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Taxation - General Principles of Taxation 03/21/2019

EASY
Question #1
Our present income tax system is not considered as
a. using the progressive rate c. global for taxable corporations
b. regressive in character d. schedular for individuals
Question #2
Juan, student activist, wants to impugn the validity of a tax on text messages. Aside from claiming that the law adversely
affects him since he sends messages by text, what may he allege that would strengthen his claim to the right to file a
taxpayers suit?
a. That text messages are an important part of the lives of the people he represents.
b. That tax money is being extracted and spent in violation of the constitutionally guaranteed right to freedom of
communication.
c. That he is entitled to the return of the taxes collected from him in case the court nullifies the tax measure.
d. That he is filing the case in behalf of a substantial number of taxpayers.
Question #3
It is the governments duty to give taxpayers general advantages and protection in exchange for the contributions that
they have made. Which principle of taxation is described in this situation?
a. Life blood theory c. Fiscal adequacy
b. Theoretical justice d. Benefit-received principle
Question #4
The e-filing of tax returns and e-payment system are manifestations of
a. fiscal adequacy c. theoretical justice
b. administrative Feasibility d. all of the choices are correct
Question #5
This is not a purpose of taxation
a. To reduce inequalities of wealth
b. As protective tariff on imported tariff on imported goods to protect local producers against foreign competition
c. To encourage the growth of home industries through the proper use of tax incentives.
d. To expropriate property for the promotion of the general welfare
Question #6
In this power of state, the person who is parting with his money or property is presumed to receive a benefit all, except
one, there can be a classification of the subject matter being required to shoulder the burden. Which is the exception?
a. eminent domain c. none of the above
b. police power d. taxation
Question #7
Which of the following has no power of taxation?
a. barangays c. cities
b. provinces d. barrios
Question #8
They restrict the exercise of the power of taxation although they are not embodied in the Constitution
a. legislative character c. inherent limitations
b. theoretical justice d. constitutional limitations
Question #9
I A revenue regulation must not be contrary to the provision of the law that it implements.
II A revenue regulation cannot expand the provision of the law that implements by imposing a penalty
when the law that authorizes the revenue regulation does not impose a penalty.

a. False, true c. False, false

b. True, true d. True, false
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Question #10
I Direct double taxation is prohibited by the Philippine Constitution.
II Indirect double taxation is allowed by the Philippine Constitution.

a. True, true c. False, true

b. True, false d. False, false
Question #11
One of the following is the least principle of sound tax system
a. Administrative feasibility c. Fiscal adequacy
b. Theoretical justice d. Economic consistency
Question #12
The distinction of a tax from permit or license fee is that a tax is:
a. Answer not given.
b. Imposed for regulation.
c. One in which there is generally no limit on the amount that may be imposed.
d. One which involves an exercise of police power.
Question #13
Which of the following judicial pronouncements is most recent:
a. The BIR should be given the necessary discretion to avail itself of the most expeditious way to collect taxes.
b. Taxes cannot be imposed by the executive department not by the courts.
c. Upon taxation depends the Governments ability to serve the people for whose benefit taxes are collected.
d. The best evidence obtainable under Section 6 (B) of the NIRC does not include mere photocopies of
records/documents.
Question #14
There can be no tax unless there is a law imposing the tax is consistent with the doctrine or principle of
a. due process of law
b. uniformity in taxation
c. the power of taxation is very broad and the only limitation is the sense of responsibility of the members of the
legislature to their constituents.
d. non delegation of the power to tax
Question #15
The stages or aspects of taxation, except
a. levy or imposition c. prescription
b. payment by the taxpayer d. assessment and collection
Question #16
In case of conflict between tax laws and generally accepted accounting principles
a. The issue shall be resolved by the court c. Tax laws shall prevail over GAAP
b. Both tax laws and GAAP shall be enforced d. GAAP shall prevail over tax laws
Question #17
Which of the following is not a condition imposed by the Constitution for the exercise of the power of eminent domain?
a. The consent of the owner of the private property to sell the same to the government.
b. The observance of due process in taking of private property.
c. The existence of public use for the taking of a private property.
d. The payment of just compensation.
Question #18
Tax laws, being imposition of burden, are construed?
a. strictly against the taxpayer c. strictly against the government
b. by strict adherence to opinions of tax expert d. by filing a case before a regular court
Question #19
Which statement refers to police power as distinguished from taxation?
a. The amount imposed depends on whether the activity is useful or not.
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b. The amount imposed has no limit.

