TAXATION 1 - Income Taxation jeneral Principles of Taxation 1. Taxation as distinguished from police power and power of eminent domain A. Property is taken to promote the general welfare. B. Maybe exercised only by the government. . Operates upon the whole citizenry D. There is generally no limit as to the amount that may be imposed. 2. The following are constitutional limitations, except A.No imprisonment for non-payment of poll tax. B. Non-impairment of the obligation of contracts. C. Rule of uniformity and equity in taxation, D. Exemption from income tax of charitable institutions, cemeteries, churches, personage or convents appurtenant thereto, as well as all lands, buildings and improvements actually, directly and exclusively used for religious, charitable and educational purposes. 3. Which of the following statements is correct?” A. The President is authorized to increase or decrease national internal revenue tax rates. B, One of the nature of taxation is the reciprocal duties of protection and support between the state and subjects thereof, C. Every sovereign government has the inherent power to tax. D. Income tax in an indirect tax. |. Atax must be imposed for public purpose. Which of the following is not a public purpose? A. National defense B. Public education C. Improvement of the sugar and coconut industries. D. Improvement of a subdivision road. 5. Which is not an essential characteristic of a tax? A. It is unlimited as to amount. B. Itis payable in money. . Itis proportionate in character. D. Itis an enforced contribution. 6. Special assessment is an enforced proportional contribution from owners of land especially benefited by public improvement, Which one of the following is not considered as one ofits characteristics? A. Ttis levied on land, B. Its based on the government's need of money to support its legitimate objectives. C. Itis not a personal liability of the persons assessed. 1D. Its based solely on the benefit derived by the owners of the land. Its the privile A. Tax incentive B. Tax exempti . Tax amnesty D. Tax credit ¢ of not being imposed a financial obligation to which others are subject. 8. Asto scope of the legislative power to tax, which is not correct? A. Where there are no constitutional restrictions, and provided the subjects are within the territorial jurisdiction of the state, Congress has unlimited diseretion as to the persons, property or occupations to be taxed.B. Inthe absence of any constitutional prohibition, Congress has the right to levy a tax of any amount it sees fit. C. The discretion of Congress in imposing taxes extends to the mode, method or kind of tax, unless restricted by the constitution. D. The sole arbiter of the purpose or which taxes shall be levied is Congress, provided the purpose is public and the courts may not review the levy of the fax to determine whether or not the purpose is public. 9. Which of the following is a nature of taxation? A. The power is granted by ley action, B. Its essentially an administrative function. . Itis generally payable in money. 1D. Without it the state can continue to exist. 10. Which of the following is not a determinant of the place of taxation? A. Source of the income B. Citizenship of the taxpayer . Residence of the taxpayer D. Amount of tax to be imposed 11. Which of the following statements is not correct?” ‘A. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation, B. The property of an educational institution operated by a religious order is exempt from property tax, but its income is subject to income tax C.. The prohibition of delegation by the state of the power of taxation will still allow the BIR to modify the rules in time for filing of returns and payment of taxes. 1D. The power of taxation is shared by the legislative and executive departments of the government. 12, Statement 1 ~The point on which tax is originally imposed is impact of taxation, Statement 2 — Eminent domain is inferior to non-impairment clause of the constitution Statement 3 — As a rule, taxes are subject to set-off or compensation, Statement 4 —As a rule, provisions on the validity of tax exemptions are resolved liberally in favor of the taxpayer, ‘Slalemen! | Statement 2Stalement 3Statement 4 A. Tre False False True B, False Tue True_—‘False C. True True False False D. False False = Tue True 13. Atax system where the revenues are supplied mostly by indirect taxes. ‘A, Schedular C. Progressive B. Proportional D. Regressive 14, A tax system where the greater bulk of the tax revenues is derived by direct taxes. A. Schedular C. Progressive B, Proportional D. Regressive 15. This is an inherent limitation on the power of taxation, ‘A. Rule on uniformity and equity in taxation. BB. Due process of law and equal protection of the laws. C. Non-impairment of the jurisdiction of the Supreme Court in tax cases. D. Tax must be for the public purpose.16. This is a constitutional limitation on the power of taxation ‘A. Tax laws must be applied within the territorial jurisdiction of the state. B, Exemption of government agencies and instrumentalities from taxation, CC. No appropriation of public money for religious purposes. D. Power to tax cannot be delegated to private persons or entities. 