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TAXATION
TAXES, TAX LAWS AND TAX ADMINISTRATION
Tax
An enforced proportionate contribution imposed upon persons, properties, businesses,
rights, interests, privileges, transactions and acts within the territorial jurisdiction of the
taxing authority exercise by the legislature for a public purpose and generally payable in
money.
Classification of Taxes
A. As to purpose
1. Fiscal general, fiscal or revenue- tax imposed for the general purpose of the
government or to raise revenue for government needs ex: income tax
2. Regulatory special or sumptuary tax imposed for a special purpose or to
achieve some social or economic ends ex: tariff or custom duties
B. As to subject matter
1. Personal, poll or capitation tax of a fixed amount imposed on individuals
residing within a specified territory without regard to their property or the
occupation in which they be engaged in. ex: community tax certificate
2. Property tax tax imposed on property, whether real or personal, in proportion,
either to its value or in accordance with some other reasonable method of
apportionment. Ex: real estate tax
3. Excise tax or privilege tax tax imposed upon the performance of an act, the
enjoyment of a privilege or the engaging in an occupation. Ex: income tax, value-
added tax, privilege tax on business or occupation.
C. As to incidence
1. Direct the tax is demanded from one person in who is intended to pay it.
Example: income tax and personal tax
2. Indirect the tax is demanded from one person in the expectation and intention
that he shall indemnify himself at the expense of another by shifting the tax to
another taxpayer. Example: Value-Added Tax, customs duties and some percentage
taxes
D. As to amount
1. Specific tax a tax of a fixed amount imposed by the head or number. Example:
tax on distilled spirits, cigars and wines (PX/piece)
2. Ad valorem tax is imposed for a fixed proportion of the amount or value of the
property to which the tax is assessed. Examples: excise taxes on cigarettes and
gasoline, real property taxes and certain customs duties (X% of selling price)
E. As to rate
1. Proportional or flat rate the tax is based on a fixed percentage of the amount
of the property, income or other basis to be taxed. Ex: real estate tax, VAT and
percentage taxes
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
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Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
2. Progressive or graduated tax the tax rate increases as the tax base increases.
Progressive rate is preferred in achieving vertical equity. Ex: income tax, estate tax
and donors tax
3. Regressive tax the tax the rate of which decreases as the tax base increases.
The Philippines has no regressive tax, but some indirect taxes manifest a
regressive effect.
4. Mixed tax
F. As to imposing authority
1. National tax imposed by the National Government.
Examples:
a. income taxes c. value-added tax e. other percentage taxes
b. estate and donors tax d. excise tax f. documentary stamp tax
2. Local tax tax imposed municipal or local governments.
Examples:
a. real property tax d. community tax; and
b. professional tax e. tax on banks and other financial institutions
c. business taxes, fees and charges
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
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Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
Tax Debt
Basis Law Contract
Effect of non- May involved imprisonment, No imprisonment
compliance except for poll tax
Assignable? No Yes
Mode of settlement Generally money Cash or In kind
Set-off? Generally not subject to set- Subject to set-off
off
Interest Does not earn interest except Draws interest when
when delinquent stipulated or when in
default
Note:
Payment of tax is compulsory to those who are covered by imposition
Taxes are important because they are the lifeblood of the government.
Taxes are personal. The burden of taxation cannot be transferred from one person to
the other by private agreement as this is determined by law
While the power of taxation includes the power to destroy, it is not absolute. It is
subject to limitation or restrictions.
TAX LAW
Any law that provides for the assessment and collection of taxes for the support of the
government and other public purposes
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
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Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
4. Tax Treaties and conventions with foreign countries 8. Revenue Regulation of by the
DoF
Revenue Regulation
Formal pronouncement intended to clarify or explain the tax law and carry into effect its
general provisions by providing details of administration and procedure. They have the
force and effect of law.
