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TAXATION REVIEW
General Principles
1. This is the inherent power by which the sovereign, through its law-making body, raises income
from the public to defray the necessary expenses of government.
a. Tax c. Taxation
b. Taxes d. National Internal Revenue Code

2. What branch of the government has the power to enact national tax legislations?
a. Congress c. House of representative
b. Senate d. Legislative department

3. What is the nature of the right of the national government to enact tax laws?
a. Inherent c. Constitutional grant
b. Delegated d. Co-ordinate with other branches of government

4. What is the nature of the right of local government units to enact tax laws?
a. Inherent c. Constitutional grant
b. Delegated d. Co-ordinate with other branches of government

5. Refer to the following statements:

S1: The national government may create tax laws even in the absence of constitutional grant of
power to tax.
S2: The power to tax is granted by the Constitution.
S3: Tax laws are superior to the Constitution.

Which is correct.
a. Only statement 3 is incorrect. c. Statements 2 and 3 are incorrect
b. Statements 1 and 2 are correct. d. Only statement 1 is incorrect

6. Which tax is collected through the BIR?

a. Real property tax c. Documentary stamp tax
b. Real estate transfer tax d. Local business tax

7. Which is paid to the local treasury?

a. Business tax c. Professional tax
b. Excise tax d. Value added tax

8. The place of taxation is commonly determined by the following, except

a. Residence c. Nationality
b. Source d. Domicile

Admission year 2019 – 2020 K.T. Tegio 1

9. The Constitution provides that the power to tax shall be “progressive” in nature. Which of the
following taxes best exemplify this Constitutional provision?
a. Corporate income tax c. Individual income tax
b. Final income tax d. Business taxes

10. Taxation is so unlimited in force and searching in extent that courts scarcely venture to declare
that it is subject to any restrictions, except those that such rests in the discretion of the authority
which exercises it. This jurisprudential pronouncement means that taxation is
a. Comprehensive c. Plenary
b. Unlimited d. Supreme

11. Income of individuals earned in the Philippines are subject to tax while income from foreign
countries are exempt from taxes, as a rule. This means that taxation is
a. Legislative c. Territorial
b. For public purpose d. Extra-territorial

12. In Ilo-ilo, et. al. v. Smart Communications, Inc. G.R. N O. 167260, February 27, 2009, the Court
ruled that the power to tax is not provided for in the law, statute or Constitution; it co-exists
with the state. This means that the power to tax is
a. Inherent c. Superior that the Constitution
b. Constitutional d. Superior than other national laws

13. The power to create tax laws cannot be delegated, as a rule. The following are the exceptions,
except
a. To local governments
b. When allowed by the Constitution
c. For merely administrative implementation
d. Delegation to the vice-president for fixing tariff rates

14. May the government tax itself?

a. Yes, the rule is taxation, exemptions are the exceptions.
b. No, the rule for government is exemption, taxation is the exception.
c. Yes, the power to tax is so unlimited and searching in its nature. It may tax everything it
deems proper to tax.
d. No, the government can not be held liable to pay for tax.

15. What is the strongest among the inherent powers of the government?
a. Taxation c. Eminent domain
b. Police power d. Imminent domain

16. What is the most pervasive among the inherent powers of the government?
c. Taxation c. Eminent domain
d. Police power d. Imminent domain

17. The power to tax is not the power to destroy. The power of taxation should be exercised with
caution to minimize injury to the proprietary rights of a taxpayer.
a. Marshall Dictum c. Pactum commissorium
b. Holmes Dictum d. Solution indebiti

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18. Congress passed a sin tax law that increased the tax rates on cigarettes by 1,000%. The
law was thought to be sufficient to drive many cigarette companies out of business, and
was questioned in court by a cigarette company that would go out of business because it
would not be able to pay the increased tax.

The cigarette company is __________

a. Wrong because taxes are the lifeblood of the government

b. Wrong because the law recognizes that the power to tax is the power to destroy
c. Correct because no government can deprive a person of his livelihood
d. Correct because congress, in this case, exceeded its power to tax

19. The president of the Republic of the Philippines imposed tariffs on imported rice. This action aims
to use taxation
a. As revenue measure c. To encourage economic growth
b. For promotion of general welfare d. For protectionism

20. The giving of 20% discount to qualified senior citizens and allowing as tax deductions those
discounts exemplifies the use of
a. Police power and taxation c. Taxation only
b. Eminent domain and taxation d. Police power only

