TAXATION - Module 1-Principles WA
BS Accountancy (ACC 102)
Module 1
*General Principles*
Choose the letter of the correct answer:
Definition:
1. EDT original The following statements correctly described the power of the State to tax, except
a. As a Power: It refers to the inherent power of an Independent State, co-extensive with
sovereignty to demand contributions for public purposes to support the government.
b. As a Process: It passes a legislative undertaking through the enactment of laws by the
Congress which will be implemented by the Executive Branch of the government through its
Bureau of Internal Revenue to raise revenue for the inhabitants in order to pay the
necessary expenses of the government.
c. As a Means: It is a way of collecting and apportioning the cost of government among those
who are privileged to enjoy its benefits.
d. None of the above
2.
Taxation as defined:
Statement 1: It is a power inherent in every sovereign state to imposed a charge or burden
upon persons, properties or rights to raise revenues for the use and support of the government
and to enable it to discharge its inappropriate functions.
Statement 2: A power that is very broad and exercised both by the legislative and executive
branch of the government.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
3.
Which of the following is incorrect?
a. Taxation is a process or means by which the Sovereign, through its law making body, raises
income to defray the necessary expenses of the government
b. Tax laws are civil and not penal in nature, although there are penalties provided for their
violations
c. Internal revenue laws are not political in nature
d. The State can exercised the power of taxation only if it is expressly mentioned in
the Constitution
*** The power to tax is an inherent power. It need not be expressly mentioned in the
Constitution for the State to exercise the same. Provisions in the constitution and other
laws will serve as limitations, but not as a GRANT to the state the power to tax.
4.
EDT original The State, having sovereignty can enforce contributions (tax) upon its citizens even
without a specific provision in the Constitution authorizing it. Which of the following will justify the
foregoing statement?
a. It is so because the State has the supreme power to command and enforce obedience to its
will from the people within its jurisdiction.
b. Any provision in the Constitution regarding taxation does not create rights for the
sovereignty to have the power to tax but it merely constitutes limitations upon the
supremacy of tax power.
c. Both “a” and “b”
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d.
Neither “a” nor “b”
Purpose of Taxation
5. The primary purpose of taxation is to raise revenue for the support of the government. However,
taxation is often employed as a devise for regulation by means of which, certain effects or conditions
envisioned by the government may be achieved. Examples of this are as follows, except:
a. Taxation can strengthen anemic enterprises or provide incentive to greater production through
grant of tax exemptions or creation of conditions conducive to their growth.
b. Taxes on imports may be decrease to protect local industries against foreign
competition or increased to encourage foreign trade.
c. Taxes may be increased in periods of prosperity to curb spending power and halt inflation or
lowered in periods of slump to expand business and ward off depression.
d. Taxes may be levied to reduce inequalities in wealth and income.
*** The power to tax should be used to protect local industries.
6.
Which of the following statement relate to regulation purpose / objective of taxation.
a.
To provide funds or property with w/c the state promotes the general welfare &
protection of its citizens.
b.
In the case of taxes levied on tobacco & alcoholic products or amusement
places like night clubs, cabarets cockpits etc.
c.
The progressive system of taxation where the objective is to prevent the undue
concentration in the hands of a few individuals.
d.
It does not only raise public revenue, but in the realm of tax exemption to tax relief.
7.
Statement 1: Regulatory tax is intended to achieve some social and economic end.
Statement 2: Toll is a demand of ownership. It is paid for the use of another’s property and may be
imposed only by the government.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
8.
Which of the following could not be considered as a purpose of taxation?
a. To raise revenue to support the government.
b. To check inflation.
c. To distribute the wealth of the nation.
d. To impose monetary burden to the people.
9.
Statement 1: The purpose of taxation may also be “compensatory”, meaning, it may be used to
make up for the benefit received (i.e., excise tax on gasoline consumed by vehicle owners using
roads)
Statement 2: Taxes may be imposed for the equitable distribution of wealth and income in society.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
10. This is not a purpose of taxation
a. To expropriate property for the promotion of the general welfare
b. To reduce inequalities of wealth
c. As protective tariff on imported goods to protect local producers against foreign
competition
d. To encourage the growth of home industries through the proper use of tax incentives
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“A” – exercise of police power
Theory and Basis
11. On theoretical basis of taxation, which of the following statements is true?
a. People pay taxes which their government uses to expand its powers and territorial domination.
