Assignment 1 - Fundamental Principles of Taxation

BATANGAS STATE UNIVERSITY
College of Accountancy, Business, Economics

& International Hospitality Management
Gov. Pablo Borbon Campus I, Batangas City, Philippines 4200
www.bat-state.edu.ph Telefax: (043) 300-2202 loc 226
Name: Bagui, Edward Glenn L. Course and Section: BSA - 3103 SR Code: 18-56350
General Direction: Select the correct answer.
Definition, Purpose, Theory and Basis
1. Which of the following statements is incorrect?

a. Taxes are the revenues raised in the exercise of the police power of the State.
b. One of the special characteristics of tax is it is unlimited in amount.
c. The three fundamental powers of the State are inherent in the State and may be exercised without the need of any
constitutional grant.
d. All of the above.
2. The State having sovereignty can enforce contributions (tax) upon its citizens even without a specific provision in
the Constitution authorizing it. Which of the following will justify the foregoing statement?
a. It is so because the State has the supreme power to command and enforce obedience to its will from the people
within its jurisdiction.
b. Any provision in the Constitution regarding taxation does not create rights for the sovereignty to have the power
to tax but it merely constitutes limitations upon the supremacy of tax power.
c. Both a and b
d. Neither a nor b
3. Statement 1: The distinction of a tax from permit or license fee is that a tax is imposed for regulation.
Statement 2: Non-payment of tax does not necessarily render a business illegal.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.
4. The primary purpose of taxation is to raise revenue for the support of the government. However, taxation is often
employed as a device for regulation by means of which, certain effects or conditions envisioned by the government
may be achieved such as:
a. Taxation may be used to provide incentive to greater production through grant of tax exemptions.
b. Taxation can strengthen weak enterprises by creating conditions conducive to their growth through grant of tax
exemptions.
c. Tax may be increased in periods of prosperity to curb spending power and halt inflation or lowered in periods of
slump to expand business and ward off depression.
d. All of the above.
5. Which of the following statements is correct?

a. The purpose of taxation may also be compensatory meaning it may be used to make up for the benefit received.
b. Taxes may be imposed for the equitable distribution of wealth and income in society.
c. Both a and b
d. Neither a nor b
6. 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. Power to destroy theory
b. Lifeblood theory
c. Sumptuary theory
d. Symbiotic doctrine
7. On a theoretical basis of taxation, which of the following statements is true?

a. People pay taxes which their government uses to expand its powers and territorial domination.
b. People demand from their government certain responsibilities and then provide this government with the means
to carry them out.
c. State needs taxation to exist, while people must support taxation because they need the presence of the state.
d. B and c
8. Incidence of taxation means

a. Shifting of tax
b. Refunds of tax
c. Payment of tax
d. Imposition of tax
9. The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is known as
a. Assessment
b. Levy
c. Payment
d. collection
10. Statement 1: Symbiotic relation is the reason why the government would impose taxes on the income of resident
citizens derived from sources outside the Philippines.
Statement 2: Jurisdiction is the reason why citizens must provide support to the state so the latter could continue to
give protection.
a. Only Statement 1 is correct.
b. Only Statement 2 is correct.
11. A law was passed by Congress which granted tax amnesty to those who have not paid income taxes for a certain
year and at the same time providing for the refund of taxes to those who have already paid them. The law is
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 that 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.
12. Congress passed a new law imposing taxes on income earned out of particular activity that was not previously
taxed. The law, however, taxed incomes already earned within the fiscal year when the law took effect. Is the law
valid?
a. No, because the laws are intended to be prospective not retroactive.
b. No, the law is arbitrary in that it taxes income that has been already spent.
c. Yes, since the tax laws are the lifeblood of the government.
d. Yes, tax laws are an exception; they can be given retroactive effect.
13. Being a legislative in nature, the power to tax may not be delegated except
a. To local governments or political subdivisions
b. When allowed by constitution
c. When delegation related 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 the policy and purpose of the act.
d. All of the above
Scope and Aspect of Taxation

14. Statement 1: The aspects of taxation are shared by the legislative and executive branches of the government.
Statement 2: Taxes should be prospective and should not be given retroactive effects because they are burdens.
a. Only Statement 1 is correct.
b. Only Statement 2 is correct.
15. The following are the aspects of taxation

I - Levy or imposition of the tax on persons, property or excises
II - Collection of taxes already levied
III - Sufficiency of government sources to satisfy its expenditure
a. I, II & III
b. I & II only
c. I & III only
d. II & III only
16. Which of the following is incorrect?

