PART 1 PRINCIPLES QUIZZERS

Choose the letter of the correct answer.

Inherent Powers of the State

1. The State, having sovereignty can enforce contributions (tax) upon its citizens even without
a specific provision in the Constitution authorizing it. Which of the following will justify the
foregoing statement?

Statement 1: It is so because the state has the supreme power to command and enforce
obedience to its will from the people within its jurisdiction.

Statement 2: Any provision in the Constitution regarding taxation does not create rights
for the sovereignty to have the power to tax but it merely constitutes limitations upon the
supremacy of tax power.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both Statement are correct
d. Both statement are incorrect
 Answer: C
 Statement 1 is a description of “sovereign power”.
 Statement 2 – The power to tax is inherent. It is a power independent
of the constitution. It can be exercised even in the absence of a
constitutional grant.

2. The following statements correctly described the power of the State to tax, except:

a. It is a power inherent in every sovereign state to imposed a charge or burden upon

persons, properties or rights to raise revenues for the use and support of the
government and to enable it to discharge its functions.

b. The State can exercise the power of taxation only if it is expressly mentioned in the
Constitution.

c. It passes a legislative undertaking through the enactment of laws by the Congress

which will be implemented by the Executive Branch of the government through its
Bureau of Internal Revenue to raise revenue for the inhabitants in order to pay the
necessary expenses of the government.

d. It is a way of collecting and apportioning the cost of government among those who
are privileged to enjoy its benefits.

Answer: B
3. Which statement is wrong?

a. The power of taxation may be exercised the government, its political subdivisions, and
public utilities.
b. Generally, there is no limit on the amount of tax that may be imposed.
c. The money contributed as tax becomes part of public funds.
d. The power to tax is subject to inherent and constitutional limitations.

Answer: A

 The power of taxation can be exercised by the government only. The only
inherent power which may be exercised by public utility companies is
eminent domain.
 There is no limit on the amount that may be imposed because it is based on
the needs of the government.

4. They exist independent of the constitution being fundamental power of the state, expect
a. Power of taxation c. Power of eminent domain
b. Police power d. Power of recall
Answer D

 They exist “independent of the constitution” means, the power can be

exercised without being granted by the constitution.

5. Statement 1: The constitution is the source of the state’s taxing power.

Statement 2: The police power of the government may be exercised through taxation.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

Answer C

 The power to tax is one of the inherent powers of the State. They exist
“independent of the constitution”.

6. Statement 1: The Constitution cannot take away the inherent powers of the State but
may only prescribe its limitations.
Statement 2: No laws are necessary to confer the inherent powers of the State upon any
government exercising sovereignty.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

Answer: C
 The constitution is not the source of the inherent powers of the State,
therefore, it cannot take away such powers.
7. The power to demand proportionate contribution from persons and property to defray the
necessary expenses of the government.
a. Power of taxation c. Power of eminent domain
b. Police power d. Power of recall

Answer: A

8. The power to regulate liberty and property to promote the general welfare

a. Power of taxation c. Power of eminent domain

b. Police power d. Power of recall

Answer: C
 The rights regulated in the exercised of the inherent powers of the State are
as follows:
 Power to tax and eminent domain = Private/Property rights
 Police Power = Private/Property rights and Liberty
9. The power to acquire private property upon payment of just compensation for public purpose
a. Power of taxation c. Power of eminent domain
b. Police power d. Power of recall

Answer: C

10. Which of the following requires public improvement?

I. Taxation
II. Police Power
III. Eminent domain
a. I only c. III only
b. I and III only d. II and III only

Answer: C

11. The strongest of all inherent powers of the government is

a. Power of taxation c. Power of eminent domain
b. Police power d. Power of recall

Answer: A

12. The following are the similarities among the Fundamentals Power of the State, except:

a. They can be abolished by the Constitution.

b. They constitute the three methods by which the State interferes with priate
property rights.
c. Each presupposes an equivalent compensation to the inhabitants.
d. The emergence of the State carries with it these fundamental powers.

Answer: A
  The constitution is not the source of the three (3) inherent powers of the
state, hence it cannot abolish such powers.