Administrative issuances or BIR Rulings these are the less general interpretations
of the tax laws at the administrative levels, being issued from time to time by the CIR, to
clarify certain provisions of the tax law. They are merely advisory or sort of an
information service to the taxpayer such that, none of them are binding except to the
addressee and may be reversed by the BIR at anytime.
TAX ADMINISTRATION
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
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Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
The Bureau of Internal Revenue is tasked with tax administration function of the
government. Together with the Bureau of Customs, they are under the supervision and
control of the Department of Finance.
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
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Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
b. involves minor criminal violations as may be determined by rules and regulations
to be promulgated by the Secretary of Finance, upon recommendation of the CIR,
discovered by regional and district officials
4. The power to assign and reassign internal revenue officers to establishment where
articles subject to excise tax are produced or kept. Revenue officers assigned to any
such establishments shall in no case stay in his assignment for more than 2 years.
Rules in assignments to other duties
Revenue officers assigned to perform assessment and collection function shall not remain
in the same assignment for more than 3 years. Assignment of internal revenue officers
and employees of the Bureau to special duties shall not exceed 1 year.
Agents and Deputies for Collection of National Internal Revenue Taxes
1. The Commissioner of Customs and his subordinates with respect to collection of
national internal revenue taxes on imported goods.
2. The head of appropriate government offices and his subordinates with respect to the
collection of energy tax.
3. Banks duly accredited by the Commissioner with respect to receipts of payments of
internal revenue taxes authorized to the made thru banks.
2. When the provision of the law is vague as to the taxation of a tax object, doubt is
resolved
a. Strictly against the government c. Liberally in favor of the government
b. Strictly against the taxpayer d. Liberally in favor of the courts
3. Upon taxation depends the governments ability to serve the people for whose benefit
taxes are collected, hence, taxes may be imposed even in the absence of constitutional
grants and collection of taxes cannot be stopped
a. Necessity theory c. Ability to pay theory
b. Benefit received theory d. Lifeblood theory
7. This principle of a sound tax system is violated when the government incurs a deficit
a. Theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. All of these
9. The progressive system of taxation is consistent with which principle of a sound tax
system
a. Theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. All of these
10.A tax reform at any given time underscores the fact that:
a. taxation is inherent power of the State. c. taxation is a very broad power of
the State.
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
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Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
b. essentially a legislative power. d. the State can and should adopt
progressive taxation.
14.Double taxation is regarded as highly objectionable. The following, except one, can
mitigate the impact of double taxation. Choose the exception.
a. Tax exemption of the income already subjected to income tax
b. Tax credit for taxpayers who already paid taxes to other tax jurisdictions
c. Reciprocity provisions between tax laws of taxing jurisdictions
d. Tax minimization schemes that would lessen the impact of levy.
21.Business taxes such as percentage tax and value added tax are
a. Specific tax c. Indirect tax
b. Direct tax d. Local tax
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
th
Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
22.The state has complete discretion on the amount to be imposed, after distinguishing
between useful and non-useful activity. This statement denotes
a. License c. License fee
b. Toll d. Customs duty
24.There can be a classification of the subject matter being required to shoulder the
burden. Which is the exception?
a. Tax c. Toll
b. License fee d. Eminent domain
28.Which is incorrect?
a. The tax code shall prevail over generally accepted accounting standards/PFRs.
b. Tax treaties can prevail over the tax code.
c. Obligation arising from law is not presumed. There should be clear and express
constitutional grant of power before taxation, police power and eminent domain
could be exercised.
d. A tax system which is dominantly characterized by indirect taxes is referred to as a
regressive tax system.
30.Based on the provisions of the tax code, the Constitutional guarantee of progressive
taxation is applied only to
a. Individual taxpayers c. Both individuals and corporate taxpayers
b. Corporate taxpayers d. Citizens of the Philippines
31.The following, except one, are exceptions to the rule that tax exemptions must be
strictly construed.
a. Where the statute granting the exemption provides for liberal interpretation
thereof.
b. The taxpayer does not fall within the purview of exception by clear legislative
intent.
c. Case of special taxes relating to special cases and affecting only special classes of
persons.
d. Exemptions refer to public property.
