CHAPTER EXERCISES
TRUE OR FALSE
1. The three fundamental powers of the state may be exercise only by the government.
2. Taxation is a process or means by which the sovereign, through its law-making body raises
income to defray the expenses of the government.
3. Eminent domain may be exercise even by public service corporations and public entities.
4. Police power regulates both liberty and property.
5. Taxes are raised to cover the cost of governance.
6. Toll is one of the taxes collected by the government.
7. License fees are imposed in the exercise of police power.
8. License fee is imposed to raise revenue.
9. Tax is generally unlimited because it is based on the needs of the State.
10. The amount imposed in the exercise of police power depends on whether the activity is
useful or not.
11. The distinction of a tax from permit or license fee is that a tax is one in which there is
generally no limit on the amount that may be imposed.
12. Debt, as distinguished from tax, may be paid in kind.
13. Under the equal protection clause of the constitution, all persons subject to legislation shall
be treated alike under dissimilar circumstances and conditions, both in the privileges conferred
and liabilities imposed.
14. Tax laws are civil and penal in nature because there are penalties provided in the case of
violation.
15. Special assessment is a tax.
16. Special assessment is imposed on persons, property and property rights.
17. The Philippine government may subject the land where embassies of foreign governments
are located to real property taxes.
18. A revenue bill may originate from the Senate and on which same bill the House of
Representatives may propose amendments.
19. A person may refuse to pay on the ground that he will not receive a benefit from the tax.
20. In the exercise of the power of taxation, the State can tax anything at any time.
21. In cases of deductions and exemptions, doubts shall be resolved liberally in favor of the
government.
22. Levying of local government taxes should be exercise only by the legislative branch of the
local government.
23. The taxing power of provinces, municipalities and cities precede from a constitutional grant.
24. Taxation is regressive when their rate goes up depending on the resources of the person
affected.
25. No law granting any tax exemption shall be passed without the concurrence of 2/3 of all
members of Congress.
26. There is no constitutional prohibition against double taxation in the Philippines. It is
something not favored, but nevertheless permissible.
27. "Global system of income taxation" means separate graduated rates are imposed on
different types of income.
28. One of the schemes of shifting the incidence of tax burden is by transferring the sales tax of
a manufacturer to the distributor, then in turn to the wholesaler, to the retailer and finally to
the consumer.
29. Transformation is a method by which the manufacturer or producer upon whom the tax is
imposed pays the tax and strives to recover such expense through lower production cost
without sacrificing the quality of his product.
30. In case of ambiguity, tax laws shall be interpreted liberally in favor of the government.
MULTIPLE CHOICE
Definition, Purpose, Theory and Basis
1. Which of the following statements is incorrect?
a. Taxes are the revenues raised in the exercise of the power of the State. police
b. One of the special characteristic of tax is it is unlimited in amount.
c. The three fundamental powers of the State are Inherent in the State and may be exercised without
the need of any constitutional grant.
d. All of the above
2. 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"
d. Neither "a" nor "b"
3. Statement 1: The distinction of a tax from permit or license fee is that a tax is imposed for regulation.
Statement 2: Non-payment of tax does not necessarily render a business illegal.
a. Only statement 1 is correct
b. Only statement 2 is correct
C. Both statements are correct
d. Both statements are incorrect
4. 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 such as:
a. Taxation may be used to provide incentive to greater production through grant of tax exemptions.
b. Taxation can strengthen weak enterprises by creating conditions conducive to their growth through
grant of tax exemptions.
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. All of the above
5. Which of the following statements is correct?
a. The purpose of taxation may also be "compensatory", meaning, it may be used to make up for the
benefit received.
b. Taxes may be imposed for the equitable distribution of wealth and income in society.
c. Both "a" and "b"
d. Neither "a" nor "b"
6. Which theory in taxation states that without taxes, a government would be paralyzed for lack of
power to activate and operate it, resulting in its destruction?
a. Power to destroy theory
b. Lifeblood theory
c.. Sumptuary theory
d. Symbiotic doctrine
7. 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"
8. Incidence of taxation means
a. Shifting of tax
b. Refunds of tax
c. Payment of tax
d. Imposition of tax
9. The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is
known as
a. Assessment.
b. Levy.
c. Payment.
d. Collection.
10. Statement 1: Symbiotic relation is the reason why the government would impose taxes on the
income of resident citizens derived from sources outside the Philippines
Statement 2: Jurisdiction is the reason why citizens must provide support to the state so the latter could
continue to give protection.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
11. A law was passed by Congress which granted tax amnesty to those who have not paid income taxes
for a certain year and at the same time providing for the refund of taxes to those who have already paid
them. The law is:
a. Valid because there is a valid classification.
b. Not valid because those who did not pay their taxes are favored over those who have paid their taxes.
C. Valid because it was Congress that passed the law and it did not improperly delegate the power to
tax.
d. Not valid because only the President with the approval of Congress may grant amnesty.
