PRINCIPLES OF TAXATION

BIR POWER AND FUNCTIONS

1. They exist independent of the constitution being fundamental power of the state, except
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Power of recall

2. The power to demand proportionate contribution from persons and property to defray the necessary expenses of the government
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Power of recall

3. The power to regulate liberty and property to promote the general welfare
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Power of recall

4. The purpose to acquire private property upon payment of just compensation for public purpose
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Power of recall

5. The following are the similarities among the Fundamental Powers of the state, except
a. They can be abolished by the Constitution
b. They constitute the three methods by which the Senate interferes with private property rights
c. Each presupposes an equivalent compensation to the inhabitants
d. The emergence of the State carries with it these fundamental powers

6. The following are the differences between the Power of Taxation and the Power of Eminent Domain, except
a. T: Enforced proportionate contribution
ED: Property to be taken is for public use
b. T: Government has no obligation to pay
ED: Government is a debtor of the property taken
c. T: It operates in a community
ED: It operates on an individual
d. T: Attribute of sovereignty
ED: Fundamental power

7. Which of the following statements is true?

a. The power of taxation and eminent domain are both exercisable only by the government and its political subdivision
b. In police power, the property taken is preserved for public use
c. The power of eminent domain is created by the constitution
d. The exercise of the power of eminent domain and police power can be expressly delegated to the LGU by the law making body

8. Which of the inherent powers maybe exercised even by public utility companies?
a. Taxation
b. Police power
c. Eminent domain
d. A and C

9. Which of the following may not raise money for the government?
a. Power of taxation
b. Police power
c. Power of eminent domain
d. Privatization of government’s capital assets

10. 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
b. Situs of taxation
c. Scope of taxation
d. Theory of taxation

11. The reciprocal duties of support and protection between the people and government
a. Basis of taxation
b. Situs of taxation
c. Scope of taxation
d. Theory of taxation
12. Which statements below expresses the lifeblood theory?
a. The assessed taxes must be enforced by the government
b. The underlying basis of taxation is government necessity, for without taxation, a government can’t either exist nor endure
c. Taxation is an arbitrary method of exaction by those who are in seat of power
d. The power of taxation is an inherent power of the sovereign to impose burdens upon subjects and objects within its jurisdiction for the
purpose of raising revenues

13. The principal purpose of taxation is

a. To encourage the growth of home industries through the proper use of tax incentives
b. To implement the police power of the State
c. To reduce excessive inequalities of wealth
d. To raise revenue for governmental needs

14. After having been informed that most of the massage parlors in the city are being used as fronts of prostitution, the Sangguniang Panlungsod of
Manila passed a tax ordinance subjecting massage parlors within its jurisdiction to such onerous taxes that leave them no other alternative but
to stop operating. The passage of the ordinance is a valid exercise of
a. Taxation
b. Police power
c. Eminent domain
d. Police power and power of taxation

15. The levying and imposition of tax and the collection of tax are processes which constitute the taxation system
a. Basis of taxation
b. Aspects of taxation
c. Nature of taxation
d. Theory of taxation

16. The official action of an officer authorized by law in ascertaining the amount of tax due under the law from a taxpayer is
a. Assessment
b. Delinquency
c. Deficiency
d. Distraint

17. Fixing the tax rate to be imposed is best described as a(n):

a. Tax administration aspect
b. Tax legislative function
c. Aspect of taxation which could be delegated
d. Function that could be exercised by the executive branch

18. All of the following are administrative functions of taxation except

a. Selection of object of tax
b. Equalization of assessment
c. Valuation of property for taxation
d. Collection of taxes

19. The Commissioner of Internal Revenue is granted certain powers under the Tax Code. Which of the following is not a power granted to the
Commissioner under the Code?
a. Interpret tax laws and decide tax cases
b. Issue summons and subpoena
c. Enact tax laws and make amendments
d. Make assessment and prescribe additional requirements