Legislative Administrative
a. Selecting the kind of tax Yes No
b. Fixing amount of tax Yes No
c. Prescribing rules of taxation Yes No
d. Assessment of tax liability Yes No
17. Which of the following is correct?

Legislative Administrative
a. Fixing of tax rates Yes Yes
b. Valuation of object of tax Yes No
c. Collection of tax Yes No
d. Assessment of tax liability No Yes
Inherent Powers of the State

18. Statement I: Inherent powers of the state exist independent of the constitution.
Statement II: The taxing power of the local government units precede from a constitutional grant.
a. Statements I&II are false.
b. Statement I&II are true.
c. Statement I is true but Statement II is false.
d. Statement I is false but Statement II is true.
19. The following are the characteristics of the State’s power to tax except
a. The strongest of all inherent powers of the State
b. Involves power to destroy
c. Both a and b
d. Neither a nor b
20. Levying of local government taxes may be exercised by:

a. The local executive only
b. The legislative branch of the local government only
c. The local executive and the legislative branch of the local government unit
d. Neither the local executive nor the legislative branch of the local government can exercise the power.
21. Where does taxing power of provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or executive act
d. Local legislation
22. Statement 1: Eminent domain may raise money for the government.
Statement 2: Barrios, barangays, municipalities/cities and provinces may collect taxes from its inhabitants.
a. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true.
Nature , Characteristics and Construction of Tax Laws

23. The following are the nature of taxation except
a. Inherent and sovereignty
b. Essentially a legislative function
c. Subject to inherent and constitutional limitation
d. Subject to the approval of the people
24. The power to tax involves power to destroy means:

a. The power to tax is viewed as the power to destroy in the sense that a lawful tax cannot be defeated just because
its exercise would be destructive or would bring about insolvency to a taxpayer.
b. The principle applies that an imposition of lawful regulatory taxes would be destructive to the taxpayers and
business establishments because the government can compel payment of tax and forfeiture of property through
the exercise of police power.
c. Both a and b
d. Neither a nor b
25. There can be no tax unless there is a law imposing the tax is consistent with the doctrine of
a. Uniformity in taxation
b. Due process of law
c. Non-delegation of the power of tax
d. All of the above
26. The tax should be based on the taxpayer's ability to pay. In relation to this, which of the following is not correct?
a. No person shall be imprisoned for non-payment of tax.
b. A graduated tax table is in consonance with this statement.
c. As a theory of taxation, ability to pay theory.
d. As a basic principle of taxation, this is called “theoretical justice”
27. Rule of “no estoppel against the government” means

a. Rule of law that in the performance of its governmental functions, the state cannot be estopped by the neglect of
its agents and officers.
b. The government is not estopped by the mistakes or errors of its agents; erroneous application and enforcement of
law by public officers do not block the subsequent correct application of statutes.
c. Both a and b
d. Neither a nor b
28. Progressivity of taxation is also mandated in the Constitution.

Statement 1: Our income tax system is one good example of such progressivity because it is built on the principle of
taxpayer’s ability to pay.
Statement 2: Taxation is progressive when their rates go up depending on the resources of the person affected.
29. One of the characteristics of our internal revenue law is that they are
a. Political in nature
b. Penal in nature
c. Generally prospective in operation although the tax statute may nevertheless operate retrospectively provided it is
clearly the legislative intent.
d. Criminal in nature
30. Which of the following distinguishes tax from license fee?

a. Non-payment does not necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation
31. The least source of tax laws:

a. Statutes
b. Presidential Decrees
c. Revenue regulations
d. Tax treaties or conventions
32. In every case of doubt, tax statutes are construed

a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
33. In every case of doubt, tax exemption are construed

a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
34. Tax of a fix amount imposed among all persons residing within a specified territory
without regards to their property or occupation they may be engaged
a. Personal, poll or capitation tax
b. Property
c. Excise
d. regressive tax
35. Tax of fixed proportion of the amount or value of property with respect to which the tax
assessed
a. Ad valorem
b. Specific
c. Excise
d. Revenue
36. Tax base on a fix percentage of the amount of property, income or other basis to be taxed
a. Progressive
b. Proportional
c. regressive tax
d. Indirect
37. Which of the following is a characteristic of taxation which distinguishes it from police power and eminent
domain?
a. For public purposes
b. Legislative in nature
c. Generally payable in money
d. Inferior to non-impairment clause in the Constitution
Sound Tax System

