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General Principles Taxation
General Principles Taxation
a. Taxes may be imposed to raise revenues or to provide distinctive disincentives to certain activities
within the state;
b. The state can have the power of taxation even if the Constitution does not expressly give it the
power to tax;
c. For the exercise of the power of taxation, the state can tax anything at any time;
d. The provisions of tax in the Philippine Constitution are grants of power and not limitations on
taxing powers.
(2) One of the characteristics of internal revenue laws is that they are:
a. Criminal in nature;
b. Penal in nature;
c. Political in nature;
(3) One of the characteristics of our internal revenue laws 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;
(4) In case of conflict between tax laws and generally accepted accounting principles (GAAP):
d. The issue shall be resolved by the Supreme Court as it is the one in charged for interpreting and
clarifying provisions of laws.
(5) The following are similarities of the inherent power of taxation, eminent domain, and police
power, except one:
a. Are necessary attributes of sovereignty;
a. Transfer tax;
b. Sales tax;
d. Income tax.
INHERENT POWERS
(7) Which of the following may not raise money for the government?
a. Power of taxation;
c. Police power;
(8) In this power of the state, the person who is parting with his money or property is presumed to
receive a benefit:
a. Taxation;
b. Police power;
c. Eminent domain;
d. Forfeiture power.
(11)The following are the similarities of the inherent power of taxation, eminent domain and police
power, except one:
(12)As a basic principle of taxation, “taxes must be based on the taxpayer’s ability to pay” is called:
a. Equality in taxation;
c. Theoretical justice;
d. Equity in taxation.
(13)Under this basic principle of sound tax system, the government must be sufficient and should not
incur a deficit:
a. Theoretical justice;
b. Fiscal adequacy;
c. Administrative feasibility;
d. Debt restructuring.
(14)What basic principle of a sound tax system is met when the Congress evolves a progressive system
of taxation as mandated in the constitution?
a. Fiscal adequacy;
b. Administrative feasibility;
c. Theoretical justice;
d. Balanced budget.
a. Provinces;
b. Cities;
c. Barangays;
d. Barrios.
(17)A fundamental rule in taxation is that the property of one country may not be taxed by another
country. This is known as:
a. International law;
b. International comity;
c. Reciprocity;
d. International inhibition.
(18)There can be no tax unless there is a law imposing that tax is consistent with the doctrine principle
of:
a. Uniformity in taxation;
d. 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.
DOUBLE TAXATION
(19)Mrs. Napoles is the owner of various real estate properties in Baguio. These properties are for lease
and yield rental income to Napoles. Every year, she pays value-added tax to the BIR. The city
government of Baguio enacts an ordinance imposing tax on her a lessor tax in accordance with the
schedule of amounts related to her gross rental income from the same real properties.
First question: Does the local ordinance, constitute, in effect, double taxation?
Answer: Yes, there is double taxation because there are two kinds of taxes levied on the same person
for the same occupation or business.
Pork Barrel City enacts an ordinance which imposes an occupation tax upon owners of piggery farms.
The validity of the ordinance is being challenged on the ground that it constitutes double taxation
because the piggery farm is already subject to land use tax.
Answer: Yes, because there are two different taxes involved, a tax on occupation and a tax on land.
Hence, there is no double taxation.
(20)The proportional contribution by persons and property levied by the lawmaking body of the state by
virtue of its sovereignty for the support of the government and all public needs is referred to as:
a. Taxes;
b. Special assessment;
c. License fees;
d. Penalty.
(21)In case of deductions and exemptions on income tax returns, doubts shall be resolved:
(22)Which of the following terms describes the statement, “that the state has complete discretion on
the amount to be imposed, after distinguishing between a useful or non-useful activity”?
a. A resident citizen of the Philippines with income from within and outside the Philippines;
b. A resident citizen of the Philippines with income from within the Philippines only;
c. A non-resident citizen of the Philippines with income from outside the Philippines only;
d. A non-citizen of the Philippines with income from within the Philippines only.
(25)Statement 1: A minimum wage earner with a fringe benefits not exceeding P30,000 is not a
Philippine income tax payer.
Statement 2: A minimum wage earner with fringe benefits exceeding P30,000 is a Philippine income tax
payer on the excess of the benefits over P30,000 as well as on his wages.
(26)If the tax payer is a resident citizen of the Philippines, which of the following is not subject to income
tax?
d. Capital gain on shares of stock of a domestic corporation sold through the Philippine Stocks
Exchange.
c. Resident alien;
d. Citizen.
(28)Which of the following BIR forms is used as a substitute filing for income tax returns (ITR) of
employees?
a. 1601C
b. 1604CF
c. 1701Q
d. 1701
e. 2316
(29)Which of the following BIR forms is used to file monthly taxes withheld on compensation?
a. 1601C
b. 1604CF
c. 1701Q
d. 1701
e. 2316
(30)Which of the following BIR forms is used to give to employees as a substitute form for income tax
returns (ITR)?
a. 1601C
b. 1604CF
c. 1701Q
d. 1701
e. 2316
(31)Which of the following BIR forms is used for filing income tax returns for mixed income
(compensation, business, and professional income)?
a. 1601C
b. 1604CF
c. 1701Q
d. 1701
e. 2316
(32)May the purpose of a tax partly public and partly private without violating the limitation that a tax
must be for public purpose?
a. Yes. The purpose to be accomplished by taxation need not be exclusively public. Although private
individuals are directly benefited (e.g. giving aids to victims of flood/typhoon), the tax will still be valid
provided such benefit is only incidental.
b. No. The purpose to be accomplished by taxation need to be exclusively public. To benefit private
individuals will be tantamount to deprivation of property of those who paid the tax without due process.
c. Yes. The purpose is not important as long as the use of the tax can be properly accounted for.
a. National defense
CORPORATE TAXATION
(34)Hungry Shark corporation, in its third year of operations, had the following data:
(a) P1,000,000
(b) P2,000,000
(c) P500,000
(d) P1,500,000
(a) For domestic corporations, the capital gain tax on sale of shares of stock are the same as the capital
gain on such assets of resident citizens of the Philippines.