13. The following statement correctly states the differences among the inherent powers of the
state, except?

a. The property taken under eminent domain and taxation are preserved but that of
police power is destroyed.
b. Eminent domain does not require constitutional grant but taxation being
formidable, does in order to limit its exercise by the legislature.
c. Police power and taxation is exercised only by the government but eminent
domain may be exercised by private entities.
d. Police power regulates both property and liberty while eminent domain and
taxation affect only property rights.

Answer: B

14. Which of the following statement is not correct?

a. Taxes maybe imposed to raise revenue 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. In the exercise of the power of taxation, the state can tax anything at any time.
d. The power of taxation in the Philippine Constitution are grants of power and not
limitations on taxing powers.

Answer: D

 There are no provisions in the constitution grating the three inherent powers
of the State. However, limitations in the exercise of those power are
provided therein.

15. The following are the differences between the power of taxation and the Power of Eminent
Domain, except:

Power of Taxation Power of Eminent Domain

a. Enforced proportionate contribution Property to be taken is for public use

b. Government has no obligation to pay Gov’t is a debtor of the property taken
c. It operates in a community It operates on an individual
d. Attribute of sovereignty Fundamental power

Answer: A

 “D” is the similarity between the two powers described above.

16. Which of the following statement is not correct?

a. The government automatically possesses the power to collect taxes from its
inhabitants
b. The government can enforce contribution upon its citizens only when the
Constitution grants it
c. Taxation power exist inseparably with the state
d. The state has the supreme power to command and enforce contribution from the
people within its jurisdiction

Answer: B

17. Statement 1: The power to tax is supreme, plenary, comprehensive and without any limit
because the existence of the government is a necessity.

Statement 2: The discretion of Congress in imposing taxes extends to the mode, method and
kind of tax, even if the constitution provides otherwise.

a. Only statement 1 is correct

b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

Answer: D
 The power to tax, though broad in nature, is not an absolute power. It is
subject to inherent as well as constitutional limitations.

18. How broad is the power of the legislature to impose taxes?

Answer 1: The legislature has limited discretion as to the persons, property or occupations
to be taxed, where there are no constitutional restrictions, provided the property is within the
territorial jurisdiction of the state.
Answer 2: The legislature has the right to finally determine the amount or rate of tax, in the
absence of any constitutional prohibitions and it may levy a tax of any amount as it sees fit.
a. Answers 1 & 2 are false
b. Answer 1 is true but answer 2 is false
c. Answer 1 is false but answer 2 is true
d. Answer 1 and 2 are false

Answer: D

19. Which of the following statement is correct?

I. Taxes are pecuniary in nature
II. It co-exist with the existence of the state
III. Imposed on persons and property beyond the territorial jurisdiction of the State
a. I only c. I and II only
b. II only d. I, II and III
Answer: C
20. Which of the following statement is correct?
I. A tax cannot be imposed without clear and express words for that purpose.
II. The provisions of a taxing act are not to be extended by implication.
III. If the law is repealed, taxes assessed before repeal of the law may no longer be
collected.
a. I and II only c. All of the above
b. II and III only d. None of the above
Answer: A

21. Statement 1: The amount of money raised for the government in the exercise of its power to
tax is and police power is based on the needs of the government.
Statement 2: The amount of money raised for the government in the exercise of its power of
eminent domain is based on the cost of processing the transfer of property from private entities
and/or individuals to the government.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: D
 In the power to tax, the money raised by the government is based on its
needs, while in the exercise of its police power, the basis is the cost of
regulation. Usefulness of the activity may also be used as a basis in
determining the amount raised under police power. The more useful the
activity is, the lower is the amount of imposition.
 There is no money raised by the government in the exercise of its power of
eminent domain. The government should instead pay the property owner
an amount equivalent to the fair value of such property, otherwise known as
“just compensation”.

22. Which of the following statement 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 local government units by the law making body.
Answer: D
 “A” is incorrect. Eminent domain may be exercised by public, utility
companies.
 “B” is incorrect. The property taken in the exercised of police power is
destroyed rather than preserved for public use.
 “C” is incorrect. Eminent domain is an inherent power, consequently,
constitutional grant is not required.

