LPU MANILA

Department of Accountancy and Management Accounting

Income Tax

Lecture 2 – CASES UNDER GENERAL PRINCIPLES OF TAXATION

1. A sweetened beverages company is questioning a legislative body’s ability to impose additional taxes on added sugars.
Is the question valid?
2. The Philippine Government imposed a new regulation on the use of E- Bicycles on main roads, where an individual
can no longer use the said mode of transportation. What power did the government exercise?
3. Excise “taxes” for sin products (tobacco, alcohol, etc.) should be classified under the Police Power of the state rather
than under the power of Taxation, because the objective of the imposition of such burden is to regulate the
manufacturers and users, as well as to promote general welfare to the public.
4. The government has called upon its residents and citizens to pay taxes and assume monetary burden so that it can meet
its widely expanding services and carry out its other functions. Mr. Balyentes, refused to pay taxes because according
to him, he can protect himself alone and he does not need the government to survive. He will now file for tax exemption.
Is the contention valid?
5. Ate Boy, a citizen of the Philippines, refused to pay any form of taxes since he does not have the capacity to pay such
burdens. He understood the “Life Blood” theory of taxes, but he claims that the government can survive even without
his small contributions. Is the statement of Ate Boy valid?
6. The Court of Tax Appeals (CTA) orders the collection of income taxes to be stopped for the year 2019. Is this valid?
7. The government exercised the power of eminent domain on a certain private property for P500,000. The owner of the
property has not been paying his real property tax for 5 years, which totaled P100,000. The owner then demands that
set-off should be made for the amounts owed to him by the government and owed by him from the government. Is his
claim valid?
8. A private corporation asked the CTA to suspend their tax dues for the meantime because taxes are causing them losses
and they might file for bankruptcy if the situation will not be changed. Do they have a valid point?
9. There are increasing number of complaints from businesses nationwide that taxes imposed by LGUs are “making
things complicated”. They are pushing the congress to abolish the power to tax delegated to LGUs. Can the congress
abolish the said delegation of power of taxation?
10. There are increasing number of complaints from businesses nationwide that taxes imposed by LGUs are “making
things complicated”. Can the Congress pass a law limiting the power of LGUs to impose tax on their jurisdictions?
11. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, issued a “Revenue
Regulation” using gross income as the tax base for corporations doing business in the Philippines. Is the revenue
regulation valid?
12. Papa Paul’s Cafeteria is operating under the DOJ’s premises, and DOJ is receiving rentals from the said restaurant. Is
the rentals received subject to taxes?
13. The legislative branch passed a law requiring citizens of the Philippines to pay real property taxes from their real
properties outside the Philippines. Is this a violation of international comity principle?
14. The Philippine Government enters into an agreement with a private telecommunication company, in which latter was
granted an income tax exemption for a period of 5 years. The government will receive unlimited telecommunication
services during that duration. Is the agreement valid? Can the lawmaking body (using its legislative powers) revokes
the exemption during the period of 5 years?
15. Mr. Choco Galyardo is the owner of a 5,000 sqm parcel of land located in Las Pinas City. He leased 80% of the
property for P500,000 a year to a religious group for a period of 10 years. The religious group built on 1,000 sqm
portion a chapel that is used in connection with its religious activities. Also, they constructed a 5 story building on the
remaining portion which it rented out to various commercial establishment.
a. Is Mr. Choco Galyardo exempt from the payment of real property taxes?

GENERAL PRINCIPLES OF TAXATION

Prepared by: Eureze Lhoed Tabar, CPA,MBA,CrFA
 b. Is Mr. Choco Galyardo exempt from the payment of income taxes?
c. Is the religious group exempt from the payment of real property taxes?
d. Is the religious group exempt from the payment of income taxes from rentals?
16. IRDR College is a non-stock, non-profit educational institution, which owns two buildings; the first building is used
for classrooms and the second building is for the library. IRDR College also collects tuition fees from students, which
will be used for the daily expenses of the school.
a. Is the two buildings subject to real property tax?
b. Is the tuition fees subject to income tax?
17. A certain revenue bill was passed in the lower house. When the bill was in the upper house, the senate passed a new
version of the bill, and then signed by the President. Is the new law follows constitutional due process?
18. The Congress revokes the tax exemption of a certain private company before the expiry date indicated from the
previous legislation. Is the revocation valid?
19. Hendrix Fukyaw, a Filipino boxer, won 1M USD in a fight that was held in United States of America. He was taxed
in the US based on gross amount, and he was also taxed in the Philippines based on the gross amount. Is there a double
taxation?
20. The municipality of Cavite enacted an ordinance which imposes occupation tax upon owners of fishponds. The validity
of the ordinance is being challenged on the ground that it constitutes double taxation because the fishpond owners are
also subject to income tax. Is the challenge valid?
21. 12 % VAT on sales and 30% Corporate Income Tax imposed in a business is an example of double taxation.
22. 12% VAT that were shifted to the consumers is an example of tax avoidance.
23. ABC Corporation sold merchandise worth P10M in the month of December of 2019. The invoices issued and official
receipt were both dated on the same month. The management instructed the accounting department to record the
transaction as sales for January 2020 instead of December 2019, since according to the management, they can avoid
paying additional taxes by this delayed sales recognition. Is this a legal way to avoid taxes?
24. A non-stock, non-profit educational institution was established in Manila. It has assets and revenues which were used
actually, directly and exclusively for educational purposes. A new city ordinance was passed that all organizations who
are “exempt” from taxes should submit an annual requirement testifying that they are indeed under the tax exempted
organizations. Failure to do so shall make them liable for all tax dues computed as if they are not exempted from tax.
Is the ordinance valid?

Various Sources

GENERAL PRINCIPLES OF TAXATION

Prepared by: Eureze Lhoed Tabar, CPA,MBA,CrFA