Economic Studies A.

F Taxation Final Trial Exam

Question (1): Multiple Choices Questions:

1) Introducing general tax on sales in 1991 and later on, value added tax in the Egyptian tax
structure were considered a good tax reform, because of the following points EXCEPT:
a) The simplicity and the unifications of the tax treatment of broad categories of goods and services.
b) Equal treatment of local and imported goods.
c) Adding value added tax paid on raw materials to the value added tax on the subsequent productive and distributive stages of
good, in order to prevent double taxation and increase economic efficiency.
d) Value added tax has broader tax base relative to the general tax on sales, because it applied on all goods and services.
2) A shipment of leather has been received by an importer. The customs house at Alexandria has
collected L.E. 800,000 as tariffs of this shipment, if this tariffs was assessed on basis of 20%
tariff’s rate, then the VAT on this shipment at the releasing stage will be:
a) L.E. 762,820. b) L.E. 672,000. c) L.E. 678,400. d) L.E. 469,000.
3) A shipment of leather has been received by an importer. The customs house at Alexandria has
collected L.E. 800,000 as tariffs of this shipment, if this tariffs was assessed on basis of 20%
tariff’s rate, then the price of this shipment at the releasing stage will be:
a) L.E. 3,762,820. b) L.E. 4,672,000. c) L.E. 3,678,400. d) L.E. 5,472,000.
4) George and his wife Susan inhabit a lovely townhouse in Boston with their three children.
George and Susan joint AGI is $380,000 and their mortgage interest $20,000, local income
and property taxes $15,000 and charitable donations sum $25,000 and their medical
expenses $40,000 - then George and his wife Susan joint tax base is:
a) $323,000. b) $299,740. c) $295,388. d) $318,866.
5) If Mr. William tax liability was $1,792.5, then Mr. William adjusted gross income was:
a) $35,000. b) $29,600. c) $30,000. d) None of the above.
6) If George and his wife Susan joint tax base is $280,000 and their tax liability were $38,400,
then ATR will be approximately:
a) 13.71%. b) 17.13%. c) 15.37%. d) None of the above.
7) From your study of the main features of the income tax in Egypt, which of the following ISN'T
CORRECT:
a) It is a tax on a comprehensive income of individuals.
b) It is an annual tax with a progressive tax rate structure.
c) It is imposed based on source principle and residency principle.
d) Salaries are collected through advanced installment method on three equal installments at the end of June, September and
December.
8) If Ahmed’s gross salary last year was 60,000 L.E.(in which his social insurance salary was
48,000 L.E) and he paid 1,000 L.E monthly for life insurance for the benefit of his wife and his
young children, then Ahmed’s sum of social insurance and for life insurance was:
a) 12,982 L.E. b) 13,488 L.E. c) 15,296 L.E. d) 60,000 L.E.
9) If Laila’s income tax base was 61,000 L.E., then her tax liability will be:
a) 4,175 L.E. b) 4,504 L.E. c) 4,805 L.E. d) 3,735 L.E.

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 Economic Studies A.F Taxation Final Trial Exam

10) MR. Moussa is professional engineer, he is married and has 3 children, last year his income
from his office was 40,000, given the following information:
He paid 5,000 pounds life insurance for benefit of his wife and children.
He donated 3,000 pounds to social and non-profit institution that were supervised by the
government, calculate the average tax rate:
a) 1%. b) 1.625%. c) 0.625%. d) None of the above.
11) Based on the criteria of a good tax:
a) Classical theory justifies using taxes to solve economic and social problems in order to achieve efficiency.
b) Compliance cost is easier to be calculated than administrative cost.
c) Keynesian macroeconomic theory justifies using taxes for macroeconomic stabilization.
d) None of the above.
12) If a shipment of leather has been received by an importer. The value of this shipment at
source was L.E. 200,000, insurance and freight were L.E. 4,000, and tariff was 30%, then
value added tax on this shipment was:
a) L.E. 42,400. b) L.E. 36,700. c) L.E. 51,400. d) L.E. 37,128.
13) From studying different kinds of tariff tax, we can say that one of the following is INCORRECT:
a) Protecting local product requires determining the amount which can be produced and impose a tax rate which enables local
industries to sell their products.
b) There are not any imports from goods that are liable for protective customs tax.
c) There is tax revenue achieved when government imposes customs tax to protect local industries.
d) In some cases, the role of preventive tariff is making local supply equals local demand.
14) The following are number of features of tariffs, EXCEPT:
a) Tariffs are flexible taxes since its revenues are directly correlated with economic conditions of the national and international
economies
b) Tariffs rates are determined according to number of criteria like origin, kind, value, and quantity of the good.
c) Cost of collecting tariff is maximal relative to income tax.
d) Tariffs are collected before releasing goods without any waiting time between tax assessment and tax collection.
15) Mr. Ali owns one residential real estate, its estimated market value is L.E. 3 million, the tax
base of this real estate is:
a) L.E. 37,800. b) L.E. 33,800. c) L.E. 38,300. d) None of the above.
16) Mrs. Hoda owns one non-residential real estate, its tax base is L.E. 50,000, the tax liability of
this real estate is:
a) L.E. 10,000. b) L.E. 20,000. c) L.E. 12,300. d) None of the above.
17) From studying tax base of real estate tax in Egypt, we can say that:
a) There is no difference between residential and non-residential properties tax base.
b) There is a difference between residential and non-residential properties according to percentage subtracted for maintenance
purpose.
c) The estimated capital value of the real state will be used for the following 10 years.
d) 30%, 35% are the maintenance purpose for residential and non-residential properties respectively.

