CPA Review School of the Philippines Manila GENERAL PRINCIPLES OF TAXATION | —_Dela Cruz/De Vera/Lopea/Liamado 1. The rnp pupae of wxaton i ' ‘+ Tocencourage the growth of home industries trough the proper use of tax exemptions and tax incentives ', Toimplement the plie power ofthe sate & The reduce excesive inequalities of wealth 4. Torsise revenues for govermmental needs 2. The aspects of taxation are Legislative in character '. Executive in character ©. Shared by the legislative and executive departments 4 Judicial in character 3. Taxation as distinguished from police power and power of eminent domain Property is taken to promote the general welfare b. May’be exercised only by the goverament © Operates upon the whole citizenry There is generally no limit as tothe amount that may be imposed i 4. Which ofthe inherent powers may be exercised even by public service corporations and public, entities | 2 Poneraf taxation Power of eminent domain | b. Police power a Aande | I 5. Which of the following statements i correct? Income tax isan indirect tax '. Our National Internal Revenue Laws are criminal in nature. | «©. The theory of taxation sates thatthe power of taxation is supreme, plenary, unlimited, and comprehensive 44. Taxation is subject to inherent and constitutional limitations ‘6. Thisis ah inberent limitation on the power of taxation 4 Rule on uniformity and equity in teation 'b. Due process of aw and equal protection ofthe aws © Notrimpairment of the jnsdition of the Supreme Court in tax cases 4 Tax tnust be for pubic purpose 7. Thisis a constitutional limitation on the power of taxation ‘Tax laws must be applied within the territorial jurisdiction ofthe state '. Exemption of government agencies and instrumenalites from taxation No-appropriation of public money for religious purposes 4. Power to tax cannot be delegated to private persons or entities 1 8. The poner to acquire private property upon payment of just compensation for public purpose 1. Power of txation €, Power of eminent domain . Polige power 4. Power of love ‘The power to regulate liberty and property to promote the general welfare a. Police power , Power of eminent domain . Power of mxation 4. Super power rangers Tax 860110 The tex imposed should be proportionate othe taxpayer’ bili fiscal adequacy Administrative feasi Equality or theoretical justice d. Beonomic consistency "1 Ths sores of venue as & whole, stould be suficient to meet the deen of public ffs adesuncy ©. Administrative feasibility b Eauaity oF theoretic Justice d. Revenue generation "2 The tax les mst be capable of convenient, just and effective administration & Fiscal adequacy ‘c. Administrative feasibility 'b. Equality or theoretical justice 4, Psychologieal compatability 13, Statement 1 ~The point on which a tax is originally imposed is impact of taxation ‘Statement 2 ~ Police power is superior to the non-impairment clase of the constitution Statement 3 As a rule taxes ae subject to set-off of compensation Statement 4 ~ As 2 rule, provisions on the validity of tax exemptions are resolved liberally in favor of the taxpayer Statement| Statement 2 Statement’3 Statement 4 a Tue False False False bre Tre False ‘True Te True False False do False Tne False False 14, Enforced proportional contributions ftom persons and property levied by the state by virtue of its sovereignty forthe support of the govemment and for ll public needs a Toll ©. Taxes b. License fee a Asessment 15, Persons or things belonging to the same class shal be taxed atthe same rate a Simplicity in taxation, Equality in taxation '. Reciprocity in taxation 4. Uniformity in taxation 16, Which is not an essential characteristic ofa tax? 2. Itis untimuted a 19 amount . Iis proportionate in character . Tris payable in money & Kis an enforced contribution 17. Special assessment 1s an enforced praportionat contribution from owners of land especially benefited by the public improveraent. Which one ofthe following is not considered as one ofits characteristics? ‘a [tis tevied on and bi. It is based onthe govemment’s need of money to suppor its legitimate objectives Teis nota personal liability ofthe persons assessed 4. Ttishased solely on tne benefit derived by the owners ofthe and 18. Iti the privilege of not being imposed a financial obligation to which others are subj a Taxincenive ©. Taxamnesty . b, Taxexemption 4, Taxcredit 19, Asto scope ofthe legislative power to tex, which is not correct? 1 Where there are no constitutional restrictions, and provided the subjects are within the fervtoral surisdction of tie stawe, Congress has unlimited discretion as to the persons, Property ot occupations to be taxed. ‘In the ebsence of any constitutional probibition, the House of Representatives: has the right tolevya tax of any amount it sces fit Tax 86-01| | i 3 © The discretion of Congress in imposing taxes extends to the mode, method or kind of tax, if ‘ot restricted bythe consitton. : " 4. The sole arbiter of the purpose for which taxes shall be levied is the Commissioner of Intemal Revenue (CIR), provided the purpose is public. However, the courts may review the levy ofthe tax to determine whether or aot the purpose is public. 