33.The fundamental rule in taxation that the property of one county may not be taxed by
another country is known as
a. International law c. Reciprocity
b. International comity d. International limitation
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
th
Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
34.The City of Manila, claiming that it can impose taxes under the Local Government
Code, imposed a tax on banks (in addition to percentage tax on banks imposed in the
National Internal Revenue Code). The banks within the City of Manila objected for the
various reasons given below. Which would justify the objection of the banks?
a. The power of taxation cannot be delegated c. Uniformity in taxation
b. The rule of double taxation d. None of these
35.Some franchise holders who are paying the franchise tax are being required by an
amendatory law to pay the value-added tax, while others remain subject to franchise
tax. Which of the following provisions makes the law unconstitutional?
a. No law shall be passed impairing the obligations of contract
b. The rule of taxation shall be uniform
c. No person shall be deprived of property without due process of law
d. None of the above.
37.A taxpayer who had gross receipts derived from business in the preceding year did
not declare it when he paid the poll tax. He paid only the basic and tax and did not
pay the additional community tax based on gross receipts. Will he be imprisoned?
a. No. No person shall be imprisoned for non-payment of poll tax.
b. Yes. This is a case of tax evasion. Tax evasion is a criminal offense.
c. No. Paying the basic poll tax is enough. The additional poll tax is discretionary.
d. Yes. Non-payment of poll tax is punishable by imprisonment.
38.All forms of tax exemptions can be revoked except tax exemption based on
I. Constitution II. Contract III. Law
a. I only c. I and II only
b. II only d. I, II and III
39.License fee levied on the sale of bibles and other religious literature is violative of
a. Non-infringement of religious freedom
b. No appropriation for religious purposes
c. Exemption of religious, charitable or educational entities, non-profit cemeteries
and churches from property taxation.
d. Exemption of revenues and assets of non-stock, non-profit educational institution
and donations for educational purpose from taxes and duties.
40.The test of exemption of real properties owned by religious or charitable entities from
real property taxes is
a. Usage c. Location
b. Ownership d. Either ownership or location
41.A person made several misrepresentations in securing a loan despite his clear
inability to repay the same. When he defaulted, the creditor filed for legal action. Can
he be imprisoned?
a. No. Non-payment of debt would not lead to imprisonment.
b. Yes. This is estafa, a criminal offense subject to imprisonment.
c. No. Non-payment of debt is a civil, rather than a criminal case.
d. Yes. One can be imprisoned for non-payment of tax.
42.Which of the following is not legally tenable in refusing to pay a tax imposition?
a. Violation of taxpayers right of due process of law.
b. The taxing authority has no tax jurisdiction.
c. The prescriptive period of assessment has elapsed.
d. That there is no benefit that can be derived from the tax.
43.A law was passed by Congress which granted tax amnesty to those who have no paid
income tax for a certain year without at the same time providing for the refund of
taxes to whose who have already paid them. The law is:
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
th
Northern CPAR: Taxation Taxes, Tax Laws and Tax Administration
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 who 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.
46.Formal pronouncement intended to clarify or explain the tax law and carry into effect
its general provisions by providing details of administration and procedure.
a. BIR Ruling c. Opinions of the Secretary of Finance
b. Revenue regulation d. Revenue Memorandum Circular
49.Which is correct regarding the chief officials of the Bureau of Internal Revenue?
a. 1 Commissioner and 5 Deputy Commissioners c. 1 Commissioner and 4
Deputy Commissioners
b. 4 Commissioners and 1 Deputy Commissioner d. 2 Commissioner and 8
Deputy Commissioners
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That in all things God will be glorified! Rex B. Banggawan, CPA, MBA TAX 6 Batch HQ02
th