38. The following are the basic principles of sound tax system
I. It should be capable of being effectively enforced.
II. It must be progressive
III. Sources of revenue must be sufficient to meet government expenditures and other public needs.
IV. It should be exercised to promote public welfare.
a. I and II only
b. III and IV only
c. I, II and III only
d. All of the above
39. The sources of revenue should be sufficient to meet the demands of public expenditures. This refers to
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
40. The tax should be imposed proportionate to the taxpayer’s ability to pay
b. Fiscal adequacy
41. The tax law must be capable of convenient just and effective administration
b. Fiscal adequacy
Inherent and Constitutional Limitations

42. Equality in taxation means
I. Progressive system of taxation shall be applied.
II. The tax laws and their application must be fair, just, reasonable and proportionate to one’s ability to pay.
III. The tax laws shall give emphasis on direct rather than indirect taxes or on the ability-to-pay principle of taxation.
a. I only
b. II only
c. III only
d. I, II & III only
43. Which of the following restrictions on the power of taxation recognizes that the country’s
tax laws shall not be applied to the property of foreign governments?
a. Taxation is inherently a legislative function
b. Exercise of taxation is subject to international comity
c. Due process of law
d. Equal protection of law
44. This is an inherent limitation on the power of taxation.

a. The rule on taxation shall be uniform and equitable.
b. No law impairing the obligations and contracts shall be enacted
c. Charitable institutions, churches, personages or convents belonging thereto, mosque and non-profits cemeteries
and all kinds of lands, building and improvements actually, directly and exclusively used for religious and
charitable purposes shall be exempt from taxation
d. The tax laws cannot apply to the property of foreign government
Exemption versus Amnesty

45. Exemption from tax is a privilege which is being looked upon by law with disfavor because everyone should be
sharing the burden of taxation. On account of this view, exemption from tax is construed strictly against the taxpayer,
except in certain situation like:
a. Exemption is granted to the impoverished sector in certain situation
b. Exemption relates to a public official
c. Exemption refers to a public property
d. All of the above
46. Tax exemption is made different from tax amnesty:

a. It is a privilege or freedom from tax burden;
b. It allows immunity from all criminal, civil and administrative liabilities arising from non-payment of taxes;
c. Amount foregone by the government is substantial;
d. It applies to past, present and future obligations.
47. Statement 1: Tax exemption applies only to government entities that exercise proprietary functions.
Statement 2: All government entities regardless of their functions are exempted from taxes because it would be
impractical for the government to be taxing itself.
Tax Avoidance/Double Taxation

48. Which of the following is to be regarded as tax minimization through legal means?
a. Not declaring all taxable income
b. Padding of expenses for deduction from income
c. Opting to transfer the property through sale rather than through donation where tax liability is higher
d. All of the above
49. Which of the following is correct?

a. Tax avoidance or tax minimization through legal means is not punishable by law.
b. Deliberate reduction of taxable income that has been received is an example of tax avoidance.
c. Evasion of tax takes place only when there are no proceeds on the part of the government
d. All of the above
50. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In this
sense, double taxation
a. Violates substantive due process.
b. Does not violate substantive due process.
c. Violates the right to equal protection.
d. Does not violate the right to equal protection

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BATANGAS STATE UNIVERSITY

College of Accountancy, Business, Economics

General Direction: Select the correct answer.

Definition, Purpose, Theory and Basis

1. Which of the following statements is incorrect?

5. Which of the following statements is correct?

7. On a theoretical basis of taxation, which of the following statements is true?

8. Incidence of taxation means

Scope and Aspect of Taxation

15. The following are the aspects of taxation

16. Which of the following is incorrect?

17. Which of the following is correct?

Inherent Powers of the State

20. Levying of local government taxes may be exercised by:

Nature , Characteristics and Construction of Tax Laws

24. The power to tax involves power to destroy means:

27. Rule of “no estoppel against the government” means

28. Progressivity of taxation is also mandated in the Constitution.

30. Which of the following distinguishes tax from license fee?

31. The least source of tax laws:

32. In every case of doubt, tax statutes are construed

33. In every case of doubt, tax exemption are construed

Sound Tax System

Inherent and Constitutional Limitations

44. This is an inherent limitation on the power of taxation.

Exemption versus Amnesty

46. Tax exemption is made different from tax amnesty:

Tax Avoidance/Double Taxation

49. Which of the following is correct?

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