20, Which of the following is a nature of taxation? ~The power is exercised by legislative action ¢. It is generally payable in money Its essentially an administrative funtion ‘The state can exist without it 21, The use of illegal or fraudulent means to avoid or defeat the payment of ta a Shing Avoidance b. Exemption 4. Brasion a Shifting Avoidance b. Exetption 4 Evasion 23, Synonymous to tx evasion a Tax dodging . Taxexemption . Tax minimization d Tax shield 24, Synonyinous to tax avoidance a Tax dodging . Taxexemption 'b. Tax minimization 4. Tax evasion 25. Incase of doubt, tax statutes are construod ‘Strictly against the goverment and the taxpayer '. Liberally in favor of the government and the taxpayer © Siritly against the govenament and Liberally in favor ofthe taxpayer ‘4. Liberally in favor ofthe government and strictly against the taxpayer 26. Incase of doubt, tax exemptions are construed ‘. Strictly against the government and the taxpayer '. Libbrally in favor ofthe govemument and the taxpayer . Strictly agains the government and liberally in favor of the taxpayer 44 Liberally in favor ofthe government and strictly against the taxpayer 22. The seo egal or permis eas to minimize or avo wes | | 27. In cast of conflict betwoon the Tax Code and the Philippine Accounting Standards (PAS) ‘2 PAS shall preval over the Tax Code '. Tax Code shall prevail over PAS ‘. PAS and Tax Code shall be bath 4. The taxpayer may choose between the PAS or the Tax Code 28, Tax ofa fixed amount imposed upon al persons residing within a specified teritory without ‘egadto their property, income, or ceupation they may be engaged in 4 Persona, pol or capitation © Excise b. Property 4. Regressive 28 Tip on penelope in proprton its ae onset esome snd of apne S"Peoeplercinson «Baie ‘ & Repesse 30, Tax imposed upon the performance of an act, the enjoyment of privilege or the engaging in an ‘occupation. ‘& Perfonal, poll or capitation ©. Excise b. Property Progressive Tax 86-0131. Tax which i demanded from the person whom the law intends or desires to pay it a Direct bs niet, ©. Excise Income 532 Tam whichis demanded fom one person inthe expectation and intention that he sal indemnify himself atthe expense of aather 2 Direct by Indirect «, Property 4 Income 33. Tax which imposes a specific sum by the head or number or by some standard of weight oF measurement and which requites no assessment other than a listing or classification of the ‘objects tbe taxed 4 Specific -b Adwalorem «Excise Income 534. Tax ofa fixed proportion of the amount or value ofthe property with respect to which the taxis assessed a Specie Excise b Ad-valorem . Percentage 35, Tax based on a fixed percentage of the amount of property, income or other basis to be taxed Proportional «. Regressive . Progressive 4. Indirect, 36. Tax where the rate decreases as the tx base increases Proportional ', Progressive c. Regressive ©. Indirect 37. Tax where te rate increases asthe tx ase increases 8 Proportional ’. Progressive —«, Regressive. Indirect 38, Which ofthe following statements isnot correct? 4 Tax burdens shall neither be imposed nor presimed to be imposed beyond what the statute expressly and clearly stats because tax statutes should be construed strictly against the government, 'b. Tax exemptions, tax amnesty, tax condonations and their equivalent provisions are tot presumed and, when granted, ere strictly constiued against the taxpayer because such provisions are highly dsfa oed by the government Exemptions trom tataton are highly disfavored in law and he who claims tax exemption must beable to jst his clarm or tight 4. The Bureau of Inieme! Revenue has the duty and the exclusive power of enacting, implementing and interpreting tas laws 39, The strongest of al inkerent powers of the state because without it, the government can neither survive nor dispense ary of is other powers and functions effectively, a Police Power © Power of Taxation b. Power of Eminent Domain. Power of Greystone 40. This power is supsroy to the non-impairment clause and is broader in application because it is the power to maise and impiement the laws, Power of Texation . Power of Eminent Domain b. Power of Recal, 4 Police Power 41. Which ofthe following taements i not core? ‘An inherent limitation of tation may be disegarded by the application of « constitutinal limitation '. Income tax lisilties shall be paid by the inhabitants even it foreign invaders occupy our count. Taxes may be imposed retrourivey by law, but unless So expressed by Such la, these taxes must only be inposed rrospectvely. 44. Tax laws are ether political or penal in nature, Tax 86.0142. Which ofthe following is nota constitutional limitation on the Power of Taxation? ‘No person shall be deprived of life, liberty or property without due process of law. 