20250312 Midterm Examination Flashcards
Which of the following statements is correct?
a. The President is authorized to increase or decrease national internal revenue tax rates
b. One of the nature of taxation is the reciprocal duties of protection and support between the state and subject thereof
c. Every sovereign government has inherent power to tax
d. Income tax is indirect tax
ANS: c. Every sovereign government has inherent power to tax.
As to scope of the legislative power to tax, which is incorrect?
a. Where there are no constitutional restrictions, and provided the subjects are within the territorial jurisdiction of the state, Congress has unlimited discretion as to the persons, property, or occupations to be taxed
b. In the absence of any constitutional prohibition, the House of Representatives has the right to levy a tax of any amount it sees fit
c. The discretion of Congress in imposing taxes extends to the mode, method, or kind of tax even if restricted by the Constitution
d. The sole arbiter of the purpose for which taxes be levied is Congress, provided the purpose is public, but the courts may review the levy of the tax to determine whether or not the purpose is public
ANS: c. The discretion of Congress in imposing taxes extends to the mode, method, or kind of tax even if restricted by the Constitution.
Subject to inherent and constitutional limitations, the power of taxation is regarded as supreme, plenary, unlimited, and comprehensive
a. Basis of taxation
b. Situs of taxation
c. Scope of taxation
d. Theory of taxation
ANS: c. Scope of taxation.
Synonymous to tax avoidance
a. Tax dodging
b. Tax minimization
c. Tax exemption
d. Tax evasion
ANS: Tax minimization.
In case of conflict between the Tax Code and the Philippine Accounting Standard (PAS)
a. PAS shall prevail over the Tax Code
b. Tax Code shall prevail over PAS
c. PAS and Tax Code shall be both disregarded
d. The taxpayer may choose between the two
ANS: Tax Code shall prevail over PAS.
Mr. X, an American management expert, is hired by a Philippine corporation to assist in its organization and operation, for which he has to stay in the Philippines for five months. His coming to the Philippines is for a definite purpose which, in its nature, will require an extended stay. To the end, he makes his home temporarily in the Philippines. The American management expert intends to leave the Philippines as soon as his job is finished.
For income tax purposes, the American management expert shall be classified as:
a. Resident alien
b. Non-resident alien engaged in trade or business
c. Non-resident alien not engaged in trade or business
d. Resident citizen
ANS: Resident alien.
Mr. X, an American singer, was engaged to sing for one week at the Westin Plaza, after which he returned to the USA. For income tax purposes, X should be classified as:
a. Resident alien
b. Non-resident alien engaged in trade or business
c. Non-resident alien not engaged in trade or business
d. Resident citizen
ANS: Non-resident alien not engaged in trade or business.
Which of the following individual taxpayers is taxed on income from sources within and without the Philippines?
a. Resident citizen
b. Resident alien
c. Non-resident citizen
d. Non-resident alien
ANS: Resident citizen.
Which of the following assets is subject to depreciation for income tax purposes?
a. Inventories or stock in trade
b. Goodwill
c. Equipment used in business
d. Residential house
ANS: Equipment used in business.
A non-resident alien is taxable on all income derived from sources
a. Within the Philippines
b. Without the Philippines
c. Partly within and partly without
d. Within and without the Philippines
ANS: Within the Philippines.
A citizen of the Philippines, who works abroad and whose employment requires him to be physically present abroad most of the time during the taxable year, is:
a. Taxable on income within and without the Philippines
b. Taxable on income from without the Philippines
c. Exempt from income tax
d. Taxable on income from within the Philippines
d. Taxable on income from within the Philippines
It is the privilege of not being imposed a financial obligation to which others are subject:
a. Tax incentive
b. Tax exemption
c. Tax amnesty
d. Tax credit
b. Tax exemption
The use of legal or permissible means to minimize or avoid taxes:
a. Exemption
b. Shifting
c. Avoidance
d. Evasion
c. Avoidance
A tax must be imposed for public purpose. Which of the following is not a public purpose?
a. National defense
b. Public education
c. Improvement of the sugar and coconut industries
d. Improvement of a subdivision road
d. Improvement of a subdivision road
Taxation as distinguished from police power and power of eminent domain:
a. Property is taken to promote the general welfare.
b. Maybe exercised only by the government.
c. Operates upon the whole citizenry.
d. There is generally no limit as to the amount that may be imposed.
d. There is generally no limit as to the amount that may be imposed.