c. It can only be imposed on specific property or properties.
d. It involves the taking of property by the government.
Question #20
Which of the following is not a direct tax?
a. Income tax c. Contractors tax (now value-added tax)
b. Transfer tax d. Immigration tax

AVERAGE
Question #1
Which of the following concepts of taxation is the basis for the situs of income taxation?
a. Lifeblood doctrine c. Compensatory purpose of taxation
b. Sumptuary purpose of taxation d. Symbiotic relationship
Question #2
Your client owns a row of apartments. He complains to you that he is being required to pay 4 kinds of taxes on this line
of business alone. From the list given by your client, which of the following taxes has been wrongly imposed on him?
a. Community tax based on the assessed value of the apartment house
b. Value added tax on the gross receipts from rent
c. Real estate tax on the land and building
d. Income tax on income from rent
Question #3
This rule is not applicable on the construction of tax laws
a. If the law is repealed, taxes assessed before repeal of the law may no longer be collected
b. Provisions intended for the security of the taxpayer or to insure equality or uniformity of taxation are mandatory
c. Where the intent to tax is clear and the taxpayer clams he is exempt from the tax obligation, the tax shall be
construed against the taxpayer
d. If the intent of the tax is not clear as to whether taxpayer is covered by the tax obligation, the law shall be
construed against the government
Question #4
Statement 1 Direct double taxation involves 2 taxes by the same taxing authority.
Statement 2 Indirect double taxation involves 2 taxes by 2 different taxing authority.
a. The first statement is true, but the second statement is false
b. Both statements are false
c. The first statement is false, but the second statement is true
d. Both statements are true
Question #5
Which among the following concepts of taxation is the basis for the situs of income taxation?
a. Compensatory purpose of taxation c. Lifeblood doctrine of taxation
b. Sumptuary purpose of taxation d. Symbiotic relation in taxation
Question #6
Which among the following concepts of taxation is the basis for the situs of income taxation?
a. Lifeblood doctrine of taxation c. Compensatory purpose of taxation
b. Symbiotic relation in taxation d. Sumptuary purpose of taxation
Question #7
The Constitution requires that all revenue bills shall originate exclusively from the House of Representatives. Assume
that in 2014, Congressman Dilingalen proposed an expansion of the coverage of the VAT to be known as EVAT law. The
proposed bill was approved by the House of Representatives later that year. However, the EVAT version of the Senate
became the EVAT law.
Which of the following statements will justify the enacted EVAT law?
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I The Constitution simply means that the initiative for filing revenue, tariff or tax bills must come
from the House of Representatives on the theory that, elected as they are from the districts, the
Members of the House can be expected to be more sensitive to the local needs and problems.

II It is not the law but the revenue bill which is required by the Constitution to originate exclusively in
the House of Representatives because a bill originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole, and a distinct bill may be
produced.