b. People demand from their government certain responsibilities and then provide this
government with the means to carry them out.
c. State needs taxation to exist, while people must support taxation because they need the
presence of the state.
d. “b” and “c”
*** “a” is wrong because the power to tax is territorial. State can only exercise the power to tax
within its territorial jurisdiction and it cannot be used to expand its territory
12. The existence of the government is a necessity and that the state has the right to compel all
individuals and property within its limits to contribute
a. Basis of taxation
c. Scope of taxation
b. Situs of taxation
d. Theory of taxation
*** Lifeblood or Necessity Theory
13. The reciprocal duties of support and protection between the people and the government
a. Basis of taxation
c. Scope of taxation
b. Situs of taxation
d. Theory of taxation
Scope and Aspect of Taxation
14. Subject to inherent and constitutional limitations the power of taxation is regarded as supreme,
plenary, unlimited and comprehensive
a. Basis of taxation
c. Scope of taxation
b. Situs of taxation
d. Theory of taxation
15. As to scope of legislative power to tax, which of the following is correct?
a. The power to tax is supreme, plenary, comprehensive and without any limit because the
existence of the government is a necessity.
b. The discretion of Congress in imposing taxes extends to the mode, method and kind of tax,
even if the constitution provides otherwise.
c. Congress has the right to levy a tax of any kind at any amount as it sees fit, even in
the absence of any constitutional provision.
d. The sole arbiter of the purpose for which taxes shall be levied is Congress, provided the
purpose is public and the courts may not review the levy of the tax to determine whether or
not the purpose is public.
16. That the legislative body can impose a tax at any amount underscores the legal truism that:
a. Taxation is an inherent power of the state.
b. Taxation is essentially a legislative power.
c. Taxation is a very broad power of the state.
d. Answer not given.
17. How broad is the power of the legislature to impose taxes?
Answer 1:
The legislature has limited discretion as to the persons, property or occupations to be taxed,
where there are no constitutional restrictions, provided the property is within the territorial
jurisdiction of the state.
Answer 2:
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The legislature has the right to finally determine the amount or rate of tax, in the absence of
any constitutional prohibitions and it may levy a tax of any amount as it sees fit.
a. Answers 1 & 2 are false
b. Answer 1 is true but answer 2 is false
c. Answer 1 is false but answer 2 is true
d. Answers 1 and 2 are true
18. Which of the following is incorrect description of taxation?
a. Legislative and inherent for the existence of the government.
b. Necessary and for public purpose
c. Supreme and absolute power of the State
d. The strongest of all inherent powers of the State.
19. The levying and imposition of tax and the collection of tax are processes which constitute the
taxation system
a. Basis of taxation
c. Nature of taxation
b. Aspect of taxation
d. Theory of taxation
20. The following are the aspect of taxation
I – Levy or imposition of the tax on persons, property or excises
II – Collection of taxes already levied
III- Sufficiency of governments sources to satisfy its expenditure
a. I, II and III
c. I and III only
b. I and II only
d. II and III only
21. The official action of an officer authorized by law in ascertaining the amount of tax due under the
law from a taxpayer is
a. Assessment
c. Deficiency
b. Delinquency
d. Distraint
22. Fixing the tax rate to be imposed is best described as a (an):
a. Tax administration aspect.
b. Tax legislative function.
c. Aspect of taxation which could be delegated.
d. Function that could be exercised by the executive branch.
23. All of the following are legislative aspect of taxation except:
a. Selection of the object or subject of tax
b. Valuation of property for taxation
c. Fixing of tax rates
d. Prescribing the general rules of taxation.
24. All of the following are administrative functions of taxation except:
a. Selection of object of tax
b. Equalization of assessment
c. Valuation of property for taxation
d. Collection of taxes.
25. Which of the following is correct?
a. Fixing of tax rates
b. Valuation of object of tax
c. Collection of tax
d. Assessment of tax liability
Legislative
Yes
Yes
Yes
No
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Administrative
Yes
No
No
Yes
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Inherent Powers of the State
26. They exist independent of the constitution being fundamental power of the state except
a. Power of taxation
c. Power of eminent domain
b. Police power
d. Power of recall
27. The power to acquire private property upon payment of just compensation for public purpose
a. Power of taxation
c. Power of eminent domain
b. Police power
d. Power of recall
28. The power to regulate liberty and property to promote the general welfare
a. Power of taxation
c. Power of eminent domain
b. Police power
d. Power of recall
29. The power to demand proportionate contribution from persons and property to defray the
necessary expenses of the government
a. Power of taxation
c. Power of eminent domain
b. Police power
d. Power of recall
30. Which of the following may not raise money for the government
a. Power of taxation
c. Eminent domain
b. Police power
d. License Fees
31. The strongest of all inherent powers of the government is
a. Power of taxation
c. Power of eminent domain
b. Police power
d. Power of recall
←
Without money, the government can neither survive nor dispense any of
its other powers and functions, effectively.