17. They exist independent of the constitution being fundamental powers ofthe state, except A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 18. The power to acquire private property upon payment of just compensation for public purpose A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 19. The power to regulate liberty and property to promote the general welfare. A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 20, The power ta demand proportionate contributions from persons and property to defray the expenses of the government, A. Power of taxation C. Power of imminent domain B. Police power D. Power of recall 21. Basic Principles of a sound tax system, except ‘A. Fiseal adequacy Administrative feasibility B. Equality or theoretical justice. Intellectual sensitivity 2. The tax imposed should be proportionate to the taxpayer's ability to pay. ‘A. Fiscal adequacy C. Administrative feasibility B. Equality or theoretical justice D. Intellectual sensitivity 23, The sources of revenue as a whole, should be sufficient to meet the demands of public expenditures, al adequacy C. Administrative feasibility quality or theoretical justice D. Intellectual sensitivity B. 24, The tax laws must be capable of convenient, just and effective administration A. Fiscal adequacy C. Administrative feasibility B. Equality or theoretical justice. Intellectual sensitivity 25, Persons or things belonging to the same class shall be taxed at the same rate. ‘A Simplicity in taxation C. Equality in taxation B. Reciprocity in taxation _—_D. Uniformity in ta 26, The tax should be proportional tothe relative value of the property to be taxed. A Simplicity in taxation C. Equality in taxation B. Reciprocity in taxation. Uniformity in taxation 27.The following are the nature of taxation, except A. Inherent in sovereignty B. Essentially legislative in character C. Subject to inherent and constitutional limitation D. Subject to approval by the people. 28, It literally means “place of taxation”; the country that has the power and jurisdiction to levy and collect the tax. A. Basis of taxation, Scope of taxationB. Situs of taxation —_D. Theory of taxation 29, The existence of the government is a necessity and that the state has the right to compel all individuals and property within its limits to contribute A. Basis of taxation, Scope of taxation B. Situs of taxation _—_D. Theory of taxation 30, The reciprocal duties of support and protection between the people and the government, ‘A. Basis of taxation C. Scope of taxation B. Situs of taxation, Theory of taxation 31, Subject to inherent and constitutional limitations, the power of taxation is regarded as supreme, plenary, unlimited and comprehensive. A.Basis oftaxation __C. Scope of taxation. B. Situs of taxation _D. Theory of taxation 32, Our National Internal Revenue Laws are A. Political in nature C, Criminal in nature D. Civil in nature B, Penal in nature 33, The levying or imposition of tax and the collection of the tax are processes which constitute the taxation system, A. Basis of taxation C. Nature of taxation B. Aspects of taxation, Theory of taxation 34, The process or means by which the sovereign, through its law-making body raises income to defray the expenses of the government. C. Taxation A. Toll B. License fee D. Assessment 35, Enforced proportional contributions from persons and property levied by the state by virtue of its sovereignty for the support of the government and for all public needs. A. Toll C. Taxes B. License fee D. Assessment 36, An escape from taxation where the tax burden is transferred by the one on whom the tax is imposed or assessed to another. A. Shifting C. Transformation B. Exemption D. Capitalization 37, An escape from taxation where the producer or manufacturer pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units of products at a lower cost. A. Shifting C. Transformation B. Exemption D, Capitalization 38, An escape from taxation where there is a reduction in the price of the taxed object equal 10 the capitalized value of future taxes which the taxpayer expects to be called upon to pay. A. Shifting . Transformation B. Exemption D. Capitalization, 39, The use of illegal or fraudulent means to avoid or defeat the payment of tax A. Exemption . Avoidance B. Shifting D. Evasion 40, The use of legal or permissible means to minimize or avoid taxes. ‘A. Exemption . AvoidanceB. Shifting D. Evasion 41. Synonymous to tax evasion. A. Tax dodging . Tax exemption B. Tax minimization. Tax evasion 42, Synonymous to tax avoidance. A. Tax dodging . Tax exemption B. Tax minimization D. Tax evasion 43, In every case of doubt, tax statutes are construed ‘A. Strictly against the government and th taxpayer. B. Liberally in favor of the government and the taxpayer: . Strictly against the government and liberally in favor of the taxpayer. D Liberally in favor ofthe government and stretly against the taxpayer 44, In every case of doubt, tax exemptions are construed A. Sirictly 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 ofthe taxpayer. D. Liberally in favor of the government and strictly against the taxpayer. 