USJ-R School of Law

Advanced Taxation Dean Jonathan P. Capanas

Answer the following Questions:

(Emphasize the KEY WORDS. For questions answerable
by true or false, explain.)

1. What is the nature of the power of taxation? (1996 Bar)

2. Why is the power to tax considered inherent in a sovereign state? (2003
Bar)
3. May Congress under the 1987 Constitution, abolish the power to tax of
local governments? (2003 Bar)
4. Discuss the meaning and implications of the following statements: Taxes
are the lifeblood of government and their prompt and certain availability is
an imperious need. (1991 Bar)
5. Justice Holmes once said: The power to tax is not the power to destroy
while this Court (the Supreme Court) sits. Describe the power to tax and
its limitations. (2000,1996 Bar)
6. Among the taxes imposed by the Bureau of Internal Revenue are income
tax, estate and donors tax, Value Added Tax, Excise Tax, other percentage
taxes, and documentary stamp tax. Classify these taxes into direct and
indirect taxes, and differentiate direct from indirect taxes. (2000 Bar)

7. The House of Representatives introduced HB 7000 which

envisioned to levy a tax on various transactions. After the bill
was approved by the House, the bill was sent to the Senate as
so required by the Constitution. In the upper house, instead
of a deliberation on the House Bill, the Senate introduced SB
8000 which was its own version of the same tax. The Senate
deliberated on this Senate Bill and approved the same. The
House Bill and the Senate Bill were then consolidated in the
Bicameral Committee. Eventually, the consolidated bill was
approved and sent to the President who signed the same. The
private sectors affected by the new law questioned the validity
of the enactment on the ground that the constitutional
provision requiring that all revenue bills should originate from
the House of Representatives has been violated.Resolve the
issue. 6% (2010 Bar)
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 8. True or False. A law that allows taxes to be paid either in cash or in kind is

valid (2009 Bar)

9. True or False. The doctrine of equitable recoupment allows a taxpayer

whose claim for refund has prescribed to offset tax liabilities with his claim
of overpayment.
(2009 Bar)

10.True or False. A law imposing a tax on income of religious institutions

derived from the sale of religious articles is valid. (2009 Bar)

11.Enumerate the four (4) inherent limitations on taxation. Explain each item
briefly. (4%)

12.Maria Suerte, a Filipino citizen, purchased a lot in Makati City in

1980 at a price of P1 million. Said property has been leased to MAS
Corporation, a domestic corporation engaged in manufacturing paper
products, owned 99% by Maria Suerte. In October 2007, EIP
Corporation, a real estate developer, expressed its desire to buy the
Makati property at its fair market value of P300 million, payable as
follows: (a) P60 million downpayment; and (b) balance, payable equally
in twenty four (24) monthly consecutive installments. Upon the advice of
a tax lawyer, Maria Suerte exchanged her Makati property for shares of
stock of MAS Corporation. A BIR ruling, confirming the tax-free
exchange of property for shares of stock, was secured from the BIR
National Office and a Certificate Authorizing Registration was issued by
the Revenue District Officer (RDO) where the property was located.
Subsequently, she sold her entire stockholdings in MAS Corporation to
EIP Corporation for P300 million. In view of the tax advice, Maria Suerte
paid only the capital gains tax of P29,895,000 (P100,000 x 5% plus
P298,900,000 x 10%), instead of the corporate income tax of
P104,650,000 (35% on P299 million gain from sale of real property).
After evaluating the capital gains tax payment, the RDO wrote a letter to
Maria Suerte, stating that she committed tax evasion.Is the contention of the
RDO tenable? Or was it tax avoidance that
Maria Suerte had resorted to? Explain. (6%) (2008 Bar)

13.What is the nature of the taxing power of the provinces, municipalities and
cities? How will the local government units be able to exercise their taxing
powers? (2007 Bar)
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 14.Enumerate the 3 stages or aspects of taxation. Explain each. 5% (2006 Bar)

