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Taxation
1. As a power – refers to the inherent power of the state to demand enforced contribution for
public purpose to support the government.
2. As a process – the legislative act of laying a tax to raise income for the government to defray its
necessary expenses
Purpose of Taxation
1. Primary – to raise revenue
2. Secondary
a. Regulatory
- To regulate the conduct of businesses or professions
- To achieve economic and social stability
- To protect local industries
b. Compensatory
- Key instrument of social control - Check inflations
- Reduces inequities in wealth distributions - Tools on international bargains
- Strengthens anemic enterprises - Promotes science and inventions
- Provides incentives
- Uses as implement in the exercise of police power to promote general welfare
How exercised:
- Legislation of laws by Congress and tax ordinances by the Local Sangguanian
- Tax collection by the administrative branch of the government
Impact of
taxation
B. Inherent Limitation
1. territoriality of taxation
2. subject to international comity or treaty
3. tax exemption of the government
4. tax is for public purpose
5. non-delegation of the power of taxation
*The last 2 limitations are also Constitutional limitations
SITUS OF TAXATION
The place of taxation
DOUBLE TAXATION
Taxing the object or subject within the territorial jurisdiction twice, for the same period, involving
the same kind of tax by the same taxing authority
Kinds:
1. Direct Double Taxation – this objectionable and prohibited because it violates the
constitutional provision on uniformity and equality
2. Indirect Double Taxation – no constitutional violation. Ex: taxing the same property by two
different taxing authority
International Double Taxation –a double taxation caused by two different taxing authorities, one
domestic and one foreign
Tax Exemptions:
is not automatic
is non-transferable
is revocable by the government (except when granted under a valid contract or by the Constitution)
rule shall be uniform
does not contravene the LifeBlood Doctrine
is always disfavored
is allowed only under a clear and unequivocal provision of the law
on real property tax will be based on the Doctrine of Usage and not Doctrine of Ownership, except for
real properties owned by the government which is absolutely exempt form taxation
on real property tax cannot be granted by local governments but can condone real property tax
liabilities in special cases
on local taxes can be granted by local governments but they cannot condone existing liabilities on
local taxes
Tax Condonation – means to remit or to desist or refrain form exacting or imposing a tax. It
cannot extend to refund of taxes already paid when obtaining condonation.
2. This theory underscores that taxes are indispensable to the existence of the state.
a. Doctrine of equitable recoupment c. The benefit received theory
b. The lifeblood doctrine d. The Holmes Doctrine
b
5. That tax laws should be certain and consider the taxpayer’s ability to pay denotes
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Compatibility with economic objectives
c
10. When tax is recovered by the manufacturer or producer by finding out means of improvement
in production so as savings would compensate for taxes, this is known as?
a. Capitalization c. backward shifting
b. onward shifting d. transformation
d
12. When the impact and incidence of taxation are merged into the statutory taxpayer, the tax is
called?
a. personal tax c. indirect tax
b. direct tax d. national tax
c
13. The following are inherent limitation on the power to tax. Which is the exception?
a. Territoriality of taxes c. Public purpose
b. Legislative in character d. Non-appropriation for religious purpose
d
17. Public improvement is a requisite to the exercise of which power of the state?
a. Police power c. Eminent domain
b. Taxation d. Eminent domain and taxation
d
18. Public utility entities may in some circumstance exercise the power of eminent domain. Which
of the following is not a public utility?
a. Electric cooperatives c. Telecommunication business
b. Water cooperatives d. Manufacturing business
d
19. I. Police power and the power of taxation are exercised primarily by the legislature but not
eminent domain
II. Taxation and eminent domain interferes with private right and property but not with police
power
a. I is true c. I and II are true
b. II is true d. I and II are not true
d
21. The inherent powers of the state are similar in the following respect, except?
a. inherent to the existence of the state
b. exercisable without the need for an express constitutional grant
c. all affects property rights
d. exercised primarily by the legislature
c
22. The following statement correctly states the differences among the inherent powers of the state,
except?
a. the property taken under eminent domain and taxation are preserved but that of police power is
destroyed
b. eminent domain do not require constitutional grant but taxation being formidable does in order
to limit its exercise by the legislature
c. police power and taxation is exercised only by the government but eminent domain may be
exercised by private entities
d. Police power regulates both property and liberty; eminent domain and taxation affects only
property rights
b
26. Which of the following is not an inherent limitation of the power to tax?
a. tax should be levied for public purpose
b. taxation is limited to its territorial jurisdiction
c. tax laws shall be uniform and equitable
d. exemption of government agencies and instrumentalities
27. Which of the following is not a constitutional limitation of the power to tax?
a. non-impairment of obligation or contracts
b. due process and equal protection of the law
c. non-appropriation for religious purposes
d. non-delegation of the taxing power
d
28. Agreement among nation to lessen tax burden of their respective subject is called:
a. Reciprocity c. territoriality
b. international comity d. tax minimization
b
30. The constitutional exemption of religious or charitable institution refers only to:
a. real property tax c. real property tax and income tax
b. income tax d. business tax
a
31. When a legislative body taxes persons and property, rights and privilege under the same taxable
category at the same rate, this is referred to as compliance with the constitutional limitation of:
a. Equity c. due process
b. Uniformity d. equal protection clause
b
32. When a certain tax imposed base tax burden on the ability of the subject to pay the tax, this is
construed as complying with the inherent limitation of taxation which is:
a. Equity c. due process
b. Uniformity d. none
a
33. The constitutional requirement for non-provision of any tax-exempt legislation without the
concurrence of the majority of all the members of Congress is intended to prevent:
a. legislation of burdensome or oppressive tax laws
b. to ensure that the government will no incur a deficit
c. ensure approval of all tax bills prior to becoming tax laws
d. unethical lobbying in the lawmaking body
d
34. I. Taxation is the rule; exemption is the exception.
II. Taxation may be used to implement the police power of the state.
a. I is true c. I and II are true
b. II is true d. I and II are not true
36. This refer to the privilege or immunity from a tax burden of which others are subjected to:
a. Exclusion c. tax holiday
b. Deduction d. reciprocity
a
37. Mr. Sorotski, is a professional practitioner as a management adviser. In addition, he held various
properties and currently engaged in diverse business operations. As a result, he has P1,895,000.00
in personal tax aside from his basic tax of P5.00. If Mr. Sorotski intentionally disregard to pay his
total personal tax, which of the following is correct?
a. Mr. Sorotski can be imprisoned for non-payment of the P5.00 personal tax.
b. Mr. Sorotski cannot be imprisoned for non-payment of the personal tax because he is a
professional wherein his imprisonment could cause economic loss to the country.
c. If Mr. Sorotski pays only the P5.00 personal tax, he cannot be imprisoned.
d. Non-payment of the additional tax could cause imprisonment.
d
38. DEF Shipping Lines operates a fleet of sheep from Metro Manila to Zambonga. DEF was
exempted from payments of the franchise tax but in return it has to transport government mails
and other government correspondence to and from Metro Manila and Zamboanga. Subsequently, a
new law was passed removing such exemptions and requiring DEF to pay the franchise tax. Which
of the following is correct?
a. The tax law is valid since the power of taxation is broad.
b. The new law is invalid being unconstitutional.
c. The new law is invalid since exemption, once given, can’t be revoke if it prejudice the taxpayer.
d. The new law is valid since tax is dictated by the needs of the government.
a
39. Wolf has many tax evasion cases. For most, he was found guilty by the courts. Which of the
following can be his sanctions?
A. Capital punishment B. Imprisonment C. Confiscation of his properties
a. A,B; C c. B; C
b. A; C d. C only
a
40. Owl has a P5,000,000.00 tax evasion case with the BIR. BIR rendered him an assessment but his
appeal failed to meet the deadline due to his undue hesitation to answer for the notice of
assessment. As a result, the assessment became final and demandable. Which of the following is
correct?
a. Owl should be allowed an extension since the amount of the tax is highly material so as his right
for equal protection of the law will not be denied
b. Due process is not violated so long as the consideration is to be given by the BIR.
c. Due process is not violated.
d. Owl should demand for compromise so as he will be overburdened.
b
41. The tax imposed upon the performance of an act, the enjoyment of a privilege or engaging in a
profession is known as?
a. Income tax c. Excise tax
b. License d. Transfer tax
c
42. When the determination of the amount of the tax requires an assessment of the value of the
subject of tax, this type of tax is known as?
a. proportional tax c. ad valorem tax
b. specific tax d. progressive tax
c
48. I. One of the essential characteristic of tax is its being unlimited in amount.
II. The State has complete discretion on the amount of license to be imposed after distinguishing
between useful and non-useful activity.
a. I is true c. I and II are true
b. II is true d. I and II are not true
b
49. Which of the following is correct regarding the tax table for individual taxable income for
residents and citizens?
a. the table shows purely progressive tax rates
b. the tax table is a combination of proportional and progressive tax rates
c. low income earners are subject to proportional rate while high income earners are subject to
both proportional and progressive tax rates
d. none of the above
b
56. Which of the following powers of the Commissioner of Internal Revenue cannot be delegated?
a. The examination of tax return and tax due thereon
b. To refund or credit tax liabilities in certain cases
c. The power to compromise or abate any tax liability involving basic deficiency tax of P500,000
and minor criminal violations
d. The power to reverse a ruling of first impression
b
57. The following are the limitation on the taxing power of the state. Which of the following
inherent limitation of taxation is also categorized as a constitutional limitation?
A. Territoriality of taxation
B. Exemption of the government
C. Public purpose of taxation
D. Non-impairment of contracts
E. Non-delegation of the power to tax
a. A and B c. C and E
b. B and C d. D and E
58. Which of the following forms of escapes to taxation will more likely to result in direct loss of
revenue to the government?
a. Shifting c. transformation
b. Capitalization d. tax exemption
59. When exemption from a tax imposition is silent or not clearly stated, which statement is true?
a. Taxation applies since exemptions are construed against the government.
b. Exemption still applies since this is exemption by omission.
c. Taxation applies since exemptions are to be construed against the taxpayer.
d. Exemption applies since obligation arising from law cannot be presumed and hence construed
against the government.
60. When the provisions of tax laws are silent as to the taxability of an item, which is true?
a. Taxation applies since taxation is the rule, exemption is the exception.
b. Exemption applies since vague tax laws are construed against the government.
c. Taxation applies in accordance with the Lifeblood doctrine.
d. Exemption applies since obligation arising from law is presumed; ignorance of the law is not an
excuse.
62. Select the incorrect statement regarding tax amnesty and condonation.
a. In tax amnesty, violators are required to pay a portion of the tax assessed.
b. When the remaining unpaid portion of the tax is condoned, the taxpayer cannot ask for refund
for the balance already paid.
c. Tax amnesty operates as a general pardon and is always not available.
d. Tax condonation operates on the whole balance of the assessed tax and not only to the unpaid
portion.