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 Economic Studies A.F Taxation Final Trial Exam

18) The American tax law creates a strong incentive for individuals, who earn their incomes from
labor, to provide tax authority with these tax returns even if their incomes are below the
poverty line, and they will receive subsidies from tax authority, we can say:
a) Negative income taxes provide unskilled labor with incomes that are not significantly different from their incomes from work.
b) Negative income taxes create negative incentives towards searching for work.
c) Negative income taxes will increase with the increase of work hours.
d) Negative income taxes create positive incentives towards searching for work.
e) A & B are correct.
19) Regarding the American personal income, we can say that:
a) Total charitable deductions can exceed 50% of adjusted gross income in certain cases.
b) The amount of un-reimbursed medical expenses that the individual pays entirely on his or her own is exceed 10 % of AGI.
c) The personal income tax is an inclusive tax on the incomes of the natural persons.
d) Bracket creep represents a distortion in the allocation of resources as a result of tax indexing.
20) An American corporation achieved $200,000 gross revenue last year, this corporation was
liable to a tax deduction of $20,000, in addition it was granted $20,000 tax credit. Then the
tax liability of this corporation was:
a) $18,700. b) $20,300. c) $17,800. d) None of the above

In solving some of the previous questions you may use the information given in the following
table (US personal income tax rate schedule)
For Single For married filing jointly MTR
$0 - $10,275 $0 - $20,550 10%
$10,275 - $41,775 $20,550 - $83,550 12%
$41,775 - $89,075 $83,550 - $178,150 22%
$89,075 - $170,050 $178,150 - $340,100 24%
$170,050 - $215,950 $340,100 - $431,900 32%
$215,950 - $539,900 $431,900 - $647,850 35%
$539,900 or more $647,850 or more 37%

Question (2): True or False Questions:

1) There is no crowding effect when supply slope of loans is vertical but demand for loans
downward sloping toward the right.
2) Evasion is an illegal manipulation of one’s affair so as to reduce tax, avoidance is the legal
manipulation of one’s affair within the law in order to reduce tax liability.
3) Achieving profit is a necessary and sufficient condition for imposing the income tax on
business’s income.
4) Income tax and value added tax are the most important taxes in Egypt in terms of revenues.
5) Retirement income and retirement reward, as well as holidays’ compensation are exempted
from tax.

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 Economic Studies A.F Taxation Final Trial Exam

6) The VAT and tax returns must be submitted on a monthly basis, and the deadline for submitting
the return is two months from the end of each tax period.
7) Examples of goods and services exempted from VAT include essential food, dairy products,
babies‘ milk and their nutritional supplements and petroleum products.
8) The VAT shall be refunded within 60 days of the date submitting the documented refund
request.
9) Financial services, medical supplies, healthcare, public broadcasting, education, domestic
energy, basic foodstuffs are exempted from value added tax.
10) Discounts for whole sellers, retailers, export's discount, and for real defects in the imported
goods are permissible discounts against tariffs.
11) If a good is not existed in the imports table, then it will be exempted from tariffs, however if
the good is not existed in the export table, it will be exempted.
12) Transit is one of the special customs schemes and is applied to goods pass through a country
to be consumed in other countries.
13) Tariffs rates are determined according to number of criteria like source, kind, quality, and
weight of the good.
14) Two kinds of statements are needed by custom's authority in order to help in calculation of
the tax base, the first is the declaration of the owner of goods on board, the second value
added tax returns of owners of goods on board.
15) Taxes on real estate (land and building) are the smallest source of revenue for local
government in USA.
16) For individuals in the US, they will always choose itemized deductions instead of choosing
standard deduction since this will reduce their income tax base.
17) The standard deductions are adjusted every year, according to the increase in the GDP.
18) Corporation A must locate a suitable facility to house one of its regional offices and has
narrowed its search to two buildings. One building is newly constructed and ready for
occupancy. The second building was constructed in 1925 and is in need of extensive
renovation. The purchase price of the first one is $10 million, while the purchase price of the
second is $5 million. The corporation estimates that the rehabilitation costs with respect to
the second building would be $6 million. Given these information, the corporation will choose
the newly constructed building.
19) In American tax system, the Rehabilitation credit equals 10% of the rehabilitation costs of a
certified historic structure originally placed in service before 1936.
20) The corporation tax is imposed on the actual accounting profits, after excluding grants,
provided by firms (within 50% of firm's gross revenues). This is encouraging firms to help
municipalities initiate social functions.

