Prelims

Question 1

Basic Principles of a Sound Tax System (3)

The sources of revenue should be efficient to meet the demands of public expenditures.

Answer 1

Fiscal adequacy

Basic Principles of a Sound Tax System (3)

Question 2

Basic Principles of a Sound Tax System (3)

The tax burden should be proportionate to the taxpayer’s ability to pay (Ability-To-Pay Principle)

Answer 2

Equality or Theoretical Justice

Basic Principles of a Sound Tax System (3)

Question 3

Basic Principles of a Sound Tax System (3)

The tax laws should be capable of convenient, just, and effective administration

Answer 3

Administrative Feasibility

Basic Principles of a Sound Tax System (3)

Question 4

Nature or characteristics of a state’s power to tax (3)

The power of taxation may be exercised by the State although not expressly granted by the constitution.

Answer 4

It is inherent in sovereignty

Nature or characteristics of a state’s power to tax (3)

Question 5

Nature or characteristics of a state’s power to tax (3)

It is only the legislature that can enact tax laws

Answer 5

Legislative in character

Nature or characteristics of a state’s power to tax (3)

Question 6

Nature or characteristics of a state’s power to tax (3)

Taxation is not an absolute power that can be exercised by the legislature anyway it pleases.

Answer 6

Subject to constitutional and inherent limitations

Nature or characteristics of a state’s power to tax (3)

Question 7

Limitations on the power of taxation (2)

Those restrictions found in the constitution or implied from its provisions

Answer 7

Constitutional Limitations

Limitations on the power of taxation (2)

Question 8

Limitations on the power of taxation (2)

Those which restrict the power although they are not embodied in the constitution.

Answer 8

Inherent Limitations

Limitations on the power of taxation (2)

Question 9

Constitutional Limitations (12)

No person shall be deprived of life, liberty, or property without (?) of law, nor shall any person be denied the equal protection of the law (Sec. I. Art. III. NC)

Answer 9

Due process

Constitutional Limitations (12)

Question 10

Constitutional Limitations (12)

No person or class of persons shall be deprived of the same protection of laws enjoyed by other persons or classes in the same place and in like circumstances. (Phil Rural Electric Cooperatives Ass., Inc. vs.DILG 403 SCRA 558)

Answer 10

Equal protection of the laws

Constitutional Limitations (12)

Question 11

Constitutional Limitations (12)

The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. (Sec. 28(1), Art. VI, 1987 Philippine Constitution)

Answer 11

Rule of uniformity and equity in taxation

Constitutional Limitations (12)

Question 12

Constitutional Limitations (12)

No person shall be imprisoned for non-payment of a poll tax. (Sec. 20, Art. III, 1987 Philippine Constitution)

Answer 12

Non-imprisonment for non-payment of a poll tax

Constitutional Limitations (12)

Question 13

Constitutional Limitations (12)

No law impairing the obligation of contracts shall be passed. (Sec. 10, Art. III, 1987 Philippine Constitution)

Answer 13

Non-impairment of the obligations of contracts

Constitutional Limitations (12)

Question 14

Constitutional Limitations (12)

No law shall be made respecting the establishment of religion, or prohibiting the free exercise thereof. The free exercise of religious profession and worship, without discrimination or preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights (Sec. 5, Art. III, id.).

Answer 14

Non-infringement of religious freedom

Constitutional Limitations (12)

Question 15

Constitutional Limitations (12)

No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, or other religious teacher, or dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage, or leprosarium. (Sec. 29(2), Art. VI, 1987 Philippine Constitution)

Answer 15

No appropriation for religious purposes

Constitutional Limitations (12)

Question 16

Constitutional Limitations (12)

Charitable institutions, churches, and parsonages or convents appurtenant thereto, mosques, 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. (Sec. 28(3), Art. VI, 1987 Philippine Constitution)

Answer 16

Excemption of religious, charitable, or educational entities, non-profit cemeteries, and churches from taxation

Constitutional Limitations (12)

Question 17

Constitutional Limitations (12)

All revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the corporate existence of such institutions, their assets shall be disposed of in the manner provided by law. (Sec. 4(3), Art. XIV, 1987 Philippine Constitution)

Answer 17

Excemption of revenues and assets of non-stock, non-profit educational institutions and donations for educational purposes from taxation

Constitutional Limitations (12)

Question 18

Constitutional Limitations (12)

No law granting any tax exemption shall be passed without the concurrence of a majority of the members of Congress. (Sec. 28(4), Art. VI, 1987 Philippine Constitution)

Answer 18

Concurrence of a majority of the members of congress for the passage of law granting any tax exemption

Constitutional Limitations (12)

Question 19

Constitutional Limitations (12)

The President shall have the power to veto any particular item or items in an appropriation, revenue, or tariff bill, but the veto shall not affect the item or items to which he does not object. (Sec. 27(2), Art. VI, 1987 Philippine Constitution)

Answer 19

Power of the President to veto any particular item or Items in a revenue or tariff bill

Constitutional Limitations (12)

Question 20

Inherent Limitations (5)

A tax imposed to raise funds for loans to earthquake victims, even if they must provide collateral and pay interest, is valid as long as it serves a public purpose. The true test of a public purpose is whether the tax revenue is used for the general good of the community, even if the benefit is not equally distributed among all inhabitants.

Answer 20

Requirement that levy must be for a public purpose

Inherent Limitations (5)

Question 21

Inherent Limitations (5)

The rule is “potestas delegata non delegari potest”—what has been delegated cannot be delegated. The people created a legislative department for the exercise of legislative power. Thus, this power should not be delegated to any other person or body.

Answer 21

Non-delegation of the legislative power to tax

Inherent Limitations (5)

Question 22

Inherent Limitations (5)

Government entities are generally exempt from taxation, as taxing public property would require new taxes to cover the imposed levy, benefiting no one except officials receiving increased compensation. However, Congress may impose taxes on government agencies if explicitly mandated. Agencies performing governmental functions are exempt unless expressly taxed, while those engaged in proprietary functions are taxable unless expressly exempted.

Answer 22

Exemption from taxation of government entities

Inherent Limitations (5)

Question 23

Inherent Limitations (5)

The term comity means recognition or respect accorded by one sovereign to the law of another within its territory because they are equals.

As a consequence of international comity, no state can claim jurisdiction over another (par in parem non habet imperium).

Answer 23

International comity

Inherent Limitations (5)

Question 24

Inherent Limitations (5)

A state cannot tax property outside its borders or impose taxes on activities conducted in another country, as tax laws do not extend beyond jurisdictional limits. However, an exception exists when there is a direct relationship between the taxing state and the taxpayer, such as in cases of income tax based on citizenship, allowing taxation beyond territorial boundaries.

Answer 24

Territorial Jurisdiction

Inherent Limitations (5)

Question 25

# Aspects of Taxation (2) Deals with the provisions of law that determine the person or property to be taxed, the sum or sums to be raised, the rate thereof, and the time and manner of levying, receiving, and collecting the taxes.

Answer 25

Levy ## Footnote Aspects of Taxation (2)

Question 26

# Aspects of Taxation (2) Consists of the provisions of law that prescribe the manner of enforcing the obligation on the part of those taxed to pay the amount due.

Answer 26

Collection ## Footnote Aspects of Taxation (2)

Question 27

# Classification of Taxes As to Subject Matter or Object (3) A tax of a fixed amount imposed on individuals, whether citizens or not, residing within a specified territory, without regard to their property or occupation. | Example: Community tax

Answer 27

Personal, Poll, or Capitation Tax ## Footnote Classification of Taxes As to Subject Matter or Object (3)

Question 28

# Classification of Taxes As to Subject Matter or Object (3) A tax imposed on property, whether real or personal, in proportion either to its value or in accordance with some other reasonable method of apportionment. | Example: Real property tax

Answer 28

Property Tax ## Footnote Classification of Taxes As to Subject Matter or Object (3)