32. Which of the following has no power of taxation
a. Provinces
b. Cities
c. Barangay
d. Barrios
33. Which of the following statement is wrong? A revenue bill
a. Maybe recommended by the President to Congress
b. May have a House version and a Senate version approved separately and then consolidated
with both houses approving the consolidated version.
c. May originate from the Senate and on which same bill the House of Representative
may propose amendments.
d. Must originate from the House of Representative and on which same bill the Senate may
propose amendments.
34. Statement 1: The constitution is the source of the State’s taxing power.
Statement 2: The police power of the government may be exercised through taxation.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
35. The least source of tax laws:
a. Statutes
b. Presidential decrees
c. Revenue regulations
d. Tax treaties or conventions
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36. Statement 1: A revenue regulation must not be contrary to the provision of the law that it
implement
Statement 2: A revenue regulation cannot expand the provision of the law that it implements by
imposing a penalty when the law that authorizes the revenue regulation does not impose a penalty.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
37. Our national internal revenue laws are
a. Political in nature
b. Penal and nature
c. Criminal in nature
d. Civil in nature
38. Where does taxing power of the provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or Executive act
d. Local legislation
39. How will the local government units be able to exercise their taxing powers?
a. By local legislation
b. By authority conferred by Congress
c. By the issuance of the Department of Finance
d. By the help of the Bureau of Internal Revenue
40. When the power to tax is delegated to the local government
a. Only the local executive can exercise the power.
b. Only the legislative branch of the local government can exercise the power.
c. The local executive and the legislative branch of the local government can exercise the
power.
d. Neither the local executive not the legislative branch of the local government can exercise
the power.
41. Which statement is false?
a. A tax is a demand of sovereignty while a toll is a demand of property ownership.
b. Non-payment of a tax does not make the activity taxed unlawful.
c. A grant of police power to a unit of local government carries with it a grant of the
power to tax.
d. Customs duty is a tax.
 The power to tax is not an inherent power of the LGUs
42. Which statement gives the correct answer? That a feasibility study needs or need to look into the
taxes of different political subdivisions of government which may be alternative sites of the business
because
a. Provinces, cities and municipalities must have uniform taxes between and among themselves
b. The local taxes of political subdivisions need not be uniform with local taxes of
another political subdivisions
c. Business that are subject to national taxes are exempted from local business taxes
d. Local business taxes may be credited against national business taxes
43. Which of the following statements is not correct?
a. Only the national government exercises the inherent power of taxation.
b. Local government units could exercise the power of taxation through legislated delegation.
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c. National legislation is exercised by Congress.
d. Interpretation of Tax Laws is done by the Legislative branch of government.
Construction of Tax Laws
44. In every case of doubt, tax statutes are construed
a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the tax payer
** Construed = Interpreted.
45. In every case of doubt tax exemption are construed
a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
*** To be entitled to exemption, the law should be clear that the taxpayer is exempt, otherwise,
the exemption claimed should be disallowed.
46. This rule is not applicable on the construction of tax laws
a. If the law is repealed, taxes assessed before repeal of the law may no longer be
collected.
b. If the intent of the tax is not clear as to whether the taxpayer is covered by the tax obligation,
the law shall be construed against the government.
c. Where the intent to tax is clear and the taxpayer claims he is exempt from the tax obligation,
the tax shall be construed against the taxpayer.
d. Provisions intended for the security of the taxpayer or to insure equality or uniformity of
taxation are mandatory.
*** Application of tax laws should be prospective.
implementation of a new law are still collectible.
Hence, taxes assessed before the
47. In the case of conflict between between the tax code and the generally accepted accounting
principles(GAAP)
a. GAAP shall prevail over the tax code
b. Tax code shall prevail over GAAP
c. GAAP and Tax code shall be both disregarded
d. The taxpayer may choose between the GAAP or the Tax Code
48. Which of the following statements is not correct?
a. A tax bill must only be applicable and operative after becoming a law.
b. The effectivity of the tax law commences upon its approval.
c. The applicability of the tax law covers the present and future transactions.
d. Tax law is ex post facto in application.