Which of the following is not a determinant of the place of taxation?
a. Source of the income
b. Residence of the taxpayer
c. Citizenship of the taxpayer
d. Amount of tax to be imposed
d. Amount of tax to be imposed
This is a constitutional limitation on the power of taxation:
a. Tax laws must be applied within the territorial jurisdiction of the state.
b. Exemption of government agencies and instrumentalities from taxation.
c. No appropriation of public money for religious purposes.
d. Power to tax cannot be delegated to private persons or entities.
c. No appropriation of public money for religious purposes.
An escape from taxation where the producer or manufacturer pays the tax and endeavors to recoup himself by improving his process of production, thereby turning out his units of products at a lower cost:
a. Shifting
b. Exemption
c. Transformation
d. Capitalization
c. Transformation
In every case of doubt, tax exemptions 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.
d. Liberally in favor of the government and strictly against the taxpayer.
Which of the following statements is not correct?
a. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes should be construed strictly against the government.
b. Tax exemptions, tax amnesty, tax condonations, and their equivalent provisions are not presumed and, when granted, are strictly construed against the taxpayer because such provisions are highly disfavored by the government.
c. Exemptions from taxation are highly disfavored in law, and he who claims tax exemption must be able to justify his claim or right.
d. The House of Representatives has the duty and the exclusive power of constructing and interpreting tax laws.
d. The House of Representatives has the duty and the exclusive power of constructing and interpreting tax laws.
Which of the following is not acceptable for legally refusing to pay the tax?
a. That the right of the state to collect the tax has prescribed.
b. That there is no jurisdiction to collect the tax.
c. That the tax law was declared as unconstitutional.
d. That there is no benefit derived from the tax.
d. That there is no benefit derived from the tax.
Congress can impose a tax at any amount and at any time, which shows 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. Taxation is based on taxpayers’ ability to pay.
c. Taxation is a very broad power of the state.
Which of the following statements is never true?
a. A business income may arise from self-employment or practice of profession.
b. An individual taxpayer who earns compensation income is an employee.
c. Business income may arise from self-employment or compensation income.
d. An income taxpayer may earn both compensation income and business income.
c. Business income may arise from self-employment or compensation income.
Passive income includes income derived from an activity in which the earner does not have any substantial participation. This type of income is
a. usually subject to a final tax
b. exempt from income taxation
c. taxable only if earned by a citizen
d. included in the income tax return
ANS: a. usually subject to a final tax.
Those required to file a declaration of their estimated income for the current taxable year must file the same on or before
a. April 15 of the current taxable year
b. April 15 of the following taxable year
c. August 15 of the current taxable year
d. November 15 of the current taxable year
ANS: April 15 of the current taxable year.
The option to be taxed at an 8% income tax rate is available to
a. VAT registered taxpayer who is in business
b. Self-employed taxpayer subject to Other Percentage Taxes under Title V of the Tax Code except those under Section 116
c. all of the above
d. none of the above
ANS: none of the above.
For purely self-employed taxpayers, the 8% tax on gross sales or receipts and other non-operating income in excess of P250,000 is in lieu of
a. graduated income tax rates under Section 24 (A) of the Tax Code
b. percentage tax under Section 116 of the Tax Code
c. VAT
d. a and b
ANS: a and b.
Persons or things belonging to the same class shall be taxed at the same rate
a. Simplicity in taxation
b. Reciprocity in taxation
c. Equality in taxation
d. Uniformity in taxation
ANS: d. Uniformity in taxation.