4S. In case of conflict between the Tax Code and the Philippine Accounting Standards (PAS), ‘A. PAS shall prevail over the Tax Code. B. Tax Code shall prevail over PAS. . PAS and Tax Code shall be both disregarded. D, The taxpayer may choose between the PAS or the Tax Code. 46, Tax of a fixed amount imposed upon all persons residing within a specified territory without regard to their property or occupation they may be engaged, A. Personal, poll or capitation C. Excise B. Property D. Regressive 47. Tax imposed on personal or real property in proportion to its value or on some other reasonable method of apportionment, A. Personal, poll ot capitation C. Excise B. Property D, Regressive 48, Tax imposed upon performance of an act, the enjoyment of privilege or the engaging in an ‘occupation A. Personal, poll or capitation C. Excise B, Property D. Regressive 49, Tax which is demanded from the person whom the law intends or desires to pay it ‘A. Direet . Excise B. Indirect D. Percentage 50, Tax which is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another. A. Direct ise B. Indirect D. Percentage 51, Tax which imposes a specific sum by the head or number or by some standard of weight or ‘measurement and which requires no assessment other than a listing or classification of the objects to be taxed, A. Specific C. Excise B. Ad-valorem D. Income52, Tax ofa fixed proportion of the amount or value of the property with respect to which the tax. is assessed. A. Specific C. Excise B. Ad-valorem D, Percentage '53, Tax based on a fixed percentage of the amount of property, income or other basis to be taxed, ‘A. Proportional C. Regressive B. Progressive D. Indirect 54, Tax where the rate decreases as the tax base increases. A. Proportional C. Regressive B. Progressive D. Indirect 55. Tax where the rate increases as the tax base increases. A. Proportional C. Regressive B. Progressive D. Indirect 56. Which of the following statements is not correct? ‘A, Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes should be construed strictly against the government. B. Tax exemptions, tax amnesty tax condonations and their equivalent provisions are not presumed and, when granted are strictly construed against the taxpayer because such provisions are highly disfavored by the government. C. Exemptions from taxation are highly disfavored in law and he who claims tax exemption must be able to justify his claim or right, D. The House of Representatives has the duty and the exclusive power of constructing and interpreting tax laws. 57, The strongest of all inherent powers of the state because without it, the government can neither survive nor dispense any of its other powers and functions effectively, A. Police Power C. Power of Taxation B, Power of Eminent Domain D. Power of Recall 58, This power is superior to the non-impairment clause and is broader in application because it is a power to make and implement laws. A. Power of Taxation C. Power of Eminent Domain B, Power of Recall D. Police Power 59, Which of the following statements is not correct? ‘A. An inherent limitation of taxation may be disregarded by the application of a constitutional limitation, B, Income tax liabilities shall be paid by the inhabitants even if foreign invaders occupy our country . Taxes may be imposed retroactively by law, but unless so expressed by such law, these taxes must only be imposed prospectively. D. Tax laws are either political or penal in nature. 60, Which of the following is not a constitutional limitation on the Power of Taxation? ‘A. No person shall be deprived of life liberty or property without due process of law. B. No person shall be denied the equal protection of the law. C. No person shall be imprisoned for debt or non-payment of tax. D. No law granting any tax exemption shall be passed without the concurrence of a majority ofall the members of Ci61. The distinction of a tax from permit or license fee is that a tax is: ‘A, Imposed for regulation, B, One which involves an exercise of police power. CC. One in which there is generally no limit on the amount that maybe imposed. D. Limited to the cost of regulation. 62. Police power as distinguished from the power of eminent domain: A. Just compensation is received by the owner of the property. B. Maybe exercised by private individuals, C. May regulate both liberty and property. D. Property is taken by the government for public purpose. 63. Atax wherein both the incidence of or the liability for the payment of the tax as well as the burden of the tax falls on the same person, A. Direct tax C. Indirect tax B. Value added tax D. Percentage tax 64, Which one of the following is not a characteristic or element of a tax? ‘A. [tis an enforced contribution. B. Its legislative in character. . Its based on the ability to pay. D. It is payable in money or in kind. 65. Tax as distinguished from license fees: ‘A. Limited to cover cost of regulation, B. A regulatory measure, CC. Non-payment does not necessarily render the business illegal. 1D, Imposed in the exercise of police power. 66. The power of taxation is exercised by ‘A. The President . Bureau of Intemal Revenue B. The Supreme Court D. Congress 67, One of the characteristics of internal revenue laws is that they are: A. Criminal in nature . Political in nature B, Penal in nature D. Generally prospective in application. 