 Ex post facto means retroactive
49. Statement 1: A tax cannot be imposed without clear and express words for that purpose.
Statement 2: The provisions of a taxing act are not to be extended by implication.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
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50. Which of the following is not correct?
a. In the absence of specific tax provision, taxes in general are not cancelable.
b. Prescriptive period for assessment and collection is applicable to returnable taxes.
c. The law on prescription being a remedial measure should be interpreted liberally in order
to protect the taxpayer.
d. The prescriptive period should be the shorter between the required filing date and the
actual date of filing.
Nature, Characteristics and Types
51. The following are the nature of taxation, except
a. Inherent and sovereignty
b. Essentially a legislative function
c. Subject to inherent and constitutional limitation
d. Subject to the approval of the people
52. Which of the following statements is true?
a. Power to tax involves power to destroy
b. In taxpayer’s suit, the government can sue taxpayers not demanding receipts from business
for their transactions
c. Double taxation is resorted to by taxing authority to increase tax collection
d. Power of taxation is absolute or without limitations
*** If the source is illegal, the State has the power to destroy the source.
53. EDT ORIGINAL “The power to tax involves power to destroy” means:
a. The power to tax is viewed as the power to destroy in the sense that a lawful tax cannot be
defeated just because its exercise would be destructive or would bring about insolvency to a
taxpayer.
b. The principle implies that an imposition of lawful regulatory taxes would be destructive to
the taxpayers and business establishments because the government can compel payment of
tax and forfeiture of property through the exercise of police power.
c. Both “a” and “b”
d. Neither “a” nor “b”
54. There can be no tax unless there is a law imposing the tax is consistent with the doctrine of
a. Uniformity in taxation
b. Due process of law
c. Non-delegation of the power of tax
d. The power of taxation is very broad and the only limitation is the sense of responsibility of the
members of the legislature to their constituents
55. “The tax should be based on taxpayer’s ability to pay”. In relation to this, which of the following is
not correct?
a. No person shall be imprisoned for non-payment of tax
b. A graduated tax table is in consonance with this statement
c. As a theory of taxation, this is called “ability to pay theory”
d. As a basic principle of taxation, this is called “theoretical justice”
56. Rule of “NO ESTOPPEL AGAINST THE GOVERNMENT” means:
a. Rule of law that in the performance of its governmental functions, the state cannot be
estopped by the neglect of its agents and officers.
b. The government is not estopped by the mistakes or errors of its agents; erroneous
application and enforcement of law by public officers do not block the subsequent correct
application of statutes.
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c.
d.
Both a and b
Neither a or b
57. Progressivity of taxation is also mandated in the Constitution.
Statement 1: Our income tax system is one good example of such progressivity because it is built on
the principle of the taxpayer’s ability to pay.
Statement 2: Taxation is progressive when their rate goes up depending on the resources of the
person affected.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
58. “Schedular system of income taxation” means
a. All types of income are added together to arrive at gross income
b. Separate graduated rates are imposed on different types of income
c. Capital gains are excluded in determining gross income
d. Compensating income and business/professional income are added together in arriving at
gross income.
59. One of the characteristic of our internal revenue laws is that they are
a. Political in nature
b. Penal in nature
c. Generally prospective in operation although the tax statute may nevertheless
operate retrospectively provided it is clearly the legislative intent
d. Criminal in nature
60. Which of the following distinguishes tax from license fee
a. Non-payment does not necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation
61. It literally means “place of taxation” the country that has the power and jurisdiction to levy and
collect the tax
a. Basis of taxation
c. Scope of taxation
b. Situs of taxation
d. Theory of taxation
62. EDT ORIGINAL Which of the following factors are determinants to the “Situs” of taxation?
I. Nature, kind, or classification of the tax being imposed.
II. Subject matter of the tax (person, property, rights or activity)
III. Citizenship of the taxpayer
IV. Residence of the taxpayer
V. Place of the excise, privilege, business or occupation subject to tax
VI. Source of the income subject to tax
a. I and II only
c. III, IV and VI only
b. III, IV, V and VI only
d. I, II, III, IV, V and VI
63. The Tax Reform Act of 1997 or the Tax Code is
a. RA 9337
b. RA 8424
c. RA 9504
d. CA 466
64. Using the preceding number, it took effect on
a. January 1, 1997
c. January 1, 1998
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b. December 11, 1997
d. July 6, 2008
65. Tax of a fix amount imposed among all persons residing within a specified territory without regards
to their property or occupation they may be engage
a. Personal, poll or capitation tax
c. Excise tax
b. Property
d. Regressive
66. Tax imposed on personal or real property in proportion to its value or some other reasonable
method of apportionment
a. Personal, poll or capitation tax
c. Excise tax
b. Property
d. Regressive
67. Tax which is demanded from the persons whom the law intends or desires to pay it
a. Direct
c. Excise
b. Indirect
d. Income
68. Tax which is demanded from one person in the expectation and intention that he shall indemnify
himself at the expense of another
a. Direct
c. Excise
b. Indirect
d. Income
69. Tax which imposes a specific sum by the head or number or by some standards of weight or
measurement and which requires no assessment other than a listing or classification of the objects
to be taxed
a. Ad-valorem
c. Excise
b. Specific
d. Revenue
70. Tax fixed proportion of the amount or value of the property with respect to which the tax assessed
a. Ad-valorem
c. Excise
b. Specific
d. Revenue
71. Tax base on a fix percentage of the amount of property, income or other basis to be taxed
a. Progressive
c. Regressive
b. Proportional
d. Indirect
72. Tax where the rate decreases as the tax base increases
a. Progressive
c. Regressive
b. Proportional
d. Indirect
73. Tax where the rate increases as the tax base increases
a. Progressive
c. Regressive
b. Proportional
d. Indirect
74. A tax classified as a regressive tax.
a. Excise tax
b. Real estate tax
c. Value added tax
d. None of the above
75. Persons or thing belonging to the same class shall be taxed at the same rate
a. Simplicity of taxation
c. Equality of taxation
b. Reciprocity of taxation
d. Uniformity of taxation
76. Which of the following is a characteristic of taxation which distinguishes it from police power and
eminent domain?
a. For public purposes
b. Legislative in nature
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c.
d.
Generally payable in money
Inferior to non-impairment clause in the Constitution
77. All of the following, except one, is an example of direct tax?
a. Income tax
c. Value added tax
b. Donor’s tax
d. Estate tax
Sound Tax System
78. The following, except one, are basic principles of sound tax system
a. It should be capable of being effectively enforced
b. It must be progressive
c. Sources of revenue must be sufficient to meet government expenditures and other public
needs
d. It should be exercised to promote public welfare
79. The sources of revenue should be sufficient to meet the demands of public expenditures. This refers
to
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
80. The tax should be imposed proportionate to the taxpayer ability to pay
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
81. The tax law must be capable of convenient just and effective administration
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
82. Basic principle of a sound tax system except
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Intellectual sensitivity
Limitations
83. EDT ORIGINAL Statement 1: Inherent limitations are the natural restrictions to safeguard and
ensure that the power of taxation shall be exercised by the government only for the betterment of
the people whose interest should be served, enhanced and protected.
Statement 2: Constitutional limitations are provisions of the fundamental law of the land that
restrict the supreme, plenary, unlimited and comprehensive exercised by the State of its inherent
power to tax.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
84. EDT ORIGINAL “Equality in taxation” means:
I. Progressive system of taxation shall be applied.
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II. The tax laws and their application must be fair, just, reasonable and proportionate
to one’s ability to pay.
III. The tax laws shall give emphasis on direct rather than indirect taxes or
on the ability-to-pay principle of taxation.
a. I only
b. II only
c. III only
d. I, II and III
85. EDT ORIGINAL. Which of the following statements correctly described “Equal protection” clause of
the Constitution regarding the government’s power to tax?
I. All persons subject to legislation shall be treated alike under dissimilar
circumstances and conditions, both in the privileges conferred and liabilities
imposed.
JOKE: (INSERT MORE FUN IN THE PHILIPPINES LOGO OF THE DOT)
EDT, BAGAYAO, JAMYL VS GEORGE JAMES…RE:TAX BASE ON FACE VALUE
– NO VIOLATION OF THIS PROVISION.
II. The purpose is to protect persons belonging to the same class against intentional
and arbitrary discrimination.