(b) The final tax on interest on foreign currency deposit under the expanded foreign currency deposit
system for domestic corporations is the same as that of resident citizens of the Philippines at seven and
one-half percent (7 ½%)
(c) Dividend received by a domestic corporation from a domestic corporation subject to tax is exempt
from income tax of the corporation receiving the dividend.
(d) Prizes exceeding P10,000 received by a domestic corporation is subject to a final tax of twenty
percent (20%)
(36)Statement 1: The minimum corporate income tax of a trading or manufacturing concern is based on
gross profit from sales.
Statement 2: The minimum corporate income tax of a service concern is based on net revenues or
receipts less direct costs of services.
(c) The first statement is true but the second statement is false
(d) The first statement is false but the second statement is true
(37)The following are true, except one. Which is exception:
(a) A domestic corporation is subject to MCIT on gross income from within and outside the Philippines.
(b) A resident corporation is subject to the MCIT on gross income from within the Philippines.
(d) The optional gross income tax (GIT) applies to domestic and resident corporations.
(a) The quarterly income tax of a corporation for any of the first, second or third quarters is filed, and
the tax due is paid, within sixty (60) days after the close of the quarter.
(b) The annual income tax return of a corporation is filed, and the tax due is paid on or before the
fifteenth day of the fourth month following the close of the taxable year
(c) There can be an income tax refundable in a quarterly income tax return of a corporation
(d) There can be an income tax refundable in the final income tax return of a corporation
(39)One of the following statements is wrong. Identify. The improperly accumulated earnings tax
imposed on corporations:
(c) Is based on the net income per books after the income tax
(40)All, except one, of the following, are not subject to the improperly accumulated earnings tax (IAET).
Which is the exception?
(c) The corporation permits its profit to accumulate beyond the reasonable needs of the business
(42)A mother corporation is abroad, with business in the Philippines through its branch in the
Philippines. Which of the following statements is wrong?
(a) In a year, the branch in the Philippines is subject to a profit remittance tax on its remittance of
profits to the mother company abroad, even if the profits from which the remittance was made was a
prior year’s profits.
(b) The profit remittance tax is fifteen (15%) percent of the total amount or profit for remittance, as
applied for with the bank.
(c) The bank with which the application for remittance was filed would be the withholding agent of the
Bureau of Internal Revenue
(d) Even activities registered with the Philippine Economic Zone Authority (PEZA), from the profits from
which the remittance is applied for, will be subject to the profit remittance tax.
(43)Statement 1: A private educational institution is a special corporation subject to income tax on all its
income at ten percent (10%)
Statement 2: A private educational institution may be treated as an ordinary corporation subject to all
the income tax rules on corporation.
(45)Corporations exempt from income tax are enumerated under Section 30 of the National Internal
Revenue Code.
Statement 1: They are not subject to income tax on income received which are incidental or necessarily
connected with the purposes for which they were organized and are operating.
Statement 2: They are subject to income tax on income of whatever kind and character from any of their
properties, real or personal, or from any activity conducted for profit, regardless of the disposition of
such income.
(d) Joint venture or consortium for engaging in energy operations under a service contract with the
government.
(47)Reasonable needs of the business is inconsistent with the concepts of IAET when:
(a) The direct correlation of anticipated needs to the accumulation of profits is proved.
(b) It is not necessary for the purpose of the business considering all the circumstances of the case
(c) The “immediacy test” under the American jurisprudence is adopted in Philippine jurisdiction
(d) Construed as immediate needs of the business including reasonable anticipated needs
(48)For purposes of determining the Improperly Accumulated Taxable Income for a taxable year, the
following, except one, are added to that year’s taxable income. Which one?
(49)For purposes of determining the Improperly Accumulated Taxable Income for a taxable year, the
following except one, are reduced from that year’s taxable income after appropriately adding certain
items. Which one?
(a) For purposes of the MCIT, the taxable year in which business operations commenced shall be the
year in which the domestic corporation registered with the BIR.
(b) Firms which were registered with BIR in 1994 and earlier years shall be covered by the MCIT
beginning January 1, 1998.
(c) Firms which were registered with the BIR in any month in 1998 shall be covered by the MCIT in
2002 after the lapse of three (3) calendar years from 1998.
(c) Depository banks under the Expanded Foreign Currency Deposit System (FCDS) on income from
foreign currency transactions with the local commercial banks.
(d) Firms that are taxed under a special income tax regime
(52)Which of the following need not be deducted from gross sales to arrive at gross income for purposes
of computing MCIT of a merchandising/ manufacturing concern?
(53)Which of the following need not be deducted from gross sales to arrive at gross income for purposes
of computing MCIT of a service concern?
(54)Which of the following need not be deducted from gross sales to arrive at gross income for purposes
of computing OCIT or GIT of a merchandising/ manufacturing concern?
(56)A PEZA-registered enterprise has a “registered” and an “unregistered” activity. The MCIT shall apply
to the:
(d) 2% of gross income for Domestic Corporations while Resident Foreign Corporations are exempted
from MCIT computation.
(58)A tax imposed whether a corporation has zero or negative taxable income or whenever the
minimum income tax is greater than the normal income tax due from such corporation:
(60)The BIR form used by corporations to file quarterly income tax returns: