Principles of taxation CE

Question 1

Power of taxation is legislative in nature. Therefore, the power to tax may not be delegated, except

a. To local government units or political subdivisions.
b. None of the above.
c. When allowed by the Constitution.
d. 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 policy and purpose of the Act.
e. All of the above.

Answer 1

All of the above:
a. To local government units or political subdivisions.
c. When allowed by the Constitution.
d. 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 policy and purpose of the Act.

Question 2

Statement I. For the exercise of the power of taxation, the state can tax anything at any time.
Statement II. The provisions of taxation in the Philippine Constitution are
grants of power enabling the state to impose taxes.

a. Only statement II is correct.
b. Only statement I is correct.
c. Both statements are correct.
d. Both statements are incorrect.

Answer 2

Only statement I is correct.

Statement I. For the exercise of the power of taxation, the state can tax anything at any time.

Question 3

Star College is a non-stock, non-profit educational institution run by the Archdiocese of Dumaguete. It is occupying the following buildings:

Building 1 - used as dormitory of its students but open to non-students who want to stay therein
Building 2 - owned by Mr. Senyor Pedro being leased to Star College and serving as administration building which houses the offices for the school
president, registrar, principal, dean and other school officials
Building 3 - used by the students for classroom purposes

Which of the above buildings is exempt from real estate tax?

a. Building 2 and 3
b. Building 1 and 3
c. Building 1 only
d. All of the buildings
e. Building 3 only

Answer 3

Building 2 and 3:

Building 2 - owned by Mr. Senyor Pedro being leased to Star College and serving as administration building which houses the offices for the school
president, registrar, principal, dean and other school officials
Building 3 - used by the students for classroom purposes

Question 4

A canon of taxation which means that tax laws must be clear and concise, capable of proper enforcement, and not burdensome, convenient as to time and manner of payment.

a. Fiscal feasibility
b. Administrative justice
c. Theoretical justice
d. Fiscal adequacy
e. Administrative feasibility

Answer 4

Administrative feasibility

Question 5

The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known as

a. Levy
b. Imposition
c. Assessment
d. Payment
e. Collection

Answer 5

Collection

Question 6

Which of the following is a characteristic of special assessment?

a. Based wholly on benefits (not necessary)
b. Exceptional both as to time and place
c. Not personal liability of the person assessed
d. Levied only on land
e. All of the above

Answer 6

All of the above:
a. Based wholly on benefits (not necessary)
b. Exceptional both as to time and place
c. Not personal liability of the person assessed
d. Levied only on land

Question 7

Statement I. The distinction of a tax from permit or license fee is that tax is imposed for regulation.
Statement II. Non-payment of tax does not necessarily render business illegal.

a. Both statements are incorrect.
b. Both statements are correct.
c. Only statement II is correct.
d. Only statement I is correct.

Answer 7

Only statement II is correct:

Statement II. Non-payment of tax does not necessarily render business illegal.

Question 8

Congress can impose a tax at any amount and at any time shows that

a. Taxation can only be imposed by Congress
b. Taxation is essentially a legislative power
c. Taxation is a very broad power of the state
d. Taxation is an inherent power of the state
e. Taxation is based on taxpayers’ ability to pay

Answer 8

Taxation is a very broad power of the state

Question 9

One of the means of avoiding or minimizing the burden of taxation is through “shifting”. Shifting is the transfer of the payment of tax by the original payer or the one on whom the tax was assessed or imposed to
someone else.

Answer 9

FALSE.

Question 10

The title of the Tax Code of the Philippines.

Answer 10

National Internal Revenue Code of 1997

Question 11

It is the place of taxation

a. Situs of taxation
b. Subject of taxation
c. Object of taxation
d. Amnesty of taxation
e. Purpose of taxation

Answer 11

Situs of taxation

Question 12

Statement I. Taxation is essentially a legislative function. Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of lawmaking.
statement II. The power of taxation is inherent in sovereignty being
essential to the existence of every government. Therefore, it shall be explicitly mentioned in the Constitution so the State can exercise such power.

a. Only statement I is correct.
b. Both statements are incorrect.
c. Both statements are correct.
d. Only statement II is correct.

Answer 12

Only statement I is correct:

Statement I. Taxation is essentially a legislative function. Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of lawmaking.