23. Statement 1: People pay taxes which their government uses to expand its power and
territorial domination.
Statement 2: People demand from their government certain responsibilities and then provide
the government with the means to carry them out.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
 d. Both statement are incorrect
Answer: B

24. Statement 1: Taxation and Police Power may be exercised simultaneously

Statement 2: In the exercise of taxation, the State can tax anything at any time and at any
amount.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: C

25. Statement 1: The power of taxation must first be expressly granted, either by law or by the
Constitution, before the State may validly exercise it.
Statement 2: The Philippine government may subject the land where embassies of foreign
government are located to real property taxes.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: D

26. Statement 1: Since taxation presupposes an equivalent form of compensation, there

should be a direct and proximate advantage received by any taxpayer before he could be
required to pay tax.
Statement 2: Compensation under police power is the intangible feeling of contribution to
the general welfare of the people.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect
Answer: B

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

28. 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
Answer: C

29. Which of the following entities, in some circumstances, may exercise the power of eminent
domain?
I. Electric cooperative
II. Lending cooperatives
III. Water cooperatives
IV. Telecommunication companies
 a. I and III only c. I, III and IV only
b. I, II and II only d. All of the above
Answer: C

30. Statement 1: Police power and the power of taxation are exercised primarily by the
legislature but not eminent domain.
Statement 2: Taxation and eminent domain interferes with private right and property but
not with police power.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statements are incorrect
Answer: D
All the 3 inherent powers of the State are legislative in application.
All the 3 inherent interfere with private rights and property. However, the
police power of the State interferes with private/property rights and liberty.

Theory and Basis of Taxation

31. 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 c. Scope of taxation
b. Situs of taxation d. Theory of taxation
Answer: D

32. 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 d. Theory of taxation
Answer: A

33. 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 subject and objects within its jurisdiction for the purpose of raising
revenues.
 Answer: B

Purpose of Taxation
34. 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.
 Answer: D
35. After having been informed that most of the massage parlors in the city are being used as
fronts for prostitution, the Sanguniang Panlungsod of Manila passed a 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
 Answer: D
The legislative branch of the LGU passed a “tax ordinance”, a valid exercise
of the LGU’s power to tax. However, the main purpose of the tax ordinance
was not to raise revenue but to impede the progress of illegal massage
parlors, a valid exercise of police power through taxation.
36. Statement 1: A provision on taxation in the Philippine Constitution is a grant of power.
Statement 2: The power to tax includes the power to destroy.
Statement 3: Sumptuary purpose of taxation is to raise funds for the government.
A. B. C. D.
Statement 1: True True False False
Statement 2: True True True True
Statement 3: True True False False
 Answer: D

37. Statement 1: Income tax collected from the taxpayers is the main source of revenue of the
local government.
Statement 2: Taxes collected are the main source of revenue of the government.
A. B. C. D.
Statement 1: True True False False
Statement 2: True False True False
 Answer: C

38. A tax must be imposed for a public purpose. Which of the following is not a public purpose?
a. National defense
b. Public education
c. Improvement of sugar industry
d. None of the above
 Answer: D
“It is not the immediate result but the ultimate result that determines, whether
the purpose is public or not. It is not the number of persons benefited but it is
the character of the purpose that determines the public character of such law.
What is not allowed is that, if it has no link to public welfare. Public purpose is
determined by the use to which the tax money is devoted. If it benefits the
community in general, then it is for public purpose no matter who collects it”
(Tio vs. Videogram).

Aspect of Taxation
39. The levying and imposition of tax and the collection of tax are processes which constitute
the taxation system
a. Basis of taxation c. Nature of Taxation
b. Aspect of taxation d. Theory of taxation
 Answer: B
40. The following are the aspect of taxation
I. – levying or imposition of the tax on persons, property or excises
II. – Collection of taxes already levied
III. – Sufficiency of governments sources to satisfy its expenditure
a. I, II and III c. I and III only
b. I and II only d. II and III only
 Answer: B

41. The official action of an authorized by law in ascertaining the amount of tax due under the
law from a taxpayer is
a. Assessment c. Deficiency
b. Delinquency d. Distraint
 Answer: A

42. Taxation is exercised both by the legislative and executive branch of the government. Which
of the following is not the function of the Congress?
a. Selecting the kind of tax
b. Fixing amount of tax
c. Prescribing rules of taxation
d. Assessment of tax liability
 Answer: D

