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WAEC 2014 · Paper 2 · Q2

  1. (a)

    A man has a wife and 6 children and his total income in a year was GH¢ 850.00. He was given the following tax-free allowances: personal GH¢ 120.00; wife GH¢ 30.00; children GH¢ 25.00 per child, for a maximum of 4 children; medical GH¢ 40.00. The rest was taxed as follows: first GH¢ 200.00 at 10%10\%; next GH¢ 200.00 at 15%15\%; next GH¢ 200.00 at 20%20\%; remainder at 25%25\%. Calculate his: (i) taxable income; (ii) monthly tax.

    Separate values with commas, e.g. 3, −2

Worked solution (try it first)

(a)(i)

  1. The children's allowance only counts 4 children.
  2. Allowances =120+30+4×25+40== 120 + 30 + 4 \times 25 + 40 = GH¢ 290.
  3. Taxable income =850−290== 850 - 290 = GH¢ 560.

(ii)

  1. Tax the 560 in bands: the first 200 at 10%10\% is 20.
  2. The next 200 at 15%15\% is 30.
  3. The remaining 160 at 20%20\% is 32.
  4. Total tax =20+30+32== 20 + 30 + 32 = GH¢ 82 a year.
  5. Monthly tax =8212≈= \frac{82}{12} \approx GH¢ 6.83.

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