Question 13

Although power of taxation is basically legislative in character, it is not the function of Congress to:

a. Collect the tax levied under the law
b. Fix with certainty the amount of taxes
c. Determine who should be subject to the tax
d. Identify who should collect the tax

Answer 13

Collect the tax levied under the law

Question 14

This is a constitutional limitation on the power of taxation

a. No appropriation of public money for religious purposes
b. Tax is unlimited
c. Exemption of government agencies and instrumentalities from taxation
d. Power to tax cannot be delegated to private persons or entities
e. Tax laws must be applied within the territorial jurisdiction of the state

Answer 14

No appropriation of public money for religious purposes

Question 15

Exemptions from taxation are highly favored in law and he who claims exemption does not need to justify his claim.

Answer 15

FALSE

Question 16

These are characteristics of our internal revenue laws, except:

a. Political in nature
b. Civil in nature
c. May operate retrospectively if Congress so provides
d. Generally prospective in application

Answer 16

Political in nature

Question 17

In case of deductions and exemptions on income tax returns, doubts shall
be resolved:

a. Construed against the government and liberally in favor of the tax payer
b. Liberally in favor of the employer and construed against the government
c. Construed against the government and liberally in favor of the employer
d. Liberally in favor of the tax payer and construed against the employer
e. Construed against the tax payer and liberally in favor of the government

Answer 17

Construed against the tax payer and liberally in favor of the government

Question 18

Tax laws are either political or penal in nature.

Answer 18

FALSE

Question 19

As a rule, taxes are subject to set-off or compensation, that is why they are
compensatory.

Answer 19

FALSE

Question 20

This is an inherent limitation on the power of taxation:

a. Taxation is used to implement police power of the state
b. Due process of law and equal protection of the laws
c. Non-impairment of the jurisdiction of the Supreme Court in tax cases
d. Tax must be for public purpose
e. Rule on uniformity and equity in taxation

Answer 20

Tax must be for public purpose

Question 21

Which of the following is an element of double taxation?
I. same kind of tax
II. same subject matter
III. same taxing period
IV. same taxing authority

a. I, II, and III
b III and IV only
c. II and III only
d. II, III, and IV only
e. All of the above

Answer 21

All of the above:

I. same kind of tax
II. same subject matter
III. same taxing period
IV. same taxing authority

Question 22

The Department of Finance, thru its officers entered into a contract with foreign investors, granting them exemption from all forms of taxes to encourage investments in the Philippines. The contract is:

a. Void, unless the President ratifies
b. Valid, because the benefits derived affect the public
c. Valid, because the purpose is to promote public welfaire
d. Valid, if the President has authorized the officers to enter into such contract
e. Void, because the power to grant tax exemption is vested in Congress

Answer 22

Void, because the power to grant tax exemption is vested in Congress

Question 23

The Bureau of Internal Revenue has the duty and the exclusive power of enacting, implementing and interpreting tax laws.

Answer 23

FALSE

Question 24

The following are similarities of the inherent powers of the State except:

a. They are necessary attributes of sovereignty.
b. They are fundamental powers of the State.
c. Compensation or benefits are received.
d. They are superior to the non-impairment clause of the constitution.
e. They are legislative in character

Answer 24

They are superior to the non-impairment clause of the constitution.

Question 25

Congress granted a franchise to Cokalyo Shipping Lines for the operation of a passenger or freight service between Manila and Dumaguete subject
to the condition that the shipping line should carry government mails free of charge. It was then exempted from the payment of franchise tax. In a law that was passed later, the Cokalyo’s exemption from franchise tax was removed on the ground that the government needed funds for its projects.
Was the law valid?

a. No, because Congress can only enact laws. It cannot remove or withdraw
exemptions.
b. No, because the grant of the franchise tax exemption was a valid consideration which may be considered a contract. To remove the tax exemption would impair the obligation of contract.
c. Yes, because the government had the power to remove exemptions if the need for public funds arose.
d. Yes, because the Congress had the sole prerogative to enact laws including removal of exemptions.

Answer 25

No, because the grant of the franchise tax exemption was a valid consideration which may be considered a contract. To remove the tax exemption would impair the obligation of contract.