III. There is denial of equal protection of laws if there is discrimination in
the implementation of tax laws.
c. II and III only
d. I, II and III
a. I and II only
b. I and III only
86. EDT ORIGINAL. “No person shall be imprisoned for nonpayment of Poll Tax”. Which of the
following statements correctly described the foregoing Constitutional limitation on the State’s
power to tax?
I. The term “Poll tax” means a tax imposed on a person as a resident within a
territory of the taxing authority with regard to his property, business or
occupation.
II. Imprisonment for nonpayment of other taxes or imposition of fine would be
contrary to the Constitution
a. I only
c. Both I and II
b. II only
d. Neither I nor II
87. Taxes must be for public purpose means that:
a.
Taxes must be raised from the public;
b.
Taxes should be used for recognized public needs benefiting a community;
c.
Power of taxation should government be exercised by the legislature;
d.
Relationship of the government and the governed must be transparent and democratic.
88. Statement 1: In the imposition of taxes, public purpose is presumed.
Statement 2: Nonpayment of license fee makes the business illegal
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
89. Which of the following statements is not correct?
a. Collections from taxes are public money.
b. Appropriation of taxes for the common good of the people is valid.
c. Construction of private road from taxes is a valid appropriation.
d. Allocation of taxes for the benefit of greater portion of population is considered for public
purposes.
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90. Taxes are public money which should be used for public purposes. Which of the following is not
regarded as for public purposes?
a. Appropriation for public education
b. Appropriation for comprehensive agrarian reform program of the gov’t
c. Appropriation for the church
d. Appropriation for governmental projects
91. The person or property taxed must be subject to the jurisdiction of the taxing State. This inherent
limitation is called
a. International comity
c. No-encroachment policy
b. Territoriality
d. Double taxation
92. Which of the following restrictions on the power of taxation recognizes that the country’s tax laws
shall not be applied to the property of foreign government?
a. Taxation is inherently a legislative function
b. Exercise of taxation is subject to international comity
c. Due process of law
d. Equal protection of law
93. This is an inherent limitation on the power of taxation.
a. The rule on taxation shall be uniform and equitable
b. No law impairing the obligations of contracts shall be enacted
c. Charitable institutions, churches, personages or convents appurtenants thereto, mosque
and non-profits cemeteries and all kinds of lands, buildings and improvements actually,
directly and exclusively used for religious or charitable purposes shall be exempt from
taxation
d. The tax laws cannot apply to the property of foreign governments
94. Which limitation on the power of taxation inherently implied that the State’s primary concern is for
the common good of the people?
a. Equality in taxation
c. Due process of law
b. Equal protection of law
d. For public purposes
95. The power of taxation being legislative, all its incidents are naturally within the control of the
legislature. Subject to constitutional and inherent restrictions, the legislature has discretion to
determine the following, except:
a. The subjects or objects to be taxed
b. The purpose or object of the tax, so long as it is a private purpose
c. The amount or rate of the tax
d. The manner, means, and agencies of collection of the tax
Exemption versus Amnesty
96. Exemption from tax is a privilege, which is being looked upon by law with disfavor because
everyone should be sharing the burden of taxation. On account of this view, exemption from tax is
construed strictly against the taxpayer, except in certain situation like:
a.
Exemption is granted to the impoverished sector in certain situation
b.
Exemption relates to a public officials;
c.
Exemption refers to a public property;
d.
All of the above.
97. Tax exemption is made different from tax amnesty:
a. It is a privilege or freedom from tax burden;
b. It allows immunity from all criminal, civil and administrative liabilities arising from nonpayment of taxes;
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c.
d.
Amount foregone by the government is substantial;
It applies to all past, present and future tax obligations.
98. Statement 1: Tax exemption applies only to government entities that exercise proprietary
functions.
Statement 2: All government entities regardless of their functions are exempted from taxes
because it would be impractical for the government to be taxing itself
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
99. EDT ORIGINALWhich of the following statements correctly describes the tax exemption of the
government?
I. The State cannot be taxed without its consent, otherwise, such is derogation to its
sovereignty.
II. Tax exemption applies only to government entities through which the government
immediately and directly exercises its governmental functions like the Department
of Justice, Department of Foreign Affairs, Philippine National Police, and the like.