20. Which of the following statement is correct?

a. The BIR Commissioner has the power to interpret the provision of the Tax Code without the need of review by the DOF Secretary
b. The BIR has the authority to prescribe additional procedural/documentary requirements for taxpayers
c. The BIR shall have commissioners and a deputy commissioner
d. The BIR Commissioner can delegate the power to abate tax liabilities

21. Where does taxing power of the provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree of Executive Act
d. Local legislation

22. When the power to tax is delegated to the local government

a. Only the local executive can exercise the power
b. Only the legislative branch of the LGU can exercise the power
c. The local executive and the legislative branch of the LGU can exercise the power
d. Neither the local executive and the legislative branch of the LGU can exercise the power

23. Levying of local government taxes may be exercised by

a. The local executive only
b. The legislative branch of the local government only
c. The local executive and the legislative branch of the LGU
 d. Neither the local executive and the legislative branch of the LGU can exercise the power
24. The Congress enacted a new law, known as EVAT. An association of taxpayers questions the constitutionality of this law on the ground that it
did not originate exclusively in the House of Representatives as required by the Constitution, because in fact the result of the consolidation of
two distinct bills, one from the House and the other from the Senate. Is the VAT Law unconstitutional?
a. Yes, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local application, and private
bills, shall originate exclusively in the House
b. Yes, because the Senate has no authority to propose or concur any amendments with the revenue or tax bill proposed by House
c. No, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local application, and private bills,
shall be initiated by the Senate
d. No, because it is not the law but the revenue bill which is required by the constitution to originate exclusively in the House and
insisting otherwise would violate the coequality of legislative power of the two houses of Congress and in fact would make the House
superior to the Senate

25. The city council passed a tax ordinance imposing an occupation tax or profession of an industrial engineer. GJ is the only person with such
occupation in the city. Which of the following is correct?
a. GJ can successfully challenge the validity of the ordinance being discriminatory since he is the only one adversely affected
b. The ordinance violates the constitutional rule of equality in taxation
c. The ordinance is a class legislation since it does not subject to Occupation tax the other industrial engineers
d. The ordinance is a valid exercise of the council’s power to enact tax ordinance to raise revenue under the Local Government Code

26. Which of the following is incorrect?

a. Taxes may be imposed retroactively by law, but unless so expressed by such law, these taxes must only be imposed prospectively
b. Tax laws are neither political nor penal in nature
c. The ex post facto rule is not applicable in taxation
d. None of the above

27. On January 1 2017, the Congress enacted a law increasing the corporate income tax from 30% to 40%. The law provides retroactive effect
starting January 1 2010. The Philippine Chamber of Commerce questions the validity of the law. Is the law constitutional?
a. No, because the retroactive effect of the law constitutes deprivation of right to property of corporation without due process of law
b. No, because 40% is violation of due process of law for being excessive and unreasonable
c. Yes, because the power of taxation is an inherent power of a sovereign State and it is based on the lifeblood doctrine and necessity
theory
d. Yes, because the power of taxation is an essentially legislative power within the exclusive prerogative of the Congress that its wisdom
is beyond the reach of the Supreme Court

28. The 30% corporate income tax is increased to 35% by the Congress for the purpose of raising revenue to be used for national road expansion
project near BGC, a private corporation. Is the exercised of the taxing power unconstitutional?
a. Yes, because taxing power must be exercised exclusively for public purpose without any incidental benefit to any private entity
b. No, because it is exercised directly for public purpose and the benefit to a private entity is only incidental
c. Yes, because the increase in tax rate constitutes deprivation of right to property of corporation without due process of law for being
excessive and unreasonable
d. No, because the constitution does not expressly state that the power of taxation must be used only for public purpose, thus it may be
used to benefit a private entity

29. One of the following is not a characteristic or an element of tax

a. It is levied by the legislature
b. It is payable in money or in kind
c. It is proportionate in character
d. It is an enforced contribution

30. All of the following, except one, are basic principles of a sound taxation system
a. Fiscal adequacy
b. Administrative feasibility
c. Theoretical justice
d. Inherent in sovereignty