68, Which of the following is not an example of excise tax: ‘A, Transfer tax C. Real property tax B. Sales tax D. Income tax 69, The following are similarities of the inherent power of taxation, eminent domain, and police power, except one: A. Are necessary attributes of sovereignty B, Superior fo the non-impairment clause of the constitution, C. Compensation is received. D. Are legislative in character 70, 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 itis 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 tothe distributor, then in turn to the wholesaler, {n turn to the retailer and finally to the consumer.71, Which of the following statements is not correct? ‘A. Taxes may be imposed to raise revenues or to provide 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 taxation in the Philippine Constitution are grants of power and not limitations on taxing powers. 72. License fee as distinguished from tax: ‘A. Non-payment does not necessary render the business illegal B. A revenue raising measure . Imposed in the exercise of taxing power. D. Limited to cover cost of regulation. 73, Value-added tax is an example of: ‘A, Graduated tax C. Regressive tax B. Progressive tax D. Proportional tax 74, Which tax principle is described in the statement “ the more income earned by the taxpayer, the more tax he has to pay.” A. Fiseal Adequacy C, Administrative feasibility B. Theoretical justice Inherent in sovereignty 75. The most superior and least limitable among the fundamental powers of the state: ‘A, Power of recall C. Power of taxation B. Police power D. Power of eminent domain 76, One of the characteristics ofa tax is that A. Its generally based on ci B. It is generally payable C. Itis generally assignable. D. [tis generally subject to compensation. 77. The following are the characteristics of our internal revenue laws except: C. Generally prospective in application. D, May operate retrospectively if congress so provides. 78. Which of the following has no power of taxation? A. _ Provinces , Barangays B. Cities D. Barrios 79, Which of the following statements is wrong? A revenue bill ‘A. Must originate from the House of Representatives and on which same bill the Senate may propose amendments, B. May originate from the Senate and on which same bill the House of Representatives may propose amendments. C.-may have a House version and a Senate version approved separately, and then consolidated, with both houses approving the consolidation version. 1D. May be recommended by the President to Congress. 80, Tax as distinguished from special assessment:A. not as a personal liability ofthe person assessed, B. based wholly on benefits . exceptional as to time and place D. based on necessity and is to raise revenues 81. Under this basic principle of a sound tax system, the Government should not incur a deficit: ‘A, Theoretical justice C. Fiscal Adequacy B. Administrative feasibility. Uniformity in taxation 82, Which of the following may not raise money for the government? ‘A.Power oftaxation _C. Eminent Domain B, Police power D. License fee 83, No person shall be imprisoned for non-payment ofthis: ‘A. Excise tax C. Income tax B. Value added tax D. Poll tax 84, This is a demand of ownership: ‘A. License fee Tol B. Tax D. Customs duties 85, Income tax is generally regarded as ‘A.an excise tax C.a property tax B. a tax on persons D. tax on profits 86, Which of the following is not acceptable for legally refusing to pay the tax? ‘A, That the right ofthe state to collect the tax has prescribed, B. That there is no jurisdiction to collect the tax. . That the tax law was declared as unconstitutional. D. That there is no benefit derived from the tax. 87, ICs important to know the source of income for income fax purposes, ie. from within or without the Philippines because ‘A. The Philippines imposes income tax on income from sources within and without of a non-resident citizen, B. Some individual taxpayers are citizens while others are aliens. C. Separate graduated rates are imposed on different types of income. D. Some taxpayers are taxed on their worldwide income while others are taxable only upon income from sources within the Phils. 88 A law granting tax exemption requires the concurrence of A. Majority yote of members of congress B. 2/3 vote of members of Congress. C. 3/4 vote of members of Congress, 1D, Unanimous vote of members of Congress, 89, No person shall be imprisoned for debt or non-payment of poll tax. This is afan) A. Inherent limitation . International limitation B. Constitutional limitation —_D. Territorial limitation 90, The Department of Finance thru its officers entered into a contract with foreign investors granting them exemption from all forms of taxes to encourage investments in the Phils. The contract is A. Void, unless the President ratifies B. Void, because the power to grant tax exemption is vested in Congress. C. Valid, if the President has authorized the officers to enter into such contract. . Valid, because the purpose is to promote public welfare.91, Tax as distinguished from debt 'A.no imprisonment for non-payment C. based on contract B. may be paid in kind D. based on law 92, Congress can impose a tax at any amount and at anytime shows that ‘A. Taxation is an inherent power of the state 1B, Taxation is essentially a legislative power. C. Taxation is a very broad power of the state. D, Taxation is based on taxpayers’ ability to pay, 93. The amount required is dictated by the needs of the government in: ‘A. License fee ©. Toll B. Tax D.Debis, 94, A charge imposed on land for special