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ICAN Taxation 2023 past questions and answers

This 2023 ICAN Taxation set has 19 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2023 set with instant marking.

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Sample ICAN Taxation 2023 questions

1. A tax analyst compares two taxpayers under a schedule in which the average tax rate increases as taxable income rises. Which principle is illustrated?
  1. Progressivity and ability to pay
  2. Certainty of tax liability
  3. Convenience of payment
  4. Economy in tax collection

Answer: A. Progressivity and ability to pay

A progressive system takes a larger proportion of income as income rises, reflecting ability to pay. Certainty, convenience and economy concern the administration and design of a tax, not this rate pattern.

2. A Lagos retailer adds VAT to a taxable item bought by a household and collects it for remittance to the tax authority. From the household's perspective, what type of tax is VAT?
  1. A direct tax on the retailer's profits
  2. An indirect tax collected by the supplier from the consumer
  3. A withholding tax on employment income
  4. A local government licence fee

Answer: B. An indirect tax collected by the supplier from the consumer

VAT is an indirect consumption tax: the supplier accounts for it, while its economic burden is generally passed to the consumer. It is not a tax on the retailer's profits or an employment withholding.

3. For this PITA calculation, consolidated relief allowance (CRA) is the higher of NGN200,000 or 1% of gross income plus 20% of gross income. Ada's annual gross employment income is NGN1,000,000 and she has no other reliefs or deductions. What is her taxable income after CRA?
  1. NGN800,000
  2. NGN810,000
  3. NGN790,000
  4. NGN820,000

Answer: C. NGN790,000

The percentage limb is 1% of NGN1,000,000 plus 20% of NGN1,000,000, or NGN210,000, which exceeds NGN200,000. Taxable income is NGN1,000,000 minus NGN210,000 = NGN790,000.

4. A Nigerian employer pays Tunde a cash transport allowance and provides him with accommodation as part of his employment package. No specific exemption applies. Under PITA, which treatment is generally correct?
  1. Only basic salary is employment income; allowances and benefits are always excluded.
  2. The cash allowance is deductible from income, while accommodation is taxed as VAT.
  3. Both items are automatically exempt if the employer pays for them.
  4. The cash allowance and taxable employment benefit are included in employment income under the applicable valuation rules.

Answer: D. The cash allowance and taxable employment benefit are included in employment income under the applicable valuation rules.

Cash allowances and taxable benefits-in-kind form part of employment income unless a specific exemption applies, with benefits valued under the applicable PITA rules. Employer payment does not by itself make them exempt.

5. Chika lives in Enugu State but works at her employer's office in Lagos. For ordinary PAYE on her employment income, which tax authority has jurisdiction based on her residence?
  1. Enugu State Internal Revenue Service
  2. Lagos State Internal Revenue Service solely because the office is there
  3. Federal Inland Revenue Service because her employer is a company
  4. The local government where the employer's head office is located

Answer: A. Enugu State Internal Revenue Service

For an individual employee, PAYE is administered by the relevant tax authority for the employee's place of residence. The employer's office location or corporate status does not make the employee's salary a FIRS assessment.

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