North SL Corporate Tax Calculation, Fiscal Policy, and Market Analysis

This assignment presents a comprehensive analysis of North SL's financial data to calculate its corporate tax liability. The solution includes a detailed breakdown of various accounts, identifying temporary and permanent differences to arrive at the taxable income. The assignment also delves into the depreciation methods for machinery and transport, providing a year-by-year calculation. Furthermore, it explores the liquidation of corporate tax, detailing the steps involved in determining the tax base, applying the tax rate, and accounting for deductions. In addition to the tax calculations, the assignment provides an introduction to fiscal policy and analyzes the fiscal environments of North America and Brazil, comparing their suitability for business expansion, and ultimately recommending North America as the more beneficial option for North SL based on its fiscal conditions and tax uniformity.

Contents
Question 1.............................................................................................................................................2
Question 2.........................................................................................................................................3
Question 3.............................................................................................................................................4
INTRODUCTION................................................................................................................................4
Analysis..............................................................................................................................................4
North America Fiscal Policy.....................................................................................................4
Brazilian Portuguese Market...................................................................................................5
CONCLUSION....................................................................................................................................6
References.............................................................................................................................................7

Question 1
Sl
No Particular
Accounts
Base
Tax
Base
Temporary
Difference
Permanent
Difference
1 Machinery 45000 35436.5 9563
2 Transport 1667 5000 -3333
3 Provision for debt 1250 0 1250
4 Provision for insolvency 3000 0 3000
5 Payment to Administrator 10000 0 10000
6 Administrative Penalty 600 0 600
7 Product given to employees 400 0 400
9230 12250
Sl
No Particulars Amount
1 Fiscal Year Outcome 25630
2 Less:
Additional Depreciation for
Machinery 2499
Additional Depreciation for
Transport 1667
3 Add
Provision for a debt 1250
Provision for insolvency 3000
Provision for Administration 10000
Administrative Penalty 600
Product given to employees 400
4 Taxable Income 36714
In point 8 and 9 you should not propose any adjustment ,in these two cases one should describe
how they affect the liquidation of Corporate Tax.
Machinery
Sl No Particulars Accounts Tax
1 Depreciation Provided 2333.333333 4832.26
Transport
Decreasing Number Method
Year Closing Value
5 0.333333 25000 8333.333333 2013 16666.66667
4 0.266667 25000 6666.666667 2014 10000
3 0.2 25000 5000 2015 5000
2 0.133333 25000 3333.333333 2016 1666.666667
1 0.066667 25000 1666.666667 2017 0

Question 2
Liquidation of Corporate Tax
Particulars
Amoun
t
Accounting Result 25630
Add: Permanent Difference 11050
Less Temporary Difference 1166
Less Set off for Tax base from previous tax year 0
Tax Base 35514
Tax Rate 25%
Assume
d
Full Quota 8879
Less: Tax deductions, bonuses and other withholdings 0
Net Quota 8879
Less: Withholding & other payments 0
Tax Difference 8879

Question 3
INTRODUCTION
Before starting or doing a business globally one question you must have
answer is that whether the business is actually suited to succeed in the
international market .It does not make any sense if you only believe that
your product and service will thrive in a new country .It is very good to
evaluate whether or not to go for expansion is very much beneficial or
rather it will take away from the main business. (Brooks, 2020).One must
also consider whether the business can actually build a very strong
customer base internationally. The product which is well sold in the
domestic market may not have the same preference in the international
market too.
In general terms fiscal policy means the estimation of taxation and the
spending by government that impacts the whole economy of the country.
Generally, there are two types of fiscal policy available:
1) Expansionary Fiscal Policy: This policy is design in order to boost
the economy. This policy works at the time of high rate of
unemployment and recession. It leads to the lowering of taxes by
the government and spending more, or any one situation out of the
two. This policy ensure that the consumer purchasing power does
not weaken at all.
2) Contractionary Fiscal Policy: At the time high inflation rate this
policy slow down the economic growth. This policy aims at to raise
the tax and cut on spending. (businessstandard.com, 2020)
Analysis
North America Fiscal Policy
The US government generally tends to spend more than it takes in and
thus always faced with the problem of fiscal deficit almost over the last
few decades. Generally, the spending of government is mandated by
certain laws with a large amount of funds allocated to various program
such as Social Security and Medicaid. The compulsory spending is almost
60 percent of the total government spending. The remaining spending is
considered to be discretionary.