31. The tax law must be capable of convenient, just and effective administration
a. Theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of appointment

32. Which is not a double taxation?

a. A lessor of property pays a real estate tax and income tax on the same property
b. Imposition of tax on the finished products and the raw materials used in the production of the said finished products
c. Imposition of tax on corporate income and shareholder’s dividends from the same corporation
d. All of the above

33. The usual mode(s) of avoiding occurrence of double taxation is/are

a. Reciprocal exemption, either by law or treaty
b. Tax credit of foreign taxes paid
c. Deduction of foreign taxes paid
d. All of the above
34. Which of the following is incorrect description of taxation?
a. Legislative and inherent for the existence of the government
b. Necessary and for public purpose
c. Supreme and absolute power of the State
d. The strongest of all inherent powers of the State

35. These are restrictions imposed by the Constitution

a. Equality in taxation
b. Equal protection of law
c. Due process of law
d. For public purposes

36. A fundamental rule in taxation is that the property of one country may not be taxed in another country. This is known as
a. International law
b. Reciprocity
c. International comity
d. International prohibition

37. May the Philippine government require tax on the salaries of Filipino employees in the American Embassy in the Philippines?
a. No, because this will violate the rule of international comity
b. No, because if the Philippine government would impose the requirement of the withholding on the salaries of the Filipino employees
working in the American Embassy in the Philippines, this would in effect require that the American government be constituted as the
withholding agent of the Philippine government insofar as the taxes on the salaries of the Filipino employees are concerned
c. Both a and b
d. None of the above

38. One of the following is not a Constitutional limitation on the power of taxation?
a. Exemption from taxes of revenues and assets of educational institutions, including grants, endowments, donations and contributions
b. Non-impairment of the jurisdiction of SC in tax cases
c. Exemption of the government from taxes
d. Non-infringement of religious freedom and worship

39. Compliance with procedural requirements must be followed strictly to avoid collision between the State’s power to tax & the individual’s
recognized rights
a. Due process of law
b. Equality in taxation
c. Non-infringement of religious freedom
d. Non-impairment of obligations and contracts

40. No person shall be imprisoned for non-payment of this

a. Property tax
b. Excise tax
c. Poll tax
d. Income tax

41. This requires that all subjects or objects of taxation, similarly situated are to be treated alike or put on equal footing both in privileges and
liabilities
a. Due process
b. Uniformity
c. Progressive taxation
d. None of the choices

42. The following are the constitutional limitations on the power of taxation, except
a. Only Congress can exercise the power of taxation
b. Non-impairment of the obligation of contracts
c. Taxes are not subject to set-off or compensation
d. The rule of taxation shall be uniform

43. No law granting any tax exemption shall be passed without the concurrence of
a. Majority of all member of Congress
b. 2/3 vote of all members of Congress
c. ¾ vote of all members of Congress
d. Unanimous vote of all members of Congress

44. The basis or test of exemption of real properties owned by religious, or charitable entities from real property taxes is
a. Use of the real property
b. Ownership of the real property
c. Location of the real property
d. Ownership or location real property at the option of the government

45. “Government agencies performing governmental functions are exempt from tax unless expressly taxed while those performing proprietary
functions are subject to tax unless expressly exempted” refers to:
a. The tax imposed should be for public purpose
b. There should be no improper delegation of the taxing power
 c. The power to tax is limited to the territorial jurisdiction of the taxing government
d. Exemption of government entities from taxation
46. It literally means “place of taxation” the country that has the power and jurisdiction to levy and collect the tax
a. Basis of taxation
b. Situs of taxation
c. Scope of taxation
d. Theory of taxation

47. Which of the following concepts of taxation is the basis for the situs of income taxation?
a. Lifeblood doctrine of taxation
b. Symbiotic relation in taxation
c. Compensatory purpose of taxation
d. Sumptuary purpose of taxation

48. The least source of tax laws

a. Statutes
b. Presidential decrees
c. Revenue regulations
d. Tax treaties or conventions

