Merry Christmas to you!
I think it will be an interesting year in 2007 for tax!
Author / Edgar
Merry Christmas!
If someone will grant me a wish for or maybe if there is enough of us to pray for peace, happiness and a stop to the degradation of the environment, the world would be a better place for all.
My friends, take care.
Serene, I thank you too :)
Hi Edgar,
I was your student in your main & revision classes this year (ie. 2006) from Jan to May, I took my CBE exam for paper 1.1 last week and am pleased to tell you I’ve passed!!!
To me, this exam was a difficult one, though I only managed to score 76 marks but I believe I had done my best and am glad I’ve cleared the paper!
I would like to take this opportunity to thank you for being an inspiring lecturer, though I was confused sometimes but over all I thoroughly enjoyed and am enriched from your lectures. Keep up the good work and may you enjoy more success in the coming Jul term!
Best wishes and God Bless You!!
Regards,
Serene
28 June 2006
Auditors to pay $775,000 damages
Who sue who and for what?
Gaelic Inns (of Muddy Murphy’s Irish Pub and Penny Black of Boat Quay) sued Patrick Lee Public Accounting Corporation for $1 million losses suffered by Gaelic Inns.
How was the monies stolen?
The then Group Finance Manager, Ms Denise Ang did not banked in the daily bar takings between March 2003 and May 2004.
What is the Hon Judge Belinda Ang’s decision and basis?
The Judge ruled in favour of Gaelic Inns and awarded $775,000 plus interest.
Judge said “while an auditor is not expected to be a detective, the duty to audit carries with it an incidental duty to warn… managementt or the directors of fraud or irregularities uncovered”.
Was it uncovered by the auditor?
The audit was in progress in March 2004 while the crime was still in progress.
Mr Lawrence Phong, the audit manager in charge then, was reviewing the bank reconciliation statements. There was a discrepancy of about $680,000 noted between cash balance as per accounts and actual cash in bank!
Mr Phong was faulted for not doing an indepth investigation immediately upon its discovery, tardy in follow-ups and lastly for not highlighting the matter to the management.
Conclusion
Does this decision further increase audit risk to the auditors? Lawyer Philip Fong, representing Gaelic Inns, seems to think so. The decision highlighted the need to review process and audit procedures of cash, particularly in F&B or retail businesses.
However, such annual audits are still not expected to discover frauds unless specially commissioned to do so. In this case, the auditor had laid his hands on the most glaring documents highlighting the crime ie. bank recon statements. And thus the decision.
Good night.
P/S – Pic of December’s rain clouds
Section 44A balances
P/s – Pic of a very majestic bldg to be converted into serviced apartments.
The one-tier corporate tax system will be fully implemented on Jan 1, 2008.
Under the “old two-tier” system, individual shareholders receiving section 44 dividends can claim a refund in part or all of the corporate tax paid.
Example
Under the “old” system, company pays $80 dividend nett of corporate tax rate of 20%. The gross dividend would be $100. $20 has been paid by the company to IRAS. The $20 is placed in the Section 44 account.
Let us assume the individual shareholder’s personal income tax rate is 10%. $10 (ie. $100 x 10%) would be taken out of IRAS’s Section 44 account as credit against the tax payable by that individual.
What is the difference?
Under the one-tier system, the $80 received by the individual would be treated as exempt income. No adjustment of $10 would be given. Effectively, the individual pays a tax rate of 20% for that income.
What to do?
Companies, with accumulated profits which qualify for Section 44 credits and have the liquidity to pay dividends, may consider paying dividends before end of 2007.
So think about it.
Year-end Corporate Tax Planning
Mr Kang Choon Pin and Mr Russel Aubrey of Ernst & Young presented the following list of helpful tips to achieve some tax savings as 2006 draws to an end.
- Bring forward your plans to buy plant and machinery.
- Make accruals for expenses incurred.
- Make provisions for doubtful debts.
- Review your closing stock for obsolescene and damages.
- Take advantage of lower effective tax rate for taxable income below $100,000.
Reference – Ernst & Young, You and the Taxman, Sep/Oct 2006.
GST in your F&B bill
Dear friends,
When you makan at a restaurant, the restaurant will almost definitely hit you with a 10% service charge on actual F&B that you consumed.
Let us take a simple example.
2 steaks @$25 $50.00
A bottle of Cardonnay $40.00
subtotal (1) $90.00
10% service charge $9.00
subtotal (2) $99.00
How much is the GST payable?
Answer – 5% of ($90.00 + $9.00) = $4.95
Mrs Lee, Director of Corporate Communications, IRAS said GST is applied on the final value of goods or services (including any indirect taxes/duties) consumed in Singapore.
P/S – For those who have gone to a movie recently – can share how they calculate GST for your movie ticket?
Reference – Straits Times – Inbox – page 45, Nov 19, 2006.
Can you give some pointers to the new students?
Dear students, past and present,
Need your help to contribute some advice to the new students coming in in next academic term.
Advice on the following:-
How to manage time between work, studies, family and bfs/gfs?
How many subjects should I take?
How should I study? Read textbook or not?
How to deal with lecturers to get them to help?
Given that you guys and gals have now got the experience of going through at least one exam, let me have your views.
No right or wrong view. It is your view. – So just type 🙂
Stock Grant vs Stock Option
What is stock grant?
Company buys shares from open market and gives them to its staff according to an incentive programme.
What is stock option?
A company issues papers to its employees giving them the right to subscribe to shares of the company at a pre-determined price (usually below current market price) after a certain vesting period.
Similarities
Both forms of incentive plan enable the company to motivate employees to achieve superior performance as well as to align the interests of employees and shareholders’.
Both costs of incentive plan have to be expensed off against profit.
Differences
Expenses incurred to do stock grant is tax deductible as per cash compensation to employees. Stock option expenses are NOT tax deductible.
Determination of cost for stock grant is more definitive. There has been constant debate over the valuation of stock options.
Conclusion
SIA, SembCorp Industries, SMRT and StarHub, are recent adopters that have awarded employees with stock grants for the first time this year.
More expected to follow forth.
Hong Kong drops sales tax
What is proposed?
5% sales tax that would raise HKD3.8bio per annum.
Why the drop?
Politically inconvenience. Sadly it reflects very poor planning.
What is the current budget situation in HK?
1. About 1/3 of income earners pay tax. Very narrow tax base.
2. They have been living admist budget deficits.
I wonder how have they been funding their budgets year in year out.
More land sales? How much more land you can sell?
More Disneylands? Oops.. that is certainly a costly exercise.
Any alternatives?
- More “sin” taxes ie. on cigarettes and liquors. Maybe it is a good outcome afterall.
- Capital gains tax – very painful for Hong Kongers as “buying and selling” is a favourite past time activity there.
- More taxes on car – another possible good outcome of no sales tax – it would help with the smog.
I hope Hong Kongers will take action to avoid borrowing from the future generations and spend today.
Accounting with Edgar 