benefits derived resulting from public improvements. ‘A. Tax C. License B. Toll D. Special assessment 95, Which of the following are National Internal Revenue Taxes? I. Incometax Ill. Donors tax V. Other percentage tax Tl, Estatetax TV, Value Added tax VI. Excise Tax VIL. Documentary stamp tax ALT 11, TV C.1, 11 II, IV, V, VI BL, 1,1 1V,V D.1, HL, IIL, IV, V, VI, VIE 96. The Bureau of Internal Revenue shall have a chief and four (4) assistant chiefs to be known A, Seeretary and Assistant Secretaries B. Secretary and Undersecretaties C. Commissioner and Assistant Commissioners D. Commissioners and Deputy Commissioners 97, The three fundamental powers of the state are 1. Inherent in the state and may be exercised by the state without need of any ‘constitutional grant. Il, Not only necessary but indispensable, A. True; True C. Falses true B. True; false D.False; false 98, The three fundamental powers of the state are 1. Methods by which the state interfere with private rights. TL Exercised primarily by the legislature. A. True; True C. False; true B. True; false D. False; false 99. I. Police power regulates both liberty and property while the power of eminent domain and the power of taxation affect only property rights. Il Police power and the power of taxation may be exercised only by the government while the power of eminent domain may be exercised by some private entities, A. True; True C. False; true B. True; false D. False; false100. 105. > 106. 108. 1. The property taken in police power is destroyed while the property taken under the power of eminent domain and power of taxation are not destroyed, IL In power of taxation, the compensation received is the protection afforded to the citizens; in police power the compensation received is the altruistic feeling that somehow ‘you contributed to the promotion of the general welfare; in power of eminent domain, the ‘compensation received is the just compensation paid for the property taken. ‘True; True C. Falses true ‘True; false D. False; false 1. The point on which a taxis originally imposed is impact of taxation. TI, The point on which a tax burden finally rests or settles down is incidence of taxation, . True; True C. False; true ‘True; false D.False; false I. Police power is superior to the non-impairment clause of the constitution. I], Power of taxation is superior to the non-impairment clause ofthe constitution, True; True 3. True; false D. False; false 13. 1. No person shall be imprisoned for debt or non-payment of tax. TH, Tax laws are eivil and penal in nature because there are penalties provided in case of violation. True; True C. False; true Truc; false D. False; false 1. Tax may be collected in an unlimited amount, TI, Livense fee may be collected in an unlimited amount ‘True; True C. False; true 3. True; false D. False; false I. Tax is imposed to raise revenue. IL. License fee is imposed to raise revenue. True; True C. False; true 3. True; false D. False; false I. Tax is a demand of sovereignty. I, Toll is @ demand of sovereignty. True; True C. False; true |. True; false D. False; false 1. Taxis imposed on persons, property, and property tights. TI. Special assessment is imposed on persons, property, and property rights ‘True; True C. False; true 3. True; false D. False; false 1, Collection of tax is a legislative act. IL, Imposition of tax is an administrative act.A. True; True C. False; true B. True; false D. False; false 109. I. Astate has the power to tax even if not granted by the constitution. TI. A state cannot exercise police power if not granted by the constitution. A. True; True C. Falses true B. True; false D. False; false 110. 1. There can only be a tax even if there is a law imposing the tax. Il, The power to tax may include the power to destroy, A. True; True C. False; true B. True; false D. False; false IIL. 1. Due process of law in taxation under the constitution is a grant of power. LL, Provisions in the Philippine constitution on taxation are grants of power: A. True; True C. False; true B. True; false D. False; false 112. 1. Inthe Philippines, there may be double taxation, IL Taxation may be used to implement the police power of the state. A. True; True C. False; true B. True; false D. False; false 113. 1. License fee is a charge imposed under police powe 1, Special assessment is levied on lands only. A. True; True . False; true B. True; false D. False; false 114, 1, ‘Taxis imposed regardless of public improvement. I], Special assessment is imposed regardless of public improvements. A. True; True C. False; true B. True; false D. False; false 115.1. ‘Tax avoidance is the use by the taxpayer of legal or fraudulent means to avoid or defeat taxes, IL, Tax evasion is the use by the taxpayer of illegal or fraudulent means to avoid or defeat, taxes. A. True; True C. False; true B. True; false D. False; false 116. 1. One of the essential characteristics ofa tax is itis unlimited in amount. I. Atax is generally unlimited because itis based on the needs of the state A. True; True C. False; true B. True; false D. False; false 117. 1. ‘The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence, even if not mentioned in the constitution the state can still exercise the power and is essentially a legislative function. IL, Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making,