The tax should be proportional to the relative value of the property to be taxed
a. Simplicity in taxation
b. Reciprocity in taxation
c. Equality in taxation
d. Uniformity in taxation
ANS: Equality in taxation.
Persons or things belonging to the same class shall be taxed at the same rate
a. Simplicity in taxation
b. Reciprocity in taxation
c. Equality in taxation
d. Uniformity in taxation
ANS: Uniformity in taxation.
The tax should be proportional to the relative value of the property to be taxed
a. Simplicity in taxation
b. Reciprocity in taxation
c. Equality in taxation
d. Uniformity in taxation
ANS: Equality in taxation.
Mr. X, a caregiver, is under a 3-year employment contract with a hospital in Australia. His wife, Y, and a minor child live in the Philippines. In 2019, he earned P80,000 (converted) a month. For the annual income of P960,000, X shall pay income tax
a. for the entire amount it being taxable in the Philippines
b. for half the full amount because the other half pertains to his wife
c. of nothing because as an OFW, he is considered a non-resident citizen
d. none of the above
ANS: c. of nothing because as an OFW, he is considered a non-resident citizen.
The P90,000 exemption threshold is applicable to:
a. regular employees
b. rank and file employee
c. managerial employees
d. all employees
ANS: all employees.
Pedro is a member of the board of directors of ABC Corporation. During the current taxable year, Pedro received director’s fees amounting to P300,000 from quarterly board meetings he attended.
Such fees should:
a. form part of Pedro’s gross compensation income, whether or not he is at the same time an employee of the corporation
b. form part of Pedro’s gross compensation income, only if he is at the same time an employee of the corporation
c. Both statements are correct
d. Neither statements are correct
ANS: form part of Pedro’s gross compensation income, only if he is at the same time an employee of the corporation.
If Mr. X arrives in the Philippines on June 30, 2020, and luckily lands a job that pays him P30,000 a month, his income from August to December shall be:
a. Exempt because he is considered a nonresident citizen for the entire year.
b. Taxed based on the graduated income tax schedule (Section 24(A)).
c. Taxed at a 15% final withholding tax.
d. None of the above.
b. Taxed based on the graduated income tax schedule (Section 24(A)).
Which is usually an employee?
a. A director who at the same time is the chief executive officer.
b. A director regularly receiving a retainer’s fee.
c. Consultant.
d. A hired TV program talent.
a. A director who at the same time is the chief executive officer.
Congress can impose a tax at any amount and at any time, which shows that:
a. Taxation is an inherent power of the state.
b. Taxation is a very broad power of the state.
c. Taxation is essentially a legislative power.
d. Taxation is based on the taxpayer’s ability to pay.
b. Taxation is a very broad power of the state.
The BIR shall be under the control and supervision of the:
a. Court of Tax Appeals.
b. Supreme Court.
c. DILG.
d. Department of Finance.
d. Department of Finance.
The tax laws must be capable of convenient, just, and effective administration:
a. Fiscal adequacy.
b. Equality or theoretical justice.
c. Administrative feasibility.
d. Internal acceptability.
c. Administrative feasibility.
The principal purpose of taxation is:
a. To encourage the growth of home industries through the proper use of tax exemptions and tax incentives.
b. To implement the police power of the state.
c. To reduce excessive inequalities of wealth.
d. To raise revenues for government needs.
d. To raise revenues for government needs.
The power to regulate liberty and property to promote the general welfare:
a. Power of taxation.
b. Police power.
c. Power of eminent domain.
d. Superpower.
b. Police power.
The power to demand proportionate contributions from persons and property to defray the expenses of the government:
a. Power of taxation.
b. Police power.
c. Power of eminent domain.
d. National power.
a. Power of taxation.
The following are the nature of taxation, except:
a. Inherent in sovereignty.
b. Essential legislative in character.
c. Subject to inherent and constitutional limitations.
d. Subject to approval by the people.
d. Subject to approval by the people.