21. Regular withholding of taxes, electronic filing and payment system are examples of which
principle of sound tax system
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Lifeblood doctrine

22. The national government may levy properties of taxpayers for payment of delinquent taxes. This
fiscal policy may affect which principle of tax system
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Lifeblood doctrine

23. XYZ Corporation manufactures glass panels and is almost at the point of insolvency. It has no
more cash and all it has are unsold glass panels. It received an assessment from the BIR for
deficiency income taxes. It wants to pay but due to lack of cash, it seeks permission to pay in
kind with glass panels. Should the BIR grant the requested permission?
a. It should grant permission to make payment convenient to taxpayers.
b. It should not grant permission because a tax is generally a pecuniary burden.
c. It should grant permission; otherwise, XYZ Corporation would not be able to pay.
d. It should not grant permission because the government does not have the storage facilities
for glass panels.

24. A tax law which violates the canons of sound tax systems are considered
a. Valid c. Voidable
b. Rescissible d. Void

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25. The BIR wants to collect taxes from the members of an ancient tribe in the deep mountains of
Samar Island, however, the latter refused to pay on the basis that the government failed to
provide on its duty to protect and provide social benefits, like infrastructures and other
governmental programs. What legal argument can the bureau use as a theory or basis for taxing
them?
a. Jurisdiction over subject & objects
b. Benefits-Protection Theory
c. Lifeblood doctrine
d. Necessity Theory

26. Frank Chavez, as taxpayer, and Realty Owners Association of the Philippines, Inc. (ROAP), alleged
that E.O.73 providing for the collection of real property taxes as provided for under Section 21 of
P.D.464 (Real Property Tax Code) is unconstitutional because it accelerated the application of
the general revision of assessments to January 1, 1987 thereby increasing real property taxes by
100% to 400% on improvements, and up to 100% on land which would necessarily lead to
confiscation of property. What defense could be raised by the BIR as against the contention of
the Chavez and ROAP?
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Jurisdiction

27. The local government of Palo enacted an ordinance taxing all transfers of real estates within the
municipality. The heirs of Mr. X asked the court to declare such ordinance as invalid invoking
double taxation. The contended that such law will re-subject their inherited real properties,
already taxed with estate tax, to another type of tax. Is their contention meritorious?
a. Yes, double taxation is prohibited as the same violates due process of the Constitution.
b. No, double taxation is not prohibited.
c. Yes, there is direct double taxation as the same subject property is subjected to same
purpose paid by the same taxpayer during the same taxable year.
d. No, there was no double taxation as the tax is collected by different government authority.

28. Bank A deposit money with Bank B which earns interest that is subjected to the 20% final
withholding tax. At the same time, Bank A is subjected to the 5% gross receipts tax on its interest
income on loan transactions to customers. Which statement below INCORRECTLY describes the
transaction?
a. There is double taxation because two taxes – income tax and gross receipts tax are imposed
on the interest incomes described above and double taxation is prohibited under the 1987
Constitution;
b. There is no double taxation because the first tax is income tax, while the second tax is
business tax;
c. There is no double taxation because the income tax is on the interest income of Bank A on
its deposits with Bank B (passive income), while the gross receipts tax is on the interest
income received by Bank A from loans to its debtor-customers (active income);
d. Income tax on interest income of deposits of Bank A is a direct tax, while GRT on interest
income on loan transaction is and tax.

Admission year 2019 – 2020 K.T. Tegio 4

29. Mr. Alas sells shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR
and the municipal license tax based on the same gross sales to the City of Makati. He comes to
you for advice because he thinks he is being subjected to double taxation. What advice will you
give him?
a. Yes, there is double taxation and it is oppressive.
b. The City of Makati does not have this power.
c. Yes, there is double taxation and this is illegal m the Philippines.
d. Double taxation is allowed where one tax is imposed by the national government and the
other by the local government.

30. What makes direct double taxation unconstitutional?

a. It violates equal protection clause c. It violates due process clause
b. It violates progressiveness rule d. It violates the Regalian Doctrine

31. The municipality of San Isidro passed an ordinance imposing a tax on installation managers.
At that time, there was only one installation manager in the municipality; thus, only he
would be liable for the tax. Is the law constitutional?
a. It is unconstitutional because it clearly discriminates against this person.
b. It is unconstitutional for lack of legal basis.
c. It is constitutional as it applies to all persons in that class.
d. It is constitutional because the power to tax is the power to destroy.