Question 29

# Classification of Taxes As to Subject Matter or Object (3) A tax imposed upon the performance of an act, the enjoyment of a privilege, or engagement in an occupation; any tax that does not fall within the classification of a poll tax or a property tax. | Example: Income tax, donor's tax, estate tax

Answer 29

Excise (Privilege Tax) ## Footnote Classification of Taxes As to Subject Matter or Object (3)

Question 30

# Classification of Taxes As to Who Bears the Burden (2) A tax that is demanded from the person who also shoulders the burden of the tax. | Examples: Income tax, estate tax, donor's tax

Answer 30

Direct Tax ## Footnote Classification of Taxes As to Who Bears the Burden (2)

Question 31

# Classification of Taxes As to Who Bears the Burden (2) A tax demanded from one person with the expectation that they will pass the burden to another. | Example: Value-added tax (VAT)

Answer 31

Indirect Tax ## Footnote Classification of Taxes As to Who Bears the Burden (2)

Question 32

# Classification of Taxes As to Determination of Amount (2) A tax of a fixed amount imposed per unit of measure (e.g., per head, weight, or volume); it requires no assessment other than listing or classification of the subjects to be taxed. | Examples: Excise tax on distilled spirits, cigars, cigarettes

Answer 32

Specific Tax ## Footnote Classification of Taxes As to Determination of Amount (2)

Question 33

# Classification of Taxes As to Determination of Amount (2) A tax based on a fixed proportion of the value of the property being taxed; it requires assessors or appraisers to estimate the value before determining the amount due. | Example: Real property tax

Answer 33

Ad Valorem Tax ## Footnote Classification of Taxes As to Determination of Amount (2)

Question 34

# Classification of Taxes As to Purpose (2) A tax imposed solely to raise revenue for government expenditures. | Examples: Income tax, value-added tax

Answer 34

General, Fiscal, or Revenue Tax ## Footnote Classification of Taxes As to Purpose (2)

Question 35

# Classification of Taxes As to Purpose (2) A tax imposed for a specific purpose, such as achieving social or economic goals, regardless of whether revenue is actually raised. | Examples: Sugar adjustment taxes, Oil Price Stabilization Fund (OPSF)

Answer 35

Special or Regulatory Tax ## Footnote Classification of Taxes As to Purpose (2)

Question 36

# Classification of Taxes As to Authority Imposing the Tax (2) A tax imposed by the national government. | Examples: Internal revenue taxes, customs duties

Answer 36

National Tax ## Footnote Classification of Taxes As to Authority Imposing the Tax (2)

Question 37

# Classification of Taxes As to Authority Imposing the Tax (2) A tax imposed by municipal or local government units. | Examples: Sand and gravel tax, occupation tax

Answer 37

Municipal or Local Tax ## Footnote Classification of Taxes As to Authority Imposing the Tax (2)

Question 38

# Classification of Taxes As to Graduation or Rate (3) A tax based on a fixed percentage of the amount of property, receipts, or other taxable basis. | Examples: Value-added tax, estate tax, donor's tax

Answer 38

Proportional Tax ## Footnote Classification of Taxes As to Graduation or Rate (3)

Question 39

# Classification of Taxes As to Graduation or Rate (3) A tax where the rate increases as the tax base or income bracket increases. | Example: Income tax

Answer 39

Progressive Tax ## Footnote Classification of Taxes As to Graduation or Rate (3)

Question 40

# Classification of Taxes As to Graduation or Rate (3) A tax where the rate decreases as the tax base increases.

Answer 40

Regressive Tax ## Footnote Classification of Taxes As to Graduation or Rate (3)

Question 41

# Three Inherent Powers of the Government The power of the state or its authorized entities to take private property for public use, provided that just compensation is paid to the owner.

Answer 41

Eminent Domain ## Footnote Three Inherent Powers of the Government

Question 42

# Three Inherent Powers of the Government The power of the state to enact laws regulating persons and property to promote public health, morals, safety, and general welfare.