12. Congress passed a new law imposing taxes on income earned out of particular activity that was not
previously taxed. The law, however, taxed incomes already earned within the fiscal year when the law
took effect. Is the law valid?
a. No, because the laws are intended to be prospective, not retroactive.
b. No, the law is arbitrary in that it taxes income that has already been spent.
c. Yes, since the tax laws are the lifeblood of the government.
d. Yes, tax laws are an exception; they can be given retroactive effect.
13. Due to an uncertainty whether or not a new tax law is applicable to printing companies, ABC Printers
submitted a legal query to the BIR on that issue. The BIR issued a ruling that printing companies are not
covered by the new law. Relying on this ruling, ABC Printers did not pay the said tax. Subsequently
however, the BIR reversed the ruling and issued a new one stating that the tax covers printing
companies. Could the BIR assess ABC Printers for back taxes corresponding to the years before the new
ruling?
a. Yes, because taxation is the rule and exemption is the exception
b. Yes, because taxes are the lifeblood of the government
c. No, the BIR is not allowed to reverse its ruling
d. No, reversal of a ruling shall not be given a retroactive application if it will be prejudicial to the
taxpayer
Use the following data for the next two questions:
The Constitution requires that all revenue bills shall originate "exclusively from the House of
Representatives. Assume that in 2014, Congressman Uro proposed an expansion of the coverage of the
value added tax to be known as e-vat law. The proposed bill was approved by the House of
Representatives later that year. However, the EVAT version of the Senate became the EVAT law.
14. Which of the following statements will justify the enacted EVAT law?
I. The Constitution simply means that the initiative for filing revenue, tariff or tax bills must come from
the House of Representatives on the theory that, elected as they are from the districts, the Members of
the House can be expected to be more sensitive to the local needs and problems.
II.It is not the law but the revenue bill which is required by the Constitution to originate exclusively in
the House of Representatives because a bill originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole, and a distinct bill may be
produced. C: Both I and Il
a. I only
b. ll only
C: Both I and Il
d. Neither I nor II
15. Assuming Senator Bobadilla filed in the Senate a substitute e-vat bill "in anticipation of its receipt of
the bill from the House. The proposal is totally different from the version of the lower house. Which of
the following statements will justify the filing of a substitute bill by Honorable Senator Bobadilla?
1.To insist that a revenue statute not only the bill which initiated the legislative process
culminating in the enactment of the law - must substantially be the same as the House bill
would be to deny the Senate's power not only to "concur with amendments but also to
"propose amendment."
11.It would be to violate the coequality of legislative power of the two houses of Congress and
in fact make the House superior to the Senate. Given the power of the Senate to propose
amendments, it can propose its own version even with respect to bills which are required by the
Constitution to originate in the House.
III.Filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House is
not prohibited under the Constitution, so long as the action by the Senate as a body is withheld
pending receipt of the House bill.
a. I only
b. Il only
c. I, II and III
d. None of the above
16. Being legislative in nature, the power to tax may not be delegated, except:
a. To local governments or political subdivisions
b. When allowed by the Constitution
c. When delegation relates merely to administrative implementation that may call for some degree of
discretionary powers under a set of sufficient standards expressed by law or implied from the policy and
purpose of the Act.
d. All of the choices
Scope and Aspect of Taxation
17. Statement 1. The aspects of taxation are shared by the legislative and executive branches of the
government.
Statement 2: Taxes should be prospective and should not be given retroactive effect because they are
burdens.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
18. The power of taxation is basically legislative in character. Which of the following is a legislative
function?
A
B
C
D
Fix with certainty the amount of tax
YES
NO
YES
YES
Identify who should collect the tax
YES
YES
NO
YES
Determine who should be subject to tax
YES
YES
YES
NO
19. 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.
20. The following are the aspects of taxation
1- Levy or imposition of the tax on persons, property or excises
II-Collection of taxes already levied
Ill-Sufficiency of governments sources to satisfy its expenditure
a. I, II and III
b. I and II only
c. I and III only
d. Il and Ill only
21. Which of the following is incorrect?
a. Selecting the kind of tax
b. Fixing amount of tax
c. Prescribing rules of taxation
d. Assessment of tax liability
LEGISLATIVE
YES
YES
YES
YES
ADMINISTRATIVE
NO
NO
NO
NO
LEGISLATIVE
YES
YES
YES
NO
ADMINISTRATIVE
YES
NO
NO
YES
22. 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
Inherent Powers of the State
23. Statement 1: Inherent powers of the State exist independent of the constitution.
Statement 2: The taxing power of the local government units precede from a constitutional grant.
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
24. The following are the characteristics of the State's power to tax, except
a. The strongest of all inherent powers of the State
b. Involves power to destroy
C. Both "a" and "b"
d. Neither "a" nor "b"
25. Levying of local government taxes may be exercised by:
a. The local executive only
b. The legislative branch of the local government only
C. The local executive and the legislative branch of the local government unit
d. Neither the local executive nor the legislative branch of the local government can exercise the power.