49. The Philippine income tax system has the following features except
a. Comprehensive tax situs by using the nationality, residence, and source rules
b. The individual income tax system is mainly progressive in nature
c. Indirect rather than direct system
d. Semi-global and semi-schedular system

50. Tax imposed on personal or real property in proportion to its value or some other reasonable method of apportionment
a. Personal, poll, or capitation tax
b. Property
c. Excise tax
d. Regressive

51. Tax which is demanded from the persons whom the law intends or desires to pay it
a. Direct
b. Indirect
c. Excise
d. Income

52. Tax which is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another
a. Direct
b. Indirect
c. Excise
d. Income

53. A tax on business is

a. Direct tax
b. Indirect tax
c. Property tax
d. None of the choices

54. Tax which is a fixed proportion of the amount or value of the property with respect to which the tax is assessed
a. Ad valorem
b. Specific
c. Excise
d. Revenue

55. JJ is a mining operator. The tax he has to pay is based on the actual value of the gross output or mineral product extracted is
a. Mining tax
b. Royalties
c. Rental
d. Ad valorem

56. Tax where the rate decreases as the tax base increases
a. Progressive
b. Proportional
c. Regressive
d. Indirect

57. A tax classified as a regressive tax

a. Excise tax
b. Real estate tax
c. Value added tax
d. None of the choices
58. Which of the following taxes is always proportional
a. Value added tax
b. Income tax
c. Estate tax
d. Donor’s tax

59. Tax as distinguished from license fee

a. Non-payment does not necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation

60. Which of the following terms describes this statement “that the State has complete discretion on the amount to be imposed after distinguishing
between a useful and non-useful activity?
a. Tax
b. License fee
c. Toll
d. Customs duty

61. Which statement is wrong?

a. A tax is a demand of sovereignty
b. A toll is a demand of ownership
c. A special assessment is a tax
d. Customs duty is a tax

62. Debt as distinguished from tax

a. Based on law
b. May be paid in kind
c. Does not draw interest except when delinquent
d. Generally, not subject to set-off or compensation

63. Schedular system of income taxation means

a. All types of income are added together to arrive at gross income
b. Separate graduated rates are imposed on different types of income
c. Capital gains are excluded in determining gross income
d. Compensation income and business/professional income are added together in arriving at gross income

64. Under CWT system, which of the following statements is incorrect?

a. Taxes withheld on certain income payments are intended to equal or atleast approximate the tax due of the payee on said income
b. The recipient of the income is no longer required to file an ITR as prescribed under Tax Code
c. The payee is required to report the income and pay the difference between the tax withheld and the tax due thereon
d. Taxes withheld under this system are creditable in nature

65. When the refund of a tax supposedly due to the taxpayer has already been barred by prescription, and the said taxpayer is assessed with a tax
at present, the two taxes may be set off with each other. The doctrine is called
a. Set-off doctrine
b. Doctrine of reciprocity
c. Tax sparing doctrine
d. Equitable recoupment

66. In case of ambiguity, tax laws imposing a tax shall be interpreted

a. Strictly against the taxpayer
b. Liberally in favor of the taxpayer
c. Liberally in favor of the government
d. None of the choices

67. In cases of deductions and exemptions, doubts shall be resolved

a. Strictly against the taxpayer
b. Strictly against the government
c. Liberally in favor of the taxpayer
d. None of the choices

68. Which of the following is correct regarding the purpose(s) of revenue regulations issued by DoF through BIR?
a. To properly enforce and execute the laws
b. To clarify and explain the law
c. To carry into effect the law’s general provisions by providing details of administration and procedure
d. All of the above

69. The use of illegal or fraudulent means to avoid or defeat the payment of tax
a. Exemption
b. Shifting
c. Avoidance
d. Evasion
70. Transfer of the tax burden by one whom the tax assessed to another
a. Shifting
b. Capitalization
c. Transformation
d. Tax exemption