a. Both I and II c. I only

b. II only d. Neither I nor II
Question #8
An annual tax of P500 was imposed upon all residents of the Philippines, who are above 21 years of age with a gross
income of P 250,000, whether or not they send their children to public schools. The tax is for the purpose of raising
funds in order to improve public school buildings. The tax is:
a. Violative of the equal protection clause of the Constitution
b. Confiscatory
c. Contradictory to the inherent limitations of taxation
d. For a public purpose
Question #9
Which of the following is not considered as a step in making a revenue regulation effective?
a. recommendation by the Commissioner of Internal Revenue to the Secretary of Finance
b. legislation by Congress
c. publication in a newspaper of general circulation
d. approval by the Secretary of Finance
Question #10
Government agencies performing essential governmental functions are exempt from tax unless expressly taxed.
Government agencies performing proprietary functions are subject to tax unless expressly exempted.
a. False, False b. True, False c. False, True d. True, True
Question #11
Which statement gives the correct answer? That a feasibility study needs or need not look into the taxes of different
political subdivisions of government which may be alternative sites of the business is because
a. provinces, cities and municipalities must have uniform taxes between and among themselves
b. businesses that are subject to national business taxes are exempt from local business taxes
c. local business taxes may be credited against national business taxes
d. the local taxes of one political subdivision need not be uniform with the local taxes of another political
subdivision
Question #12
I The levying, imposition and collection of tax are legislative in character
II The aspects of taxation shared by the legislative and executive branches of the government

a. True, false b. True, true c. False, true d. False, false

Question #13
The following are the differences between the power of taxation and the power of eminent domain, except:
a. power of taxation (attribute of sovereignty); power of eminent domain (fundamental power)
b. power of taxation (enforced proportionate contribution); power of eminent domain (property to be taken is for
public use)
c. power of taxation (operates in a community); power of eminent domain (operates on an individual)
d. power of taxation (government has no obligation to pay); power of eminent domain (government is a debtor of
the property taken)
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Question #14
Which statement is true?
The prohibition in the Philippine Constitution on taxation of religious corporations is
a. A prohibition on imposition of any and all local taxes on the corporation
b. A prohibition on imposition of property taxes on the corporation
c. A prohibition on imposition of any and all national taxes on the corporation
d. A prohibition on imposition of excise taxes on the corporation
Question #15
Which of the following is not a scheme of shifting the incidence of taxation
a. the manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold
b. the purchaser asks for a discount or refuse to buy at regular prices unless it is reduced by the amount equal to
the tax he will pay
c. changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the
title passes abroad instead of in the Philippines
d. the manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer
and finally to the consumer.
Question #16
Direct double taxation is allowed by the Philippine Constitution.
Indirect double taxation is prohibited by the Philippine Constitution.
a. False, True b. False, False c. True, True d. True, False
Question #17
Statement 1 VAT is a property tax
Statement 2 The estate tax is a direct tax
a. Both statements are false
b. Both statements are true
c. The first statement is false, but the second statement is true
d. The first statement is true, but the second statement is false
Question #18
The rule in taxation is that the property of a Filipino taxpayer in the United States cannot be taxed in the Philippines is
recognition of the principle of:
a. Territoriality b. International comity c. International law d. Reciprocity
Question #19
The following are basic principles of a sound tax system
a. fiscal adequacy, administrative feasibility and theoretical justice
b. fiscal deficit, administrative feasibility, and ability to pay
c. fiscal adequacy, ability to pay, symbiotic relationship
d. fiscal adequacy, economic feasibility and theoretical justice
Question #20
The actual effort exerted by the government to effect the exaction of what is due to the taxpayer is known as:
a. Collection
b. Levy
c. Assessment
d. Payment