Question 26

To provide means for the rehabilitation and stabilization of the sugar industry so as to prepare it for the eventuality of the loss of the quota allocated to the Philippines resulting from the lifting of U.S. sanctions against African countries, congress passes a law increasing the existing tax on the manufacture of sugar on a graduated basis. All collections made under the law are to accrue to a special fund to be spent only for the purposes enumerated therein, among which are to place the sugar industry a living wage and to improve their working conditions.

Sweet, a sugar planter files a suit questioning the constitutionality of the law alleging that the tax is not for public purpose as the same is being levied exclusively for the aid and support of the sugar industry.

Which of the following options is correct?
a. All of the above.
b. The imposition is unconstitutional because it does not benefit the general
public.
c. The imposition is also an exercise of police power.
d. None of the above.
e. The imposition is not for public purpose

Answer 26

The imposition is also an exercise of police power.

Question 27

Gain from sale of shares of stock in a domestic corporation of non-resident foreigner is not taxable in the Philippines.

Answer 27

FALSE

Question 28

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.

Answer 28

TRUE

Question 29

Pedro, a lessor of a property, pays the following: real estate tax on the premises, a real estate dealer’s tax based on rental receipts, and income tax on the rentals. Pedro claims that this is double taxation.

a. Pedro is right because the character of the taxes imposed is the same.
b. Pedro is wrong because even if real estate tax and real estate dealer’s tax are the same, they are imposed on different fiscal years.
c. Pedro is wrong because the real estate tax is a tax on property and real estate dealer’s tax is a tax on the privilege to engage in business.
d. Pedro is right because the same tax is imposed on his property.

Answer 29

Pedro is wrong because the real estate tax is a tax on property and real estate dealer’s tax is a tax on the privilege to engage in business.

Question 30

The Municipality of San Benedicto has a 10-hectare cemetery consisting of four different cemeteries which are differently owned. Which of the following is subject to real estate tax?

a. San Benedicto Memorial Park - owned by a corporation where dividends are distributed to the shareholders at the end of the year.
b. San Benedicto Memories - owned by an association consisting of 100 different families; each family owns several square meters of lot; not a single portion is held for sale to either member of non-member of the association.
c. San Benedicto Catholic Cemetery - owned by the catholic church; payments are remitted to the catholic church and for the improvement of
the cemetery.
d. Cemeterio San Benedicto - a government cemetery owned by the municipal government which was established for the purpose of using it as a burial ground of paupers in the municipality

Answer 30

Subject to real estate tax:

San Benedicto Memorial Park - owned by a corporation where dividends are distributed to the shareholders at the end of the year.

Question 31

Mr. Juanito, a hardworking man, refused to pay taxes. Which of his reasons is not acceptable for legally refusing to pay his taxes?

a. That he has already paid taxes due and should not be imposed with double taxation
b. That he has been deprived of due process of law
c. That he will derive no benefit from paying the taxes
d. That there is lack of territorial jurisdiction
e. That the prescriptive period for the tax has elapsed

Answer 31

That he will derive no benefit from paying the taxes

Question 32

Tax is distinguished from special assessment:

a. based wholly on benefits
b. based on necessity and purpose to raise revenues
c. exceptional as to time and place
d. not a personal liability of the person assessed

Answer 32

based on necessity and purpose to raise revenues

Question 33

Tax of a fixed proportion of the amount or value of the property with respect to which the tax is assessed.

a. None of the above.
b. Percentage
c. Ad-valorem
d. Specific
e. Excise

Answer 33

Specific

Question 34

The primary purpose of taxation is

a. To encourage the growth of home industries through the proper use of tax exemptions and tax incentives
b. To raise revenues for governmental needs
c. To implement the police power of the state
d. To reduce excessive inequalities of wealth
e. To promote work in the economy

Answer 34

To raise revenues for governmental needs

Question 35

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. Financial source theory
b. Sumptuary theory
c. Power to destroy theory
d. Zero visibility theory
e. Lifeblood theory

Answer 35

Lifeblood theory

Question 36

Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statue expressly and clearly states because tax statutes should be construed strictly against the government.

Answer 36

TRUE

Question 37

In the construction of tax laws, public purpose is always presumed. If the law is clear, apply the law in accordance to its plain and simple tenor. A statute will not be construed as imposing a tax unless it does so clearly.