71. Tax administration is a system involving enforcement of taxes through the use of
a. Tax legislation
b. Tax legislation and assessment
c. Tax imposition and collection
d. Tax assessment and collection

72. A governmental officer considered as tax enforcer by having the power to ascertain the validity of tax laws subject to the review of the Court of
Justice
a. Secretary of Justice
b. Secretary of Finance
c. BIR Commissioner
d. Chief Justice

73. Which of the following is not within the scope of authority of the BIR Commissioner?
a. To exercise the levying function of taxation
b. To interpret tax laws
c. To assess and collect BIR Taxes
d. To decide cases involving National Internal Revenue Taxes

74. The following instances allow the BIR Commissioner to inquire or examine the bank deposits of taxpayers, except
a. To determine the gross estate of a decedent
b. When the taxpayer filed an application for compromise of his tax liability
c. The taxpayer waives the right in writing the confidentiality of the bank deposit
d. When the taxpayer fails the lifestyle check test and shows unexplained wealth

75. The BIR is under the supervision of

a. DoB
b. BoC
c. DoF
d. DTI

76. Which of the following is not an activity involving tax administration?

a. Execution of judgment decided by the court in favor of the BIR
b. Passage of tax laws and ordinances through the legislature
c. Computation of tax due and payable
d. Taxpayer’s compliance to pay tax obligation

77. Which of the following statements is correct?

a. Levying and collection of taxes are legislative functions
b. Assessment and collection are administrative functions
c. Enacting of tax laws and its interpretation are legislative functions
d. Levying and impositions are judicial functions

78. Which of the following is correct?

Legislative Administrative
a. Fixing of tax rates Yes Yes
b. Valuation of object of tax Yes No
c. Collection of taxes Yes Yes
d. Assessment of tax liability No Yes

79. It has the executive supervision and control over tax administration
a. BIR
b. BoC
c. DoF
d. Court of Justice

80. Which of the following is not among the administrative powers of BIR
a. Compromise tax assessments
b. Distraint of personal property of delinquent taxpayer
c. Render court decision concerning tax dispute
d. Levy of real property of delinquent taxpayer
81. By forfeiture, the proceeds of the property sold are applied to satisfy the tax liability and the excess thereof shall be returned to the taxpayer

82. By seizure, no part of proceeds goes to the taxpayer because the property is confiscated in favor of the government

83. A second cousin of an internal revenue officer is allowed to receive an informer’s reward.

84. Cases regarding collection of taxes already filed in the court are not subject to compromise

85. The BIR can access the taxpayer’s record regarding sales and purchases even without LOA

86. In a written protest to Commissioner, all relevant supporting documents must be submitted to the CTA within 60 days from date of assessment,
otherwise, the assessment shall become final

87. The object of distraint may either be personal and/or real properties of delinquent taxpayer

88. Criminal violations filed in courts may be compromised

89. The prescriptive period for collection of tax shall be made within three years from the time the final assessment was released

90. After one year from the date of sale of real property under levy, the delinquent taxpayer may redeem the property sold

91. The transfer of business place during the year will require registration and additional registration fee

92. The required initial bond for manufacturers and importers of articles subject to excise tax is P200,000

93. Tax assessment cannot be enforced when there are no available accounting records maintained by the taxpayer

94. When a taxpayer applies for tax compromise, the CIR can automatically inquire into his bank deposits

95. The BIR is the principally responsible for the fiscal policies and general management of the government’s financial resources

96. The BIR is primarily in charge to assess and collect taxes imposed by both national and local government units

97. The Secretary of Justice has the authority to interpret and ascertain the validity of tax laws, subject to the review by the CTA

98. The power to interpret the provisions of the Tax Code, to be able to decide on tax cases under its office is granted by law to the BIR
Commissioner

99. Internal Revenue taxes are self-assessing; hence government tax assessment is not necessary to demand settlement of a taxpayer’s liability

100. The interest on the deficiency tax shall discontinue to accrue upon the protest of the taxpayer against the tax assessment