DIFFICULT
Question #1
The secondary or non-revenue purposes of taxation include the following except:
a. to reduce social inequality
b. to protect our local industry against unfair foreign competition
c. as an implement of the power of eminent domain
d. to encourage the growth of local industries
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Question #2
Many European countries have adopted the value-added tax as the major source of revenue to avoid the
a. effect of income taxes d. compounding effect of sales taxes
b. compounding effect of withholding taxes e. compounding effect of capital taxes
c. effect of business taxes
Question #3
Statement 1 A license fee at an amount that is more than necessary for regulation is a tax, and hence
may be imposed only on a clear authority under the law to impose the tax.
Statement 2 A tax levied for a special purpose, which is spent for purposes other than those stated in
the law for its use, if involving a huge amount, may tantamount to the crime of plunder.
a. The first statement is false, but the second statement is true
b. Both statements are true
c. Both statements are false
d. The first statement is true, but the second statement is false
Question #4
Taxation is a necessary burden to preserve the State’s sovereignty, and a means to give the citizenry an army to resist an
aggression, a navy to defend its shores from invasions, a corps of civil servants to serve, public improvement designed
for the enjoyment of the citizenry and protection which a government is supposed to provide
a. taxation involves the reciprocal obligation of the State and the citizens
b. taxation emanating from necessity
c. taxation is unlimited in scope
d. taxation is inherent in sovereignty
Question #5
The Constitution does not prohibit indirect taxes. What the Constitution provides is that Congress shall evolve a
progressive system of taxation. Resort to indirect taxes should be minimized but not avoided because it is difficult, if not
impossible, to avoid them
a. regressive taxes is in accordance with theoretical justice or ability to pay
b. regressive taxes do not violate Sec 28 (1), Art VI of the Constitution
c. indirect taxes should be shifted without violating public purpose
d. indirect taxes do not violate due process
Question #6
Taxes are enforced proportional contributions from persons and property because
a. they are levied by the authority of the law
b. they are obligations created by law predicated on equitable taxation.
c. they are based on taxpayer’s ability to pay
d. they are the lifeblood of the government
Question #7
Taxes are assessed for the purpose of generating revenues to be used for public needs. Taxation itself is the power by
which the State raises revenue to defray the expenses of the government. A jurist said that a tax is what we pay for
civilization
a. laws are imposed on persons and property within the territorial jurisdiction of s State
b. taxes are pecuniary in nature
c. taxes are enforced charges and contributions
d. Taxes are levied by the legislative branch of the government
e. taxes are assessed according to a reasonable rule of apportionment
Question #8
The religious sect was organized as a corporation sole. It owns a 5,000 sq. m. lot, registered in the name of the head
priest, and rented out for use as a school site of an educational institution organized for profit. The sect used the rentals
for the support and upkeep of its priests. Choose which among the following is the most appropriate ruling with regard
to real property tax (RPT) exemption of the 5,000 sq. m. lot?
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a. Exempt from the payment of RPT because it is actually, directly and exclusively used for educational purposes.
b. Not exempt from the payment of RPT because the user is organized for profit.
c. Exempt from the payment of RPT because it is actually, directly and exclusively used for religious purposes.
d. Not exempt from the payment of RPT because it is the proceeds, and not the property, that is actually, directly
and exclusively used for religious purposes.
Question #9
The fundamental principles of local taxation are
a. to allow the collection of taxes to private person
b. private purpose
c. all of the above
d. uniformity principle
Question #10
A suit filed by a taxpayer questioning the constitutional of a law on the theory that the expenditure of public funds of
the government for the purpose of administering an unconstitutional law constitutes a misapplication of such funds.
a. constitutionality suit c. tax suit
b. suit for certiorari and prohibition d. derivative or representative suit
Question #11
Advantages of the foreign trade zone to exporters appear to have been
a. unknown d. exaggerated
b. overlooked e. well documented
c. well known
Question #12
The power of Mindoro to impose a gross sales tax of 1/2 percent on the gross freight and fares of the cargo and
passengers shipped or transported out from Mindoro by vessels plying between the city and other ports was held valid.
a. an exception to the principle of non-delegability of the power of taxation
b. the taxing power of the State cannot be delegated
c. local governments units have the power of taxation like the State
d. taxation of the local governments is inherent
Question #13
Statement 1 In criminal cases involving tax offenses punishable by the NIRC, prescription is
construed strictly against the government.
Statement 2 In civil cases involving the collection of internal revenue taxes, prescription is
construed strictly against the government and liberally in favor of the taxpayer

