the county governments: Factors considered and formula used
  • Division of revenue bill and county allocation of revenue bill
  • The role of the Commission on Revenue on Allocation (COR)
  • The role of the Council of Governors in county financial management
  • National Government public funds: The Consolidated Fund; The Contingency fund; The Equalisation fund and Other National Government public funds
  • County Government public funds; County Revenue Fund; County Government Emergency Funds and other county public funds
  • County government revenue sources.
  1. Oversight Function in Public Finance Management
  • The role of National Assembly: Responsibilities of the National Assembly budget committee in public finance matters
  • The role of Senate: Responsibilities of the Senate budget committee in public finance matters
  • The role of Parliamentary Budget Office
  • The role of Auditor General
  • The role of Internal Audit
  • Role of Controller of Budget
  • The role of public sector accounting standards board
  1. Procurement in public entities
  • Introduction to Public Procurement and Disposal (PPD) Act
  • Procurement guidelines as envisaged by PPD Act
  • Procurement process by National, County and other public entities: The role of the National Treasury, Public Procurement Regulatory Authority and Public Procurement Administrative Review Board
  • Tendering process and selection of suppliers in public sector
  • Concept of e-procurement
  1. Public Private Partnerships Arrangements
  • Rationale and justification for Public Private Partnerships
  • Establishment of Public Private Partnerships (PPP) Unit in the National Treasury
  • Contract/project agreements, guidelines and standards
  • Composition and role of PPP petition committee
  • Establishment and role of PPP project facilitation fund
  1. Public Debt Management
  • Establishment of debt management office
  • Objectives of debt management in public sector
  • Sources of public debt in Kenya
  • Management of debts by county governments and other public entities
  • Role of the Cabinet Secretary of the National Treasury in public debt management
  • Measures that can be adopted to reduce public debt
  1. Introduction to Taxation
  • Definition of Tax, Taxation and Types of taxes in Kenya
  • History of taxation
  • Classification of taxes; Tax shifting and Factors that determine tax shifting
  • Principles of an optimal tax system
  • Types of tax systems; Single versus multiple tax systems
  • Purposes of taxation/Why the government levy taxes
  • Tax evasion and tax avoidance
  • Taxable capacity
  • Budgetary and Fiscal policies
  • The Revenue Authority; Structure, Functions, Large and Medium Taxpayers Office mandate
  1. Taxation of Income
  • Introduction
    • Basis of charging tax in Kenya: Section 3 of the Income Tax Act
    • Concept of residency and Criteria of taxing income in Kenya.
    • Taxable and non-taxable persons
    • Specified Sources of income
    • Incomes exempted from taxation
  • Taxation of Employment income
  • Taxable cash and non-cash benefits/rewards received from employment
  • Non-taxable cash and non-cash benefits/rewards received from employment
  • Allowable deductions against employment income
  • Tax credits (withholding tax, personal and insurance relief, others)
  • Taxation of lumpsum payment for services rendered and services that would have been rendered; Gratuity, terminal dues, compensation for loss of office.
  • Operations of PAYE systems: Preparation of PAYE returns, categories of employees, multiple sources of income, irregularly paid employees, casual workers, PAYE audit and triggers
  • Other Statutory deductions (NSSF and NHIF)
  • All these should be illustrated with relevant computations including PAYE computations
  • Taxation of Business Income
  • Introduction to taxation of business income including criteria of taxing business income
  • Income Tax Act provisions on computation of business income
  • Allowable and disallowable business expenses and taxable business income
  • Taxable business income and tax payable computations in respect of:
      • Sole proprietorship
      • Partnerships (excluding admissions, retirement of partners and conversions)
      • Incorporated entities (excluding specialised institutions)
  • Taxation of rental income and royalties
  • Taxation of Farming income
  • Taxation of Investment income (Dividend and interest income)
  • Turnover tax and Minimal tax
  • Taxation of Capital gains
  • Taxation of Digital income; digital service tax and Digital service tax agents
  • Withholding Tax
      • Income subject to withholding tax (Dividends, Interest, management and profession fees, royalties)
      • Withholding Tax Rates on Residents and non-residents
      • Introduction to Double Tax Agreements and the impact on withholding tax payments

All the above should be illustrated with relevant basic computations.

