Bond and Debentures, Shares, Income Tax Value Added Tax – SS3 Mathematics Lesson Note (Second Term)

Income tax is the part of a person’s income paid to the government, worked out on taxable income after allowances are subtracted. Value added tax (VAT) is an indirect tax charged on goods and services as a percentage of the cost of an item. Commission and discount are also calculated as a percentage.

Behavioural objectives

By the end of the lesson, students should be able to:

• define tax and value added tax;
• calculate VAT on the cost of goods and services;
• find taxable income using the tax bands and allowances, and calculate the tax payable;
• calculate commission on sales;
• calculate discount on the price of goods.

Instructional resources

Examples of receipts that show VAT.

Presentation

Step I: What are tax, VAT, commission and discount?

Mode: Whole class

Teacher activities: The teacher leads the students in explaining the following.

• Tax: the part of the money paid to the government. Tax charged on income is called income tax.
• Value added tax (VAT): an indirect tax charged on goods and services, expressed as a percentage of the cost of an item. If the rate of VAT is x%, the VAT paid to the government is:
  
• Commission: a payment to a person for selling goods or promoting services on behalf of another (the principal). The commission is paid to the agent. The advantage of commission is that it increases sales.
• Discount: a reduction in the price of goods, usually given for bulk payment.

Student activities: Students copy the note.

Step II: How is income tax calculated?

Mode: Whole class

Teacher activities: The teacher explains the table of the rates of tax payable on various levels of income.

The second table shows common allowances.

If both husband and wife are earners, the spouse and child allowances are subtracted from the husband’s income only.

Student activities: Students copy the note.

Step III: Discussion of examples

Mode: Whole class

Teacher activities: The teacher leads the students through these examples.

1. A person earns ₦280,000. What is her taxable income? (Use the table above.)
   1. If she pays tax at the rate of 25% on her taxable income, how much tax does she pay?
   2. How much of her salary is she left with?
2. A married man has no children but claims allowances of ₦22,500 for a dependent relative and ₦26,000 for insurance premiums. If his annual salary is ₦1,864,000, calculate his monthly tax payment (to the nearest ₦10). Use the table on page 42.
3. During the 1st quarter of 2011, a trading company collected a total of ₦840,000 as VAT, which was transferred to the government. What was the amount of the total pre-VAT sales of the company during that period?
4. The advertised price of a plasma TV is ₦99,990 including VAT at 5%. If the government raises VAT to 8%, calculate the new price of the TV (to the nearest ₦10).

Student activities: Students ask questions on the points they did not understand.

Step IV: How are commission and discount calculated?

Mode: Whole class

Teacher activities: The teacher leads the students to solve problems.

Example 1. A firm employs a salesman who receives a 5% commission on his sales. Find his commission on sales totalling ₦65,000 and the amount the salesman pays to the company.

Solution

Commission = 5% of ₦65,000 = ₦3,250

Money paid to the company = ₦65,000 − ₦3,250 = ₦61,750

Example 2. A bookseller gives a 15% discount to a school on a book that is expected to be sold for ₦1,000. If the school buys 20 copies of the book, how much discount is given?

Evaluation

Mode: Whole class

The teacher asks the following questions.

• Define tax.
• Define value added tax.
• The pre-VAT cost of a refrigerator is ₦32,000. What would be the selling price if VAT is (a) 15% and (b) 8%?

Assignment

Exercise 5c, numbers 6, 7 and 11, of New General Mathematics for SS3.

References

• J. Olowofeso et al (2019), Multipurpose Mathematics for Senior Secondary Schools, Feso Educational Publication.
• A.O. Kalejaiye (2016), New General Mathematics for SS3, Pearson Publication Limited.
• H.N. Odogwu et al (2016), New General Mathematics for SS3, Learn Africa Publication.