a. Only Statement 1 is True c. Only Statement 2 is True

b. Both Statements are True d. Both Statements are False
Question #14
One who seeks a tax exemption should:
a. Point to specific words in the tax exemption law which unmistakably grant the exemption
b. Not pay the tax, and wait for an assessment notice from the BIR which could then be the subject of a protest
c. Invoke the warning that the State should recognize the exemption so as not to kill the hen that lays the golden
eggs.
d. First pay the tax, and after doing so, apply for a tax refund; if denied, seek refuge with the Court of Tax Appeals
Question #15
When different types of income are subjected to common tax rates, the tax system is described as
a. totality tax system c. segregated tax system
b. gross income system d. schedular tax system
Question #16
The multiple situs of taxation may seek relief by reducing the amount of tax by way of
a. tax credit
b. international tax treaty on the basis of reciprocity
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c. tax declaration
d. tax exemption
Question #17
Collection of taxes cannot be enjoined as government would not be able to perform its function because
a. fiscal adequacy demands for their immediate collection
b. taxes are the lifeblood of government
c. taxation is inherent in sovereignty
d. taxation is for a public purpose
Question #18
Real property taxes should not disregard increases in the value of real property occurring over a long period of time. To
do otherwise would violate the canon of a sound tax system referred to as
a. symbiotic relationship. c. administrative feasibility.
b. fiscal adequacy. d. theoretical justice.
Question #19
Srictissimi juris may be applied in the construction and interpretation of tax laws except
a. local ordinance granting tax amnesty
b. special law lowering tax rate
c. local ordinance imposing business tax
d. provision of the NIRC granting tax credit
Question #20
Which of the following is not a necessary condition to become a tax haven country?
a. no national tax treaties
b. good communication system
c. freedom of currency movements
d. a stable government
e. low taxes
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ANSWERS:
1. B
2. B
3. D
4. B
5. D
6. D
7. D
Provinces, cities and barangays have no inherent power to tax. However, taxing power has been tied
up to them by the local autonomy, thus authorizing these local government units to exercise the power,
subject to limitations set by law.
8. C
9. B
10. C
The Philippine Constitution has provisions on taxation. There is no provision that prohibits double
taxation. Since double taxation is not prohibited, therefore, it is allowed.
11. D
Economic consistency is not a principle of a sound tax system.
12. C
The power is very broad and comprehensive. The amount of tax is dictated by the needs of the
government. The tax system should have fiscal adequacy.
13. B
14. D
Taxation is an inherent power of the state and is essentially a legislative power that is exercised with
the enactment of the law.
15. C
16. C
Tax laws are passed by the legislative body while generally accepted accounting principles are
formulated by the Financial Reporting Standards Council. The accounting principles should always be
in accordance with law otherwise, it is not enforceable.
17. A
18. C
19. A
In the exercise of police power and imposing an amount as license fee, when the activity or business
being regulated is useful, the rule is that the amount of license fee should only be such amount as shall
be necessary to carry out regulation. On the other hand, when the activity or business being regulated
is non-useful, the licensing government (national or local) has complete discretion on the amount to
impose.
20. C

1. D
2. A
3. A
4. D
5. D
6. B
7. A
8. D
9. B
Although revenue regulations have the force and effect of law they are, strictly speaking not tax laws.
Hence, legislation by Congress is no longer necessary for its implementation.
10. D
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11. D
Under the Local Government Code, LGU are given the power to impose local taxes. One limitation on
the taxing power of the local government is that the tax imposed should be uniform. In local taxation,
uniformity is required only within the territory of the taxing authority. Hence, one LGU can have taxes of
different amounts from that of another LGU
12. C
13. A
14. B
15. C
16. D
17. C - VAT is an excise tax.
18. A
19. A
20. A

1. C
2. C
3. B
4. B
5. B
6. B
7. D
Taxes are levied by the legislative branch of government. It is part of the nature of taxation that it is
legislative in character because tax laws are rules, and the constitution has allocated to the legislative
department the enactment of laws.
8. A
9. A
10. D
11. B
12. A
13. C
14. A
15. A
16. A
17. B
18. B
19. C
20. A