Your tax director has requested that you prepare a proposal to Cik Farra, addressing the following issues:

a) Tax incentives available Explain how MKSB is potentially eligible for each of the following incentives:

i. Pioneer status.

ii. Investment tax allowance.

iii. Reinvestment allowance. In each case, identify the period for which tax relief is available, or the years of assessment in which the incentive applies, and explain the mechanism for each incentive measure.

b) Computation of tax savings Compute the tax savings arising from each incentive measure for the first five years of operation. Attach your computations as an appendix to the letter.

c) Recommendations

i. Based on the computations above, state your recommendation; and

ii. If your recommendation in (i) is not approved, recommend your next best incentive or combination of incentives.

d) Group relief in respect of the tax audit and the group loss relief claim which has proved to be excessive, explain the consequences for MKSB as the claimant company, and Kekwa as the surrendering company. State any penalties which may be payable and whether there is any right of appeal regarding any penalties arising.

Required: 1. Prepare a proposal addressing all the matters above to Cik Farra as instructed by your tax director.