a 60% wholly owned subsidiary of the ABCD Group Ltd. ABCD Group Ltd owns 100% of the 30% GH1,500,000.00 debentures in ABC Ghana Ltd. The following is an extract from the 2022 annual financial statements of ABC Ghana Ltd. GH

90,000 paid up ordinary shares 180,000

Retained earnings 60,000

150,000 10% Preference shares 1,000,000

The debentures were issued at a time when ABC Ltd was facing significant liquidity challenges. The average rate of return for debentures of the class issued by ABC ltd is 20%. Additional information Included in the income statement of ABC Ghana Ltd for the year ended 31 December 2022 was a foreign exchange loss of GH250,000.00. The ABCD group is an exempt entity. Required Explain the following: Thin Capitalization, and (1 Marks) Exempt entity (2 Marks) Calculate the allowable deductions for the year 2022, hence (7 Marks) Determine how much would be disallowed in 2022 for tax purposes. (2 Marks)

Explain four (4) canons of a good tax system and demonstrate how each can be achieved in practice. (8 marks)