The 50 percentage of tax collected by the US government comes from
taxes levied on individual person with an additional of 10 percent come
from business and corporate entity. Another 35 percent of tax comes from
payroll and social security tax. Another 5 percent taxes which are charged
on other goods like liquor, gasoline and tobacco also generate smaller
amount of revenue to the government.
The United States always considered to have been at top for the
investment making purpose and always rank at first for its
competitiveness, innovation and also doing the business with much ease.
The business-friendly environment, market open to all customer type and
high standard of living.US is also known for the world’s largest consumer
market and a market driven and transparent economy. The regulatory
environment of US also offers a great operational freedom, which makes
the formation of business quite simple and easy. The major industries
which are engaged in the business process includes Energy,
Manufacturing hub, Transportation, Healthcare and Agriculture. Financial
Services, IT and Telecommunications. The reason for investment by
foreign entrepreneurs in US market is risk diversification, efficiency of
financial markets and strong governance. It also has a common business
language involved i.e. English which also makes the business very ease
for foreign entrepreneurs to carry. (Great Business Schools, 2020)
United States also act as a largest consumer market on earth with a GDP
of $20 trillion and 325 million people engaged. As compared to other
country household spending is also the highest. Free trade agreement
with twenty different country provide advance access to hundred of
million additional consumers. The country also works with other
companies in order to increase the opportunity for US exporters.
(International Trade Administration, 2020)
Brazilian Portuguese Market
Brazil is a country which make up half of South America and is also the
fifth largest country in the world. It has a population of around
197,000,000. Brazil has a market which offers an excellent opportunity for
exports. Brazil is also considered to be a part of emerging and developing
market It is the fifth largest country of the world and both physically and
economically Brazil dominates Latin America. Brazil also has a huge and
growing consumer market over the last ten years. A principal area of
growth in Brazil is e-commerce which provides an endless opportunity for
the business. The language which is well spoken is Brazilian Portuguese. It
leads the South American market. It also provides a gateway for business
to various neighbouring Latin American countries. (Why you should be
doing business in Brazil, 2020)

Portugal has a major global reach. Portugal touches many nations and has
very strong relation around the world. The largest country in South
America is Brazil. Their occupation with the Portuguese in 1500,Brazil also
has seen great wealth from natural resources and is the world’s ninth
largest economy .After working with the Portuguese suppliers and
businessman ,international entrepreneurs easily connect themselves to
the Brazil market .The businesses are diversifying globally as a way to
expand from the relatively lacking Portuguese consumer market.
Working with Portuguese companies also add a great advantage as the
companies are also doing business abroad which mans one can sell their
goods in Brazil as well as in Portugal. If a person works with Portuguese
entity it opens up his area of business in major South America market.
(Portugal’s 3 Most Important International Markets, 2020)
Brazil has made a great improvement in fiscal governance. Brazil has a
progressive system of taxation. The fiscal adjustment was done by a
massive increase in the tax revenue. This makes Brazil an outlier among
the developing countries in order to extract resources from the society.
The tax burden in Brazil is due to the introduction of new taxes and also
the increase in rate of existing tax particularly the federal rate of tax and
also the so-called social contributions which are also the cascading tax.
The tax burden in Brazil is very huge as compared to other developed
countries like Japan, USA, Switzerland, Canada, Irelandother developing
country such as Mexico and Turkey. This negative impact affects the
investment and other sector. (Melo, 2020)
CONCLUSION
According to the analysis done above the option which is more beneficial
for North SL in terms of fiscal condition is North America. As it offers a
wide spread of area of business with a tax uniformity and low rate as
compared to Brazil which has a progressive system of tax with a
cascading effect too. As a suggestion North SL should enter the North
American market and expand its business with all the significant benefits.

References
Brooks, C. (2020, April 6). How to Expand Your Business Internationally. Retrieved from
www.businessnewsdaily.com: https://www.businessnewsdaily.com/8211-expand-business-
internationally.html
businessstandard.com. (2020, April 6). WHAT IS FISCAL POLICY. Retrieved from www.business-
standard.com: https://www.business-standard.com/about/what-is-fiscal-policy
Great Business Schools. (2020, April 6). Best Locations For International Business. Retrieved from
greatbusinessschools.org: https://greatbusinessschools.org/the-best-locations-for-
international-business/
International Trade Administration. (2020, April 6). Why Invest in the United States. Retrieved from
www.selectusa.gov: https://www.selectusa.gov/why-invest
Melo, C. P. (2020, April 7). Tax Policy in Brazil. Retrieved from www.brookings.edu:
https://www.brookings.edu/opinions/tax-policy-in-brazil-the-reform-that-never-was/
Portugal’s 3 Most Important International Markets. (2020, April 6). Retrieved from www.veem.com:
https://www.veem.com/library/portugals-3-important-international-markets/
Why you should be doing business in Brazil. (2020, April 7). Retrieved from
www.capitatranslationinterpreting.com:
https://www.capitatranslationinterpreting.com/doing-business-in-brazil/