III. Government agencies performing governmental functions are exempt
from tax unless expressly taxed, while those performing proprietary
functions are subject to tax unless expressly exempted.
a. I only
b. II only
c. III only
d. I, II and III
100.Which of the following are exempt from real property taxes?
a. Properties or religious organization
b. Properties of charitable organization
c. Properties of educational institution
d. Properties actually, directly, and exclusively used for religious purposes
101.The Constitution provides, “charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, and non-profit cemeteries and all lands, buildings, and improvements actually,
directly and exclusively used for religious, charitable or educational purposes shall be exempt
from taxation.” This provision exempts charitable institutions and religious institutions from
what kind of taxes?
a. From all kinds of taxes, i.e. income, vat, customs, local taxes, and real property tax
b. From income tax only
c. From value added tax
d. From real property tax
e. From capital gains tax
Tax Avoidance/Evasion
Double Taxation
Escape from Taxation
102.Which of the following is to be regarded as tax minimization through legal means?
a. Not declaring all taxable income
b. Padding of expenses for deduction from income
c. Opting to transfer the property through sale rather than through donation where
tax liability would be higher
d. All of the above
103.Which of the following is incorrect?
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a.
b.
c.
d.
Tax evasion is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the
payment of a tax.
Tax avoidance, or tax minimization, through legal means, is not punishable by law.
Deliberate reduction of taxable income that has been received is an example of tax
avoidance.
Evasion of the tax takes place only when there are no proceeds on the part of the
government.
104.Statement 1: An attempt to minimize one’s tax constitute fraud, taxpayer may diminish his liability
by any means, which the law permits.
Statement 2: To avoid is legal but to evade is illegal. The legal rights of a taxpayer to decrease the
amount of what otherwise would be his taxes, altogether avoid them, by means which the law
permits, cannot be doubted.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
105.Which of the following could be described as tax evasion?
a. Using two sets of books of accounts
b. Non-issuance of commercial invoice
c. Both “a” and “b”
d. none of the above
106.Double taxation
a. In its strict sense, means taxing twice by the same taxing authority, within the same
jurisdiction, for the same purpose, in the same taxing period some of the property in the
territory
b. In its narrow sense is undoubtedly unconstitutional, but that in the broader sense is
necessarily so
c. While not forbidden, is something not pressured, and should, whenever possible, be avoided
and prevented
d. All of the above
107.Double taxation is defined as taxing the same property twice when it should be taxed but once. But
there is no constitutional prohibition against double taxation in the Philippines. Which of the
following statement is/are true?
IA license tax may be levied upon a business or occupation although the land or
property used in connection therewith is subject to property tax.
IIBoth a license fee and a tax cannot be imposed on the same business or
occupation for selling the same article.
a. I only
c. Both I and II
b. II only
d. Neither I nor II
108.Statement 1: There can be double taxation where the state merely imposes tax on every separate
and distinct business in which a person is engaged.
Statement 2: There is no objectionable double taxation if the tenements in the city are subjects to
real estate tax while the business of leasing said property are also subject to real dealer’s tax.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
109.Statement 1: Most common tax remedies from double taxation are tax deductions and tax credits.
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Statement 2: The benefit of credit against income tax for taxes of foreign countries should be
allowed to a citizen of the Philippines or domestic corporation but not to an alien individual and
foreign corporation.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true
110.Which of the following is a method of avoiding the occurrence of double taxation?
a. Allowing reciprocal exemption either by law or by treaty.
b. Reduction of the Philippine tax rate.
c. Allowance of tax credit for foreign taxes paid.
d. All of the above.
111.Which of the following is not an element of double taxation?
a. Two taxes
c. Same year
b. Same subject matter
d. Same amount
112.Which of the following is not related to double taxation?
a. Twice imposition of a tax
c. Tame taxpayer’s location
b. Same subject of taxation
d. All of the above
113.An escape from taxation where the tax burden is transferred by one whom the tax is imposed or
assessed to another
a. Exemption
c. Transformation
b. Shifting
d. Capitalization
*** Example: VAT
114.An escape from taxation where the producer or manufacturer pays the tax and endeavor to
recoup himself by improving his process of production thereby turning out his units of products at a
lower cost
a. Exemption
c. Transformation
b. Shifting
d. Capitalization
115.An escape from taxation where there is a reduction in the price of the taxed object equal to the
capitalized value of the future taxes which the taxpayer expects to be called upon to pay
a. Exemption
c. Transformation
b. Shifting
d. Capitalization
*** Example: Depreciation
*** End of Module 1 ***
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