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

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.
 Answer: B

44. All of the following are legislative aspect of taxation except

a. Selection of the object or subject of tax
b. Valuation of property for taxation
c. Fixing of tax rates
d. Prescribing the general rules of taxation.
 Answer: B
o Executive function

45. 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.
 Answer: A
o Legislative function

46. 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 tax Yes No
 d. Assessment of tax liability No Yes
 Answer: D
o “A” is wrong. Fixing of tax rate is not an administrative function
o “B” is wrong. Valuation of object is an administrative function, not
legislative
o “C” is wrong. Collection is an administrative function, not legislative

47. 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 law and make amendments
d. Make assessment and prescribe additional requirements
 Answer: C
o Enactment and amendment of tax laws are functions exercised not by
the executive branch such as the Commissioner of internal Revenue
(CIR) but by the legislative branch of the government.

48. Which of the following statement is correct?

a. The BIR Commissioner has the power to interpret the provision of the tax Code without a
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 abilities.
 Answer: B

LGU’s Power to Tax

49. Where does taxing power of the provinces, municipalities and cities precede from?
a. constitutional grant
b. legislative enactment
c. presidential decree or Executive act
d. local legislative
 Answer: A
The power to tax in the national government is an inherent power. In contrast,
the power of taxation of the LGUs is a delegated power, granted by a
provision in the Constitution.

50. How will the local government units be able to exercise their taxing powers?
a. By local legislative
b. By authority conferred by Congress
c. By the issuance of the Department of finance
d. By the help of the Bureau of Internal Revenue
 Answer: A

51. 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 local government can exercise the power.
c. The local executive and the legislative branch of the local government can exercise the
power.
d. Neither the local executive not the legislative branch of the local government can
exercise the power.
 Answer: C

52. 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 local government only
d. Neither the local executive nor the legislative branch of the local government can
exercise the power.
 Answer: B

53. Which of the following statement is not correct?

a. Only the national government exercises the inherent power of taxation.
b. Local government units could exercise the power of taxation through legislated
delegated
c. National legislation is exercised by congress.
d. Interpretation of tax Laws is done by the Legislative branch of government.
 Answer: D

Characteristics/Elements of Tax
54. 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
 Answer: B

55. Being legislative in nature, the power to tax may not be delegated, except:
a. To local governments or political subdivisions
b. When allowed by the Constitution
c. When delegation relates merely to administrative implementation that may call for some
degree of discretionary powers under a set of sufficient standards expressed by law or
implied from the policy and purpose of the Act.
d. All of the choices
 Answer: D

Sound Tax System

56. 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
 Answer: D

57. Under this basic principle of a sound taxation system, the government should not incur a
deficit:
a. Theoretical justice
b. Administrative feasibility
c. Fiscal adequacy
d. None of the above
 Answer: C

58. The basic principle of a sound taxation system, where, “taxes must be based on the
taxpayer’s ability to pay” is called:
a. Equality in taxation c. theoretical justice
b. Ability to pay theory d. Equity in taxation
 Answer: C
59. The tax law must be capable of convenient, just and effective administration
a. Theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
 Answer: C

Double Taxation
60. The following constitute double taxation, except one
a. Both taxes are imposed in the same amount
b. Both taxes are levied for the same purpose
c. Both taxes are imposed by the same taxing authority
d. Both taxes are imposed upon the same person
 Answer: A

61. 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 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
 Answer: D

62. One of the following is a false statement about double taxation. Which is it?
a. There is no constitutional prohibition on double taxation.
b. Direct duplicate taxation is a valid defense against a tax measure if it is violative of
the equal protection clause.
c. Absence of any of the elements of direct double taxation makes it indirect duplicate
taxation.
d. A 20% final withholding tax on interest income on bank deposits and a 5% gross
receipts tax on banks is a direct duplicate taxation.
 Answer: D
63. Which of the following statement is correct?
a. Indirect double taxation violates the Constitutional provision of uniformity and equal
protection.
b. There is direct double taxation in taxation in taxing the income of the corporation and
again subject the portion of that income declared as dividend to final tax.
c. Indirect double taxation is legal as long as there is no violation of equal protection and
uniformity clauses of the Constitution.
d. All of the above
 Answer: C