  1. Investment Allowances/deductions
  • Introduction to capital allowances and Rationale for capital deductions
  • Types of capital allowances; Theory and computations
  • Investment deductions; Ordinary manufacturers
  • Industrial building deductions
  • Wear and tear allowances
  • Farm works deductions
  • Shipping investment deduction
  • Other deductions

All the above should be illustrated with relevant computations

  1. Administration of Income Tax and Tax Procedures
  • Registration and deregistration of tax payers
  • Personal identification number: Issue, uses, cancellation of a PIN
  • Taxpayer’s tax representative: Appointment, liabilities and obligations
  • Tax Returns and Assessments: Self-assessment, Default assessment, Advance assessment, Amendment of assessments
  • Collection, recovery and refund of taxes
  • Tax Decisions, Objections, Appeals and Relief of mistakes
  • Voluntary Tax Disclosure Program
  • Administrative penalties and offences
  • Application of ICT in taxation: Practical use of iTax to file the returns

 

  1. Administration of Value Added Tax (VAT)
  • Introduction to VAT, Basis of charging VAT and VAT rates
  • Rights and obligations of VAT taxable person
  • Registration and deregistration of businesses for VAT
  • Key terms in VAT: Input tax, Output tax, Supply, Time of supply/Tax point and Taxable value of a supply/Value for VAT supported with relevant calculations
  • Deduction of input tax
  • Accounting for VAT and VAT records
  • Taxable and non-taxable supplies: Zero rated supplies, Exempt goods and exempt services including restriction of input tax claim.
  • Privileged persons and institutions
  • Withholding VAT and withholding VAT agents
  • VAT returns and assessments including VAT Auto Assessments
  • Remission, rebate and refund of VAT
  • Changes to be notified to the commissioner
  • Offences, fines, penalties and interest

 

  1. Customs Taxes and Excise Taxes
  • Purpose of customs and excise duties
  • Imposition of customs duty
  • Customs procedure
  • Bonded warehouse and bond securities
  • Goods subject to customs control
  • Refund of duty
  • The Simba System/Integrated Customs Management System
  • Imposition of excise duty
  • Excisable goods under excise control
  • Application for excise duty (licensing), issue of licences, Suspension and Cancellation of Licences
  • Excise stamps and Excisable goods management system
  • Refund of excise duty
  • Excise duty returns and payments
  • Offences and penalties

 

  1. Miscellaneous fees and levies
  • Export levy
  • Import Declaration fee (IDF)
  • Railway Development Levy (RDL)
  • Stamp duty
  • Catering levy
  • Motor vehicle advance tax
  • Betting, Lotteries & Gaming taxes

 

SAMPLE WORK

Complete copy of CPA Public Finance and Taxation Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy 

Phone: 0728 776 317

Email: info@masomomsingi.com

TOPIC 1

 INTRODUCTION TO PUBLIC FINANCIAL MANAGEMENT

 

QUESTION 1

December 2022 Question One C

Outline SIX contents that should be included in development plan prepared by every county government as specified under Section 126 (1) of the Public Finance Management Act, 2012.              (6 marks)

ANSWER

Contents that should be included in development plan prepared by every county government as specified under Section 126 (1) of the Public Finance Management Act, 2012

  1. Strategic priorities for the medium term that reflect the county government’s priorities and plans
  2. A description of how the county government is responding to changes in the financial and economic environment
  3. Programmes to be delivered with details for each programme of:
    • The strategic priorities to which the programme will contribute;
    • The services or goods to be provided
    • Measurable indicators of performance where feasible and
  4. The budget allocated to the programme
  5. Payments to be made on behalf of the county government, including details of any grants, benefits and subsidies that are to be paid
  6. A description of significant capital developments
  7. A detailed description of proposals with respect to the development of physical, intellectual, human and other resources of the county, including measurable indicators where those are feasible
  8. A summary budget in the format required by regulations

MASOMO MSINGI PUBLISHERS APP – Click to download and access all CPA revision materials in soft copies

 

QUESTION 2

August 2022 Question One D

Outline the stages to be followed in the budget process for the national government in any financial year.       (8 marks)

ANSWER

Stages to be followed in the budget process for the national government in any financial year

The budget process for the national government in any financial year shall comprise the following stages:

  1. Integrated development planning process which shall include both long term and medium term planning
  2. Planning and determining financial and economic policies and priorities at the national level over the medium term
  3. Preparing overall estimates in the form of the Budget Policy Statement of national government revenues and expenditures
  4. Adoption of Budget Policy Statement by Parliament as a basis for future deliberations
  5. Preparing budget estimates for the national government
  6. Submitting those estimates to the National Assembly for approval
  7. Enacting the appropriation Bill and any other Bills required to implement the National government’s budgetary proposals
  8. Implementing the approved budget
  9. Evaluating and accounting for, the national government’s budgeted revenues and expenditures
  10. Reviewing and reporting on those budgeted revenues and expenditures every three months.