Answer 42

Police Power ## Footnote Three Inherent Powers of the Government

Question 43

# Three Inherent Powers of the Government The power of the state, through its legislature, to raise revenue to support the necessary expenditures of the government.

Answer 43

Taxation ## Footnote Three Inherent Powers of the Government

Question 44

# Situs of Taxation Business, Occupation, or Transaction

Answer 44

The place where the business is conducted, the occupation is practiced, or the transaction takes place. ## Footnote Situs of Taxation

Question 45

# Situs of Taxation Real and Tangible Personal Property

Answer 45

The location of the property. ## Footnote Situs of Taxation

Question 46

# Situs of Taxation Intangible Personal Property

Answer 46

The domicile of the owner unless the property has acquired a business situs in another jurisdiction. ## Footnote Situs of Taxation

Question 47

# Situs of Taxation Income

Answer 47

The place where the income is earned or the citizenship/domicile of the owner. ## Footnote Situs of Taxation

Question 48

# Situs of Taxation Gratuitous Transfer of Property

Answer 48

The residence or citizenship of the taxpayer or the location of the property. ## Footnote Situs of Taxation

Question 49

# Basic Forms of Escape from Taxation The transfer of the tax burden from the person on whom the tax is assessed to another. This is common in business taxes, where the seller shifts the tax burden to consumers. | Those That Do Not Reduce Government Revenue Collection (3)

Answer 49

Shifting

Question 50

# Basic Forms of Escape from Taxation The reduction in the selling price of income-producing property by an amount equal to the capitalized value of future taxes that may be paid by the purchaser. | Those That Do Not Reduce Government Revenue Collection (3)

Answer 50

Capitalization

Question 51

# Basic Forms of Escape from Taxation A method where the manufacturer, upon whom the tax is imposed, pays the tax but offsets the expense by reducing production costs without sacrificing product quality. This is done to avoid losing market competitiveness instead of adding the tax to the selling price. | Those That Do Not Reduce Government Revenue Collection (3)

Answer 51

Transformation

Question 52

# Basic Forms of Escape from Taxation The use of fraudulent or illegal schemes designed to lessen or defeat taxes (Yutivo Sons Hardware Co. v. CTA, G.R. No. L-13203, January 28, 1965). This is also known as tax dodging. | Those That Result in Loss of Government Revenue (3)

Answer 52

Tax Evasion

Question 53

# Basic Forms of Escape from Taxation The exploitation of legally permissible tax rates or methods of assessing taxable property or income to minimize tax liability. This is also referred to as tax minimization. | Those That Result in Loss of Government Revenue (3)

Answer 53

Tax Avoidance

Question 54

# Basic Forms of Escape from Taxation The grant of immunity to specific persons, corporations, or classes of persons or corporations from a tax that others in the same taxing jurisdiction are required to pay (51 Am. Jur. 503). | Those That Result in Loss of Government Revenue (3)

Answer 54

Exemption from Taxation

Question 55

# Sources of Tax Laws The provisions of the Constitution dealing with taxation regulate the exercise of the power but do not grant it. Taxation is an inherent power of the government and exists independently of the Constitution.

Answer 55

The Constitution

Question 56

# Sources of Tax Laws Tax laws passed by Congress, which establish the legal basis for taxation.

Answer 56

Statutory Enactments

Question 57

# Sources of Tax Laws Issued by the Commissioner of Internal Revenue to interpret tax laws and clarify specific provisions upon taxpayers' requests. These are commonly known as "BIR Rulings."

Answer 57

Administrative Rulings

Question 58

# Sources of Tax Laws Issued by the Secretary of Finance upon the recommendation of the Commissioner of Internal Revenue. They clarify tax laws and provide details on administration and procedures. However, in case of conflict, the statute prevails over the regulation.

Answer 58

Revenue Regulations

Question 61

# Sources of Tax Laws Decisions of the Court of Tax Appeals and the Supreme Court that interpret and apply tax laws. These decisions form a major part of Philippine jurisprudence on taxation. The rulings of the Court of Tax Appeals can still be appealed to the Supreme Court.

Answer 61

Judicial Decisions