26. 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
27. Statement 1: Eminent domain may raise money for the government.
Statement 2: Barrios, barangays, municipalities/cities and provinces may collect taxes from its
inhabitants.
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
Nature, Characteristics and Construction of Tax Laws
28. 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
29. "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"
30. 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. All of the above
31. "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"
32. 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.
c. Both a and b
d. Neither a or b
33. 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. when their rate goes up
Statement 2: Taxation is progressive 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
34. One of the characteristics 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
35. Which of the following distinguishes tax from license fee
a. Non-payment does not necessarily render the business
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation
36. The least source of tax
a. Statutes laws:
b. Presidential decrees
c. Revenue regulations
d. Tax treaties or conventions illegal
37. 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
38. 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 taxpayer of the
d. Liberally in favor of the government and strictly against the tax payer
39. 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 taxpayer the government and liberally in favor of the
d. Liberally in favor of the government and strictly against the taxpayer
40. Which of the following statements is correct?
I. A tax cannot be imposed without clear and express words that purpose.
II. The provisions of a taxing act are not to be extended by implication. For
III. If the law is repealed, taxes assessed before repeal of the law may no longer be collected.
IV. Tax law is ex post facto in application.
a. I and II only
b. III and IV only
c. All of the above
d. None of the above
41. 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
VI.Source of the income subject to tax
a. I and II only
b. III, IV, V and VI only
c. III, IV and VI only
d. I, II, III, IV, V and VI
42. Tax of a fix amount imposed among all persons residing within a specified territory without regards
to their property or occupation may be engage
a. Personal, poll or capitation tax c. Excise tax
b. Property d. Regressive
43. Tax of fixed proportion of the amount or value of the property with respect to which the tax
assessed
a. Ad-valorem
b. Specific
C. Excise
d. Revenue
44. Tax base on a fix percentage of the amount of property, income or other basis to be taxed
a. Progressive
b. Proportional
c. Regressive
d. Indirect
45. 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
c. Generally payable in money
d. Inferior to non-impairment clause in the Constitution
Sound Tax System
46. The following are basic principles of sound tax system
I. It should be capable of being effectively enforced
II. It must be progressive
III. Sources of revenue must be sufficient to meet government expenditures and other public needs
IV. It should be exercised to promote public welfare
a. I and II only
b. III and IV only
c. I, II and III only
d. All of the above
47. The sources of revenue should be sufficient to meet the demands public expenditures. This refers to
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
48. 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
49. 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 Inherent and Constitutional Limitations
50. 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
51 Equality in taxation" means:
I.
Progressive system of taxation shall be applied
II.
The tax laws and their application must be fair, just, reasonable and proportionate to one's
ability to pay.
III.
III. The tax laws shall give emphasis on direct rather than indirect taxes or on the ability-topay principle of taxation.
a. I only
b. Il only
c. Ill only
d. I, II and III
52. 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.
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.
a. I and II only
b. I and III only
c. II and III only
d. I, II and III
53. 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 pro of law
d. Equal protection of law
54. 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 nonprofits 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
Exemption versus Amnesty
55. Exemption from tax is a privilege, which 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 official
C. Exemption refers to
d. All of the above. a public property
56. 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 non-payment of
taxes;
c. Amount foregone by the government is substantial;
d. It applies to all past, present and future tax obligations.
57. 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
58. Which of the following statements correctly described 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. Il only Tax Avoidance/ Double Taxation
c. Ill only
d. I, II and III
59. 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
60. Which of the following is correct?
a. Tax avoidance, or tax minimization, through legal means, is not punishable by law.
b. Deliberate reduction of taxable income that has been received is an example of tax avoidance.
c. Evasion of the tax takes place only when there are no proceeds on the part of the government.
d. All of the above
61. 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
62. Which of the following is an element of double taxation?
1. Same kind of tax
II. Same subject matter
III. Same taxable period
IV. Same taxing authority
a. I and II only
b. I, II and III only
c. All of the above
d. None of the above
63. Double taxation in its general sense means taxing the same subject twice during the same taxing
period. In this sense, double taxation
a. Violates substantive due process.
b. Does not violate substantive due process.
C. Violates the right to equal protection.
d. Does not violate the right to equal protection.
64. 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
65. Ligaya Educational Foundation, Inc., a stock educational institution organized for profit, decided to
lease for commercial use a 1,500 sq. m. portion of its school. The school actually, directly, and
exclusively used the rents for the maintenance of its school buildings, including payment of janitorial
services. Is the leased portion subject to real property tax?
a. Yes, since Ligaya is a stock and for-profit educational institution.
b. No, since the school actually, directly, and exclusively used the rents for educational purposes.
c. No, but it may be subject to income taxation on the rents it receives.
d. Yes, since the leased portion is not actually, directly, and exclusively used for educational purposes.