Answer 37

TRUE

Question 38

Power of taxation is legislative in nature. Therefore, the power to tax may not be delegated, except

a. None of the above.
b. 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 policy and purpose of the Act
c. To local government units or political subdivisions.
d. All of the above.
e. When allowed by the Constitution

Answer 38

All of the above:

b. 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 policy and purpose of the Act
c. To local government units or political subdivisions. .
e. When allowed by the Constitution

Question 39

Statement I. A revenue bill must originate from the House of Representatives and on which same bill the Senate may propose amendments.
Statement II. A revenue bill may be recommended by the President to Congress.

a. Both statements are correct.
b. Both statements are incorrect.
c. Only statement I is correct.
d. Only statement II is correct.

Answer 39

Both statements are correct:

Statement I. A revenue bill must originate from the House of Representatives and on which same bill the Senate may propose amendments.
Statement II. A revenue bill may be recommended by the President to Congress.

Question 40

Power of taxation is legislative in nature. Therefore, the power to tax may not be delegated, except:

a. All of the above.
b. None of the above
c. When allowed by the Constitution.
d. To local government units or political subdivisions.
e. 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 policy and purpose of the Act.

Answer 40

All of the above:

c. When allowed by the Constitution.
d. To local government units or political subdivisions.
e. 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 policy and purpose of the Act.

Question 41

The more income earned by the taxpayer, the more tax he has to pay.

a. Fiscal adequacy
b. Theoretical justice/Equitability
c. Administrative equality
d. Fiscal feasibility
e.
Administrative feasibility

Answer 41

Theoretical justice/Equitability

Question 42

Statement I. Symbiotic relation is the reason why citizens must provide support to the state so the latter could continue to give protection.
Statement II. Jurisdiction is the reason why the government would impose taxes on the income of resident citizens derived from sources outside the Philippines.

a. Both statements are incorrect.
b. Only statement I is correct.
c. Both statements are correct.
d. Only statement II is correct.

Answer 42

Both statements are correct:

Statement I. Symbiotic relation is the reason why citizens must provide support to the state so the latter could continue to give protection.
Statement II. Jurisdiction is the reason why the government would impose taxes on the income of resident citizens derived from sources outside the Philippines.

Question 43

Statement I. The purpose of taxation may be compensatory, meaning it may be used to make up for all the benefits received.
Statement II. Taxes may be imposed for the equitable distribution of wealth and income in society.

a. Only statement I is correct.
b. Both statements are incorrect
c. Only statement II is correct.
d. Both statements are correct.

Answer 43

Both statements are correct:

Statement I. The purpose of taxation may be compensatory, meaning it may be used to make up for all the benefits received.
Statement II. Taxes may be imposed for the equitable distribution of wealth and income in society.

Question 44

Father Pedro was so busy during the week. He had the following activities. Which of these is subject to income tax?

a. Teaches religion in one university and collects his salary
b. Performs marriage ceremony in church and collect alms from attendees
c. Celebrates mass and collect the alms from the faithful
d. Solicits funds for the construction of the church
e. Sales bibles to the public

Answer 44

Teaches religion in one university and collects his salary

Question 45

The general rule is that the situs of intangible personal property such as shares of stock is at the domicile of the owner.

Answer 45

TRUE

Question 46

One of the characteristics of a tax is that

a. It is generally subject to compensation
b. It is generally based on creditor-debtor relationship
c. It is generally based on contract
d. It is generally assignable
e. It is generally payable in money

Answer 46

It is generally payable in money

Question 47

Taxes may be imposed retroactively by law, but unless so expressed by such law, these taxes must only be imposed prospectively.

Answer 47

TRUE

Question 48

Progressive tax is based on a fixed percentage of the amount of property, income or other basis to be taxed.

Answer 48

FALSE

Question 49

One of the following is not a manifestation of the lifeblood theory:

a. Right to select subjects of taxation.
b. Imposition of tax even in the absence of constitutional grant.
c. No injunction to enjoin tax collection.
d. Equal protection of law.
e. Right to select objects of taxation.

Answer 49

Equal protection of law.

Question 50

The power to impose taxes is exercised by the

a. Senate
b. NBI
c. President
d. BIR
e.
Congress

Answer 50

BIR