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Economic Studies A.F Taxation Final Trial Exam

Question (3): Matching Questions:

A Tax laws have self-identity, which means………
B Tax laws are closely related to criminal procedures’ law, since……….
C Tax capitalization ………
Those who are against the existence of a separate tax on the corporation income in the
D American tax system, are justifying their contention on ………
E The personal income tax in Egypt is an annual tax with number of exceptions like………

1 Occurs if there is no forward shifting, backward shifting, or no shifting.

Tax evaders aren’t liable to legal punishments and no execution of a court decision
2 shouldn’t be done before reaching a final verdict.
The corporations are distinct entities, the corporation receives a number of special
3 privileges from society, and corporation tax protects the integrity of the personal
income tax.
4 Occurs if the burden of the tax is incorporated in the value of long-term assets.
Tax evaders are liable to legal punishments that will be taken place by the help of ministry
5 of interior, according to criminal procedures’ law.
It is imposed on all goods and services without considering the personal circumstances of
6 the taxpayers.
Taxpayer will be penalized with a fine that is not less than L.E 2,000 and no more than L.E
7 20,000.
8 When the individual stops his business, or when he dies, or leaving the country.
The net tax base equals 68% from estimated annual rental value, which is 3% of the
9 capital value of the building.
If differences in interpretations of tax law existed, between tax administration and
10 taxpayers, then the interpretations of tax law will be used, even if theses interpretations
are not consistent with other public or private laws.
11 The horizontal tax equity principle and Economic efficiency principle
12 The net tax base equals 70% from estimated annual rental value, which is 3% of the
capital value of the building.

13 If differences in interpretations of tax law existed, between tax administration and

taxpayers, then the interpretations of public and private laws will not be used.

14 Taxpayer
2,000.
will be penalized with a fine that is not less than L.E 200 and no more than L.E

15 When established according to Egyptian law, the effective managing headquarters is out
Egypt.

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Economic Studies A.F Taxation Final Trial Exam

Answers:
1-C 2-B 3-D 4-A 5-B 6-A 7-D 8-B 9-A 10-C
11-C 12-D 13-B 14-C 15-D 16-D 17-B 18-E 19-C 20-C

Questions (2 & 3)
1) Tax Base for VAT = Tariff base (+) Tariff
Tariffs were 800,000 at the value of 20%, then if we added it to the value of shipment it will be
120%
𝟏𝟐𝟎%
Tax base = 800,000 x = 4,800,000
𝟐𝟎%
Another solution to get the original value:
Tariffs were 800,000 at the value of 20%
𝟖𝟎𝟎,𝟎𝟎𝟎
Original value of shipment = = 4,000,000
𝟐𝟎%
4,000,000 + 800,000 = 4,800,000
2) VAT = TBVAT x 14%
4,800,000 x 14% = 672,000
3) Selling price = Shipment value (+) VAT
4,800,000 + 672,000 = 5,472,000

Question (4):
1) Itemized Deduction = Interest (+) Local Taxes (+) Donations (+) Unreimbursed expenses
Maximum deduction for local taxes for joint return = 10,000
Deducted medical expenses:
AGI x 10% = 380,000 x 10% = 38,000  40,000 – 38,000 = 2,000
Deducted charitable donations:
AGI x 50% = 380,000 x 50% = 190,000  choose lower = 25,000
20,000 + 10,000 + 25,000 + 2,000 = 57,000
2) Tax base = AGI (-) Itemized deductions
380,000 – 57,000 = $323,000