 

QUESTION 3

April 2022 Question Two A

With reference to public finance management, distinguish between “planning” and “budgeting”.      (4 marks)

ANSWER

Distinction between “planning” and “budgeting” with reference to public finance management

Planning refers to the process of developing long-term strategies and goals for the use of public resources. It involves analyzing current trends, identifying future needs, and developing policies and programs to address those needs. Planning is usually done over a multi-year horizon and involves a wide range of stakeholders, including government officials, private sector representatives, civil society organizations, and the general public.

Budgeting is the process of allocating resources to specific programs and activities within the context of the overall plan. It involves translating the long-term goals and strategies into specific financial targets and plans for the short-term. Budgeting is typically done on an annual basis and involves government officials, particularly finance and budget officers, as well as other stakeholders.

Planning is the process of setting long-term goals and strategies, while budgeting is the process of allocating resources to specific programs and activities to achieve those goals. Both planning and budgeting are critical to effective public finance management, and they must work together to ensure the optimal use of public resources.

 

QUESTION 4

December 2021 Question Two A

Outline two objectives of the Public Finance Management Act.       (2 marks)

 

ANSWER

Objectives of the Public Finance Management Act

  1. To ensure Public finances are managed at both the national and the county levels of government in accordance with the principles set out in the Constitution
  2. To ensure Public officers who are given responsibility for managing the finances are accountable to the public for the management of those finances through Parliament and County Assemblies.

 

QUESTION 5

December 2021 Pilot Paper Question Two A

Highlight the steps followed by your county government in developing its annual budget.    (9 marks)

ANSWER

Steps followed by your county government in developing its annual budget

The budget process for county governments in any financial year shall consist of the following stages—

  1. Integrated development planning process which shall include both long term and medium term planning;
  2. planning and establishing financial and economic priorities for the county over the medium term;
  3. making an overall estimation of the county government’s revenues and expenditures;
  4. adoption of County Fiscal Strategy Paper;
  5. preparing budget estimates for the county government and submitting estimates to the county assembly;
  6. approving of the estimates by the county assembly;
  7. enacting an appropriation law and any other laws required to implement the county government’s budget;
  8. implementing the county government’s budget; and
  9. accounting for, and evaluating, the county government’s budgeted revenues and expenditures;

 

QUESTION 6

September 2021 Question One B

Outline four functions of a County Treasury as provided in the Public Finance Management Act.    (8 marks)

ANSWER

Responsibilities of a County Treasury with respect to county public funds

  1. The County Treasury for each county government shall ensure that all money raised or received by or on behalf of the county government is paid into the established County Revenue Fund.
  2. County Government Executive Committee may establish county government Emergency Fund.
  3. County Executive Committee member for finance is responsible for administering the Emergency Fund
  4. County Executive Committee member for finance has the responsibility to seek approval for payments from Emergency Fund from the county assembly.
  5. County Treasury is to submit a report to Auditor-General in respect to Emergency Fund
  6. County Treasury is responsible for preparing County Fiscal Strategy Paper.
  7. County Treasury responsible for preparing a County Budget Review and Outlook Paper.

 

 

SAMPLE WORK

Complete copy of CPA Public Finance and Taxation Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy 

Phone: 0728 776 317

Email: info@masomomsingi.com

 

END 

Revision is the process by which you remind yourself of the material you have studied during your course, clarify any problem areas and bring your knowledge to a state where you can retrieve it and present it in a way that will satisfy the examiners. The paragraph herein-above captures the essence of revision. It is implicit that revision is nothing short of “fine tuning” the knowledge acquired in the course or making it more digestible for usage in an examination. Revision is an integral part of examination preparation. It is not a substitute for a sustained preparation earlier in the course. The syllabus for Public Finance and Taxation is expansive and cannot be “hastily crammed” for purposes of the examination. A deliberate attempt must be made to study and appreciate the basic principles and concepts and their application. Revision must therefore be seen as a final stage in the study of any topic. Its utility is therefore undermined if earlier stages have not been completed. As an integral part of the course revision must be commenced shortly after the commencement of the course. Initially this could take the form of a review of what has been covered in a week or two not a month as this may be inordinately long. Ideally, revision is necessary after every topic. Coverage of the topics must be incisive and indiscriminate. The main purpose of this booklet is to help candidates preparing for the Public Finance and Taxation KASNEB examination to make the best use of the last few weeks before the examination.

MASOMO MSINGI PUBLISHERS APP – Click to download and access all CPA revision materials in soft copies

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