32. Payment of business taxes on goods sold, payment of income tax based on income earned from
such sales, and payment of dividend taxes for distributing such income to members constitutes
a. Direct double taxation c. Triple taxation
b. Indirect double taxation d. Double taxation

33. These are legal means of tax payment, except

a. Exemption c. Transformation
b. Shifting d. Evasion

34. CIC entered into an alleged simulated sale of a 16-storey commercial building. CIC authorized
Benigno Toda, Jr., its President to sell the Cibeles Building and the two parcels of land on which
the building stands. Toda purportedly sold the property at a loss for P100 million to Altonaga,
who, in turn, sold the same property on the same day to Royal Match Inc. (RMI) for P200 million
evidenced by Deeds of Absolute Sale notarized on the same day by the same notary public. For
the sale of the property to RMI, Altonaga paid capital gains tax in the amount of P10 million.

The BIR sent an assessed deficiency income tax arising from the sale alleging that CIC evaded the
payment of higher corporate income tax of 30% with regard to the resulting gain. What scheme
was perpetuated by Toda?
a. Evasion c. Shifting
b. Avoidance d. Capitalization

35. This form of escape from payment of taxes requires legislation

a. Exemption c. Transformation
b. Shifting d. Capitalization

Admission year 2019 – 2020 K.T. Tegio 5

36. VAT is originally assessed against the seller who is required to pay the said tax, but the
payment is actually shifted or passed on to the buyer. Who, then, bares the incidence of
taxation?
a. Seller c. Government
b. Buyer d. Either a or b

37. Refer to the following statements:

S1: Tax statues are construed strictly against the government.
S2: Exemptions are strictly construed against the taxpayers.
S3: Tax exemptions are construed liberally in favor of government political subdivision or
instrumentality.
S4: Tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris
against the taxpayer.

Which is incorrect?
a. S1 and S2 are correct. c. S2 is correct
b. S4 is correct. d. S3 is incorrect.

38. These are rules or orders having force of law issued by the executive branch of the government
to ensure uniform application of the tax law.
a. Revenue regulations c. BIR rulings
b. Revenue memorandum circulars d. Tax laws

39. Rulings are official response of the Bureau to queries of taxpayers for clarifications and
interpretation of tax laws.
a. Revenue regulations c. BIR rulings
b. Revenue memorandum circulars d. Tax laws

40. What is the nature of our NIRL?

a. Civil c. Political
b. Penal d. Remedial

41. It is the imposition of a tax upon another tax.

a. Tax pyramiding c. Double jeopardy
b. Double taxation d. Duplicate taxation

42. The litmus test for this kind of limit of taxation is that taxes should be used for something which
is the duty of the State to provide.
a. Public purpose c. Territoriality
b. Exemption of the government d. International comity

43. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills, shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
a. Territoriality limit c. International comity limit
b. Non-delegability limit d. Public purpose limit

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44. The factor which determines the source of income for personal services is the place where
a. Services were actually rendered c. Contract is perfected
b. Payment is made d. Debtor resides

45. Failure to notify taxpayers regarding tax assessments violates principle of

a. Due process c. Non-impairment clause
b. Equal protection clause d. Either a or b

46. Non-payment of which type of tax does not result in imprisonment?

a. Income tax c. Basic poll tax
b. Poll tax d. Additional poll tax

47. This principle is one of the attributes or characteristics of tax. Money collected from taxation
shall not be paid to any religious dignitary EXCEPT when:
a. The religious dignitary is assigned to the Philippine Army
b. It is paid by a local government unit
c. The payment is passed in audit by the COA
d. It is part of a lawmaker’s pork barrel

48. Refer to the following statements:

S1: The president has the exclusive power to fix within specified limits, tariff rates, import or
export quotas, tonnage and wharfage dues and other duties or imposts.
S2: The house of representatives has the sole power to enact national tax laws.
S3: The sanggunian has the exclusive power to enact local tax legislations.

Which is correct.
a. S1 and S2 are correct c. S2 is incorrect
b. S2 and S3 are correct d. All are correct

49. A local government agency collects fees from use of its facilities. These proceeds are used to pay
the costs of regulating the covered activities of such agency and for constructions of public
infrastructures. The fees collected results from?
a. Police power c. Eminent domain
b. Taxation d. Either a or b

50. Which of these inherent powers is exercised exclusively by the legislative department?
a. Police power c. Eminent domain
b. Taxation d. All inherent powers

--- Altius ---

Admission year 2019 – 2020 K.T. Tegio 7