'b No person shall be denied the equal protection o the law, ‘No person shall be imprisoned for debt or non-payment of tax. 4. No law granting any tax exemption shall be passed without the concurrence of a majority ofall the members of Congress. 43. The distinction ofa tax from permit or license fee is that a tax is ‘Imposed for regulation . One which involves an exercise of police power. © One in which there is generally no limit onthe amouat that may be imposed. Limited tothe cost of regulation 4, Police power as distinguished from the power of eminent domain: 4 Just compensation is received by the owner ofthe property. . May be exercised by private individuals May regulate both liberty and property 44. Property is taken by the goverment for public purpose. 45. A tax wherein both the impact ofor the liability for the payment of the tx as well as the burden of the tax falls onthe same person. a Direct wx b. VAT —¢, Indirecttax Percentage tax 48. Which one ofthe following isnot a characteristic or element ofa tax? a. Itisan enforced coatribution . Itis legislative in character. € Itisbased on the ability to pay. 4 Itis payable in money or in kind. 47, Tax as distinguished from license fees: 2 Limited to cover cot of regulation B.A regaliory mesure 6. Non-payment doesnot necestany ender the busines illegal 4. Imposed inthe exercise of police power 48. The power to impose taxes is exercised by the a. President ’, Supreme Court © BIR d. Congress 49, One ofthe characteristics of internal revenue laws is that they are: ‘Criminal in nature «. Political in nature . Penal in nature d. Generally, prospective in application 50. Which ofthe following is not an example of excise tx: a. Transfertax, b Sales tax «©, Real property ax Income tax. 51. The following are similarities of the inherent power of taxation, eminent domain, and potice ‘power, except one 2 a Are necessary attributes of sovereignty, 'b. Superior tothe non-impairment clause ofthe constitution ©. Compensationbenefitis received: 4._ Are legislative in character. Tax 86-01‘62. No person shall be imprisoned for non-payment of this a Excise x b. VAT —. Incometax Poll tax 63. This isa demand of ownership: License fee b. Tax Toll ©. Customs duties ‘6 acome tax is generally regarded as 2 anexcise tax . atax on persons (© a property tax 4 tax on profits 65. Which f the following isnot acceptable for legally refisng to pay the tx] a "thal hei ght of the state to collect the tax has prescribed Thaker tono justin calet | That the tax lar was declared as unconstitional 4. Tha theres no benefit derived fom the tx 66, Al granting tax exemption requires the concumence of Majority vote ofall members of Congress . 28 ‘ote of members of Congress © vote of members of Congress 4. unanimous vote of members of Congress (67. No person shall be imprisoned for debtor non-payment of a poll tax. Ths is @ (an) ‘a Inherent limitation ¢, Intemational limitation Campane etdom, d.Derbe o j 4 68, The Department of Finance thr its offices entered into a contract with foreign investors, trang tam econ fon al fm of ae esouage vest ne Pps “The contac is a. Void, unless the President ratifies 1. Void, because the power to grant tax exemption is vested in Congress id ifthe President has authorized the officers to emer into such contrac, 44. Vali, because the purpose is to promote public welfare | (69. Tax as distinguished from debt no imprisonment for non-payment , based on contract ‘may be paid in kind 4. based on law 70, Congress can impose a tax at any amount and at any time shows that ‘a. Taxation is an inherent power of the estate 'b. Taxation is essentially a legislative power Taxation is avery broad power ofthe state 4 Taxation is based on taxpayers’ ability to pay 1. A charge imposed on land for special benofits derived resulting from public improvements Tax} b. Toll, License 4. Special assessment 1 ‘72. Which of the following are National Internal Revenue Taxes? HL Denor’s tax v.0PT VILDsT IV. VAT VL Excise tax Tax 86.0173. The tree fundamental powers ofthe state are |. Inherent in the ste and may be exercised by the state without need of any constutional rant I Not only necessary bu indispensable. IIL Methods by which the state itrferes with private rights 1V. Exereised primarily by the legislature @ Alloue ¢, Half true, half false b. All false None of the sbove st domain and 74. 1. Police power regulates both liberty and property while the power of the power oftexation afect only property rights 11 Police power and the power of taxation maybe exercised only by the government wile the ‘Power of eminent domain may be exercised by some private entities. 