Question (5):
Bracket Range Rate Calculations Liability
$0 - $10,275 10,275 10% 10,275 x 10% = 1,027.5
$10,275 - $41,775 31,500 12% 6,375 x 12% = 765
Tax Liability = 1,792.5
𝟕𝟔𝟓
= 6,375 1,792.5 – 1,027.5 = 765
𝟏𝟐%
Then tax base = (10,275 + 6,375) = 16,650
AGI = tax base + standard deduction = 16,650 + 12,950 = $29,600

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Economic Studies A.F Taxation Final Trial Exam

Question (6):
𝑻𝑨𝑿 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝒀 𝟑𝟖,𝟒𝟎𝟎
ATR = = = 13.714%
𝑻𝑨𝑿 𝑩𝑨𝑺𝑬 𝟐𝟖𝟎,𝟎𝟎𝟎

Question: (8)
1) Social insurance = social insurance income x 11%
48,000 x 11% = 5,280
2) Net annual income = Annual salary – social insurance
60,000 – 5,280 = 54,720
3) Gross Taxable income = Net annual income – private insurance

Actual payment x 12 Net annual income x 15% Maximum deduction (30,000)

1,000 x 12 = 12,000 54,720 x 15% = 8,208 30,000
And choose whatever is lower = 8,208
5,280 + 8,208 = 13,488

Question (9)
Tax liability = Tax Base x Tax rate structure (progressive table)
Bracket Range Rate Calculations Liability
0 – 21,000 21,000 0% 21,000 x 0% = 0
21,000 – 30,000 9,000 2.5% 9,000 x 2.5% = 225
30,000 – 45,000 15,000 10% 15,000 x 10% = 1,500
45,000 – 60,000 15,000 15% 15,000 x 15% = 2,250
60,000 – 200,000 140,000 20% 1,000 x 20% = 200
Tax Liability = 4,175

Question (10)
1) Net income before donations and insurance = Gross income – 10% of GI
40,000 – (40,000 x 10%) = 36,000
2) Net income after insurance = Net annual income – private insurance

Actual payment Maximum deduction (10,000)

5,000 10,000
And choose whatever is lower
36,000 – 5,000 = 31,000
3) Net income after donations (Tax Base) = NI after insurance – donations

Actual payment Maximum deduction (10% of NI)

3,000 31,000 x 10% = 3,100
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Economic Studies A.F Taxation Final Trial Exam

And choose whatever is lower

31,000 – 3,000 = 28,000
4) Tax liability = Tax Base x Tax rate structure (progressive table)
Bracket Range Rate Calculations Liability
0 – 21,000 21,000 0% 21,000 x 0% = 0
21,000 – 30,000 9,000 2.5% 7,000 x 2.5% = 175
Tax Liability = 175
𝑻𝑨𝑿 𝑳𝑰𝑨𝑩𝑰𝑳𝑰𝑻𝒀 𝟏𝟕𝟓
ATR = = = 0.625%
𝑻𝑨𝑿 𝑩𝑨𝑺𝑬 𝟐𝟖,𝟎𝟎𝟎

Question (12)
1) Tariff base = CIF = Cost (+) Insurance (+) Freight
200,000 + 4,000 = 204,000
2) Tariff = Tariff base x Tariff rate
204,000 x 30% = 61,200
3) Tax Base for VAT = Tariff base (+) Tariff
204,000 + 61,200 = 265,200
4) VAT = TBVAT x 14%
265,200 x 14% = 37,128

Question (15)
1) Estimating market value of the property = GIVEN
3,000,000
2) Estimating capital value = Market value x 60%
3,000,000 x 60% = 1,800,000
3) Estimating annual rental value = Capital value x 3%
1,800,000 x 3% = 54,000
4) ARV after deduction = Annual rental value x 70%
54,000 x 70% = 37,800
5) ARV after exemption = ARV after maintenance – 24,000
37,800 – 24,000 = 13,800

Question (16)
Tax due = Net ARV (Tax base) x 10%
50,000 x 10% = 5,000

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Economic Studies A.F Taxation Final Trial Exam

Question (20)
1) Taxable income (Tax base) = Total revenue (-) Tax deductions
200,000 – 20,000 = 180,000
2) Tax liability = Tax base x 21% (proportional)
180,000 x 21% = 37,800
3) Net tax liability = Tax liability (-) tax credit
37,800 – 20,000 = 17,800

1-False 2-True 3-False 4-True 5-False 6-True 7-True 8-False 9-True 10-True
11-False 12-True 13-True 14-False 15-False 16-False 17-False 18-True 19-False 20-False

A-10 B-5 C-4 D-11 E-8

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