15.Distinguish direct taxes from Indirect taxes. Give examples. 5% (2006

Bar)

16.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? Choose the best answer. Explain. 5%
a. from all kinds of taxes, i.e., income, VAT, customs duties, local taxes
and real property tax

b. from income tax only

c. from value-added tax only

d. from real property tax only

e. from capital gains tax only (2006 Bar)

17.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? Choose the best answer. Explain. 5%
a. from all kinds of taxes, i.e., income, VAT, customs duties, local taxes
and real property tax

b. from income tax only

c. from value-added tax only

d. from real property tax only

e. from capital gains tax only (2006 Bar)

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 18.Congress enacts a law imposing a 5% tax on the gross receipts of common
carriers. The law does not define the term gross receipts. Express
Transport, Inc., a bus company plying the Manila- Baguio route, has time
deposits with ABC Bank. In 2005, Express Transport earned P1 Million
interest, after deducting the 20% final withholding tax from its time deposits
with the bank. The BIR wants to collect a 5% gross receipts tax on the
interest income of Express Transport without deducting the 20% final
withholding tax. Is the BIR correct? Explain. 5% (2006 Bar)

19.The Police Power , the Power to Tax and the Power of Eminent Domain are
inherent powers of government. May a tax be validly imposed in the
exercise of the police power and not of the power to tax? If your answer is
in the affirmative, give an example. (1991 Bar)

20.If the taxpayer has a tax liability, and he has a claim against the government,
can these be subject to compensation? (1996 Bar rephrased)

21.Is double taxation a valid defense against the legality of a tax measure?
(1997 Bar)

22.When an item of income is taxed in the Philippines and the same income is
taxed in another country, is there a case of double taxation? (1997 Bar)

23.What are the usual methods of avoiding the occurence of double taxation?
(1997 Bar)

24.X, a lessor of a property, pays real estate tax on the premises, a real estate
dealers tax based on rental receipts and income tax on the rentals. X
claims that this is double taxation. Decide. (1996 Bar)

25.Why is tax exemption strictly construed against the taxpayer? (1996 Bar)

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 26.When may a taxpayers suit be allowed? (1996 Bar)

27.The President of the Philippines and the Prime Minister of Japan entered
into an executive agreement in respect of a loan facility to the Philippines
from Japan whereby it was stipulated that interest on loans granted by
private Japanese financial institutions to private financial institutions in the
Philippines shall not be subject to Philippine income taxes. Is this tax
exemption valid? Explain. (1992 Bar)

28.An Executive Order was issued pursuant to law, granting tax and duty
incentives only to businesses and residents within the secured area of the
Subic Economic Special Zone, and denying said incentives to those who live
within the Zone but outside such secure area. Is the constitutional right to
equal protection of the law violated by the Executive Order? Explain.
(2000 Bar)

29.The City of Makati, in order to solve the traffic problem it its business
districts, decided to impose a tax, to be paid by the driver, on all private cars
entering the city during peak hours from 8:00 a.m. to 9:00 a.m. from
Mondays to Fridays, but exempts those cars carrying more than two
occupants, excluding the driver. Is the ordinance valid? Explain. (2003
Bar)

30.X Corporation was the recipient in 1990 of two tax exemptions both from
congress, one law exempting the companys bond issues from taxes and the
other exempting the company from taxes in the operation of its public
utilities. The two laws extending the tax exemptions were revoked by
Congress before their expiry dates. Were the revocations constitutional?

31.Taxes are assessed for the purpose of generating revenue to be used for
public needs. Taxation itself is the power by which the state raises revenue
to defray the expenses of government. A jurist said that a tax is what we pay
for civilization. In our jurisdiction, which of the following statements may
be erroneous:
1) Taxes are pecuniary in nature.
2) Taxes are enforced contributions.

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 3) Taxes are imposed on persons and property within the territorial
jurisdiction of a State.
4) Taxes are levied by the executive branch of the government.
5) Taxes are assessed according to a reasonable rule of apportionment.
(2004 Bar)