1. The property taken in police power is destroyed while the property taken under the power of eminent domain and power of taxation isnot destroyed. IV. In the power of taxation, the ‘compensation received is the protection of the state afforded to it citizen; in police power, a higher standard of living is enjoyed by the citizens, and in the a citizen receives just compensation forthe property taken from & Alltrue — b.Allfilse —e, Halftrue 4. None of the above 75,1. The point on which s tx is originally imposed is impact of taxation 1. The point on which a tax burden finally rests or setles dawn is incidence of taxation. LL Police power is superior tothe non-impairment clause ofthe constitution, 1V, Power of taxation is not superior tothe non-impairment clause of the constitution & Allirue — »,Allfalse ©. Half mue 4d. None ofthe above 76. 1. No person shall be imprisoned for debt or non-payment of tax . Tax laws are civil and penal in nature because there are criminal penalties when they are violated. UL Taxes may be collected in au walimited amount TV. Livense fies may be collected in an unlimited amount, 4. One statement is true ». Two statements are tue, ¢. Three statementsare true d. All statements are true. 77, 1. Taxis imposed on persons, property, and property rights. . IL. Special assessment is imposed on persons, property and property rights. TL, Tax collection isa legislative act. TV. Imposition of tax is ap administrative act. 2. One statement is true >, Two statements ae tue. . Three statements are true d,_All statements are true 78. 1 There.can only bea tax if there is a law imposing the tax. IL The power to tax may include the power to destroy a True, tre b. True, false ©. False, true d. False, false Tax 86.0179.1 Due process of law in taxation under the constitution is a grant of power. 1, Provision in the Philppne constitation on taxation are grants of power. IIL There may be double taxation in the Philippines. 1V, Tanation may be used to implement the police power of the sate a One statement is true 'b. Two statements are true. ¢. Three statements are true d All statements are true, 80. 1 License fer is a charge imposed under police power 1. Special assessment is levied on lands onl. UNL Tax is imposed regardless of public improvements. |V. Special assessment is imposed regardless of public improvements. One statement is rue Two statement are te. © Thyeestatemenis are true. ll statements are tre 81, 1. One ofthe essential characteristics ofa taxis it is unlimited in amount: TA tax is gencrally unlimited because it is based on the needs of the stat. True, true ’. True, false . False, tue 4. False, false | | | 82. A system of taxation where the amount of revenue from indirect taxes are hore than the direct taxes is a Progressive Regressive ©-Proportional d._Sthedulr 83. Congress passed a law which granted tax amnesty to those who have not paid their income taxes in 2010 bat dd not provide forthe refund to those who paid. I the aw valid? 8. NG, this will encourage taxpayers not to pay their axes 'b. Yes, Congress has the sole discretion of determining whom to tax Nd, the grant of amnesty isthe sole prerogative ofthe President 4. Yes, Congress provided fora valid classification. ‘84. Money collected from taxation shall not be paid to any religious dignitary ‘when 4 The eligious digntary is assigned tothe Philippine Amy, >. Its ped by a local goverment nit ©The payment is passed in aut bythe COA. Is par ofa lawmakers pork barrel ! 85, Which in taxation states that without taxes, a goverament would be paralyzed for lack of Mia hereon een races a ‘to destroy theory ¢. Sumptuary theory TESS Ese 86. The actual effort exerted by the government to effect the exaction of what is due ftom the taxpayer is known as Assessment © Payment b 4. Collection 87. Although the power of taxation is basicaly legislative in characte, itis NOT the function of Congress to Sf Fix with certainty the amount of axes 1b. Collect the tax levied under the law © Identify who should collect the tax 4. Determine who should be subject to the tx Tax 86.0110 88 An cxample ofa tax where the concept of progressivity finds application is the &Gmduated income tax mites on indwiduals Excise tax on petroleum products © Value-added tax on certain articles d Amusement tax on boxing exhibitions 89. The power to wy is the power to destroy, 1s this always 507 & No The I:xvcutive Branch may decide not to enforce a tax law which it believes to be eonviseatory b Yes. The tax collectors should enforce a tax law even if it resuls to the destruction of the Property rights ofthe taxpayer © Yes The tax laws should always be enforced because without taxes the very existence of the Stale 1s endangered 4. No. The Supreme Court may nullify # tax law, hence, property rights are not affected. 