ATTEMPT ANY TWO QUESTIONS $($MAF $941$ ADVANCED TAXATION$)$

QUESTION ONE

The "BOOK PROFIT" is the accounting profit found in the income statement as "profit before tax", whereas the "tax profit" is one submitted by the taxpayer to tax authorities in the annual tax return.

For the two profits, that is$,$ "BOOK PROFIT" and "TAX PROFIT" figure; Give at least two reasons why the two profit figures should be the same in principle. Give at least two reasons why the two profit figures would not be expected to be the same.

QUESTION TWO

The effective tax rate $($ETR$)$ is one important performance measure for the tax department. ETR is also used to measure tax avoidance behaviour, whether aggressive or otherwise.

Required:

Explain the use of ETR as an appropriate performance measurement tool for the tax department as well as it $($ETR$)$ being used as a tool for measuring tax avoidance behaviour