90. ‘This is not an inherent imitation on the power of taxation Double taxation, though not probibited, is disfavored aunlty and uniformity in taxation Public purpose of taxation Territonaliy apee 91, Revenue regulations (RRs) are: @ Issuances signed by the Secretary of Finance, upon recommendation of the CIR, that specify. prescribe or define rules and reyulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes. '. Issuances that publish pertinent and applicable portions, as well as amplifications, of Jaws, rules, regulations and precedents issued by the BIR and other agenciesloffices. ©. Issuanees that provide diveetives ut instructions, prescribe guidelines, and outline Processes, operations, avtivites, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and programs of the Bureau in all uteas of operations, except auditing, 4 None of ine above, 92. Revenve Memorandum Circulars (RMCS) are 4. Issuances signed by the Sccretery of Finance, upon recommendation of the Comamissionc of tnternal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and elated setutes b Issaances that publish pertinent and applicable portions, as well as amplifications, of Jans, rules, cegulations and precedents issued by the BIR and other agencies/offices. © Issuances that provide directives or insiructions, prescribe guidelines; and outline processes, operations, activities, workflows, methods and procedures necessary in the {implementation of stated policies, goals, bjcetives, plans and programs of the Bureau in all anas of operons, except auditing. 4. None of the above. 93. Revenue Memnorandurs Onders (RMOs) ar: ‘2 Issuunces signed ay the Secretary of Finanee, upon recommendation of the Commissione: of Intzrnal Revenue, that spect), prescribe or define rules and regulations forthe effective enforcement ofthe provisions ofthe National Internal Revenue Cede (MIRC) and related stautes. bi. Issuunces that publish pertinent and applicate postions, as well ws amplifications, of Jaws, rules, regulations end precedents istusd by the BIR and other agencies/offices ‘& Issuances that provide giteotives or instructions, prescribe guidelines; and outline [provesses, operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goal, objectives, plans and programs ofthe Bureau in all areas of opersions, excep auditing. Tax 86.01u 4d. None of the above, 94, The following are the powers ofthe CIR except: 4 After a retum has beea filed or when no retum is filed, the CIR may authorize the {exarnnation of any taxpayer, and the assessment of the correct amount of tax. . The CIK has the power to issue Summons or Subpoena Duces Tecum to a taxpayet, #0 officer or employee of taxpayer, or to any person having possession of records relating 10 the business ofa taxpayer. © The CIR has the power to take the testimony of a person, under oath, that may be relevant or materal to the inquiry 4 The CIR has the power to inquire into taxpayer's bank deposits in all instances, 95. What is tax mapping? 8) Tris equvatent to tx assessment within the applicable reglementary periods depending on whether the taxpaver i guity of fraud or not. ) Itis a mere verification made by the BIR of a taxpayer's compliance with registration and other reyuirements prior to, during, and ater its business operations such asthe following: (@) registration ofthe head office and branches; (b) payment of annual registration fee and posting of the samme in the place of busines; (c) authority to print reeipts and invoices; (8) the issuance of receipts and invoices on every sal, (e) the contents of such receipts and invoices, (f) registration of cash register machines, point-of-sale machines, and computerized accounting systems; and (g) registration of books of accounts 1) This is the directory of the Revenue District Offices of the BIR witha listing of al officers and revenue agents. 4) None of the above. 96. Dante Company is a hotel company registered 2s a local economic enterprise (“LEE”) of the City of Depitan. The company is asserting tet, as an LEE owned and operated by a local govemment unit ("LGU"), it should no longer be required to pay income taxes to the BIR. It argues that all revenues collected by it must accrue exclusively to the city government of Dapitan, Is the company correct? 18) Yes. Since the company is owned by an LGU which itself is exempt fiom taxes imposed by the Tax Code, the same privileges must also be accorded to it 1) Yes. Under Section 18 ofthe Local Government Code, LGUs are authorized to generate their own sources of revenues, and the allocation ofthe same shall accrue exclusively to them ©) No._ The company is wot one of those corporations exempt from taxes under Section 30 of the Tax Code or under any special laws. Beside, the acts of an LGU in its corporate capacity and forthe purpose of economic gain may be subject to tx just lke any other [iva or goverment corporation (BLGF Opinion, April 20, 2017). 4) None ofthe above. 97. Mr. Compton sels shoes in Makati through areal store. He pays the VAT on his gross sales to the BIR and the municipal license tax based on the same gross sales tothe 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? ‘Yes, there is double taxation and itis progressive. '. The City of Makati has no taxing power. «Yes, there is double txation and this is illegal in the Philippines. 4. Double taxation is allowed where ane taxis imposed by the national government and the other by local goverameat, ‘THEEND Tox 86-01