64. 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 for foreign taxes paid
d. All of the above
 Answer: D
Inherent and constitutional Limitations
65. Statement 1: Inherent limitations are the natural restrictions to safeguard and ensure that
the power of taxation shall be exercised by the government only for the betterment of the people
whose interest should be served, enhanced and protected.
Statement 2: Constitutional limitations are provision of the fundamental law of the land that
restrict the supreme, plenary, unlimited and comprehensive exercised by the state of its inherent
power to tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
 Answer: C

66. 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.
 Answer: C

[Link] limitation on the power of taxation inherently implied that the State’s primary concern
is for the common good of the people?
a. Equality in taxation c. Due process of law
b. Equal protection of law d. For public purposes
 Answer: D

68. These are restrictions imposed by the Constitution.

a. Inherent limitations
b. Constitutional limitations
c. Basic principles of sound tax system
d. None of the choices
 Answer: B

69. Which of the following is a constitutional limitation on the power of taxation?

 I. Territoriality of taxes
II. Public purpose
III. Legislative in character
IV. Non-appropriation for religious purpose
a. II only c. II and IV only
b. IV only d. III and IV only
 Answer: B

70.”Equality in taxation” means:

I. Progressive system of taxation shall be applied.
II. The tax laws are their application must be fair, just, reasonable and proportionate to
one’s ability to pay.
III. The tax laws shall give emphasis on direct rather than indirect taxes or on the ability-to-
pay principle of taxation.
a. I only c. III only
b. II only d. I, II and III
 Answer: D

[Link] 1: Uniformity in the imposition and/or collection of taxes means that all taxable
articles or kinds of property of the same class shall be taxed at the sme rate. This requirement is
complied with the tax operates with the same force and effect in every place where the subject
of it is found.
Statement 2: Uniformity rule is not violated when different articles are taxed at different amounts
provided that the rate is uniform on the same class everywhere with all people at all times.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
 Answer: C

72. Statement 1: A tax is deemed to have satisfied the uniformity rule when it operates with the
same force and effect in every place where the subject may be found.
Statement 2: The equal protection clause of the constitution forbid classification based on real
and substantial differences having a reasonable relation to the subject of the particular
legislation.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
 Answer: A

73. Which of the following statements correctly described "Equal protection" clause of the
Constitution regarding the government's power to tax?

I. All persons subject to legislation shall be treated alike under similar circumstances and
conditions, both in the privileges conferred and liabilities imposed.

II. The purpose is to protect persons beloging to the same class against intentional and arbitrary
discrimination.
 III. There is denial of equal protection of laws if there is discrimination in the implementation of
tax laws.

a. I and II only
b. I and III only
c. II and III only
d. I, II and III

Answer: D

74. A fundamental rule in taxation is that "the property of one country may not be taxed by
another country". This is known as

a. International law
b. Reciprocity
c. International comity
d. International inhibition

Answer: C

75. May the Philippine government require tax withholding on the salaries of Filipino employees
working in the American Embassy in the Philippines?

a. No, because this will violate the rule on international comity.

b. No, because on the Philippine government would impose the requirement of tax
withholding on the salaries of Filipino employees working in the Philippine Embassy in
the Philippines, this world in effect require that the American government be constituted
as the withholding agent of the Philippine government in so far as the taxes of the
salaries of the Filipino employees are concerned
c. Both A and B
d. None of the above

Answer : B

76. 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 Supreme Court in taxes cases.
c. Exemption of the government from taxes.
d. Non-infringement of religious freedom and worship

Answer: C

[Link] stems from the principle that we pay taxes for the protection and services provided by
taxing authority which could not be provided outside the territorial boundaries of the taxing state.

a. The tax imposed should be for public purpose.

 b. There should be no proper delegation of the taxing power.
c. The power to tax is limited territorial jurisdiction of the taxing government.
d. Exemption of government entities from taxation.

Answer: C

78. Compliance with procedural requirements must be followed strictly to avoid collision
between the state's power to tax and the individuals recognized rights.

a. Due process of law

b. Equality in taxation
c. Non-infringement of religious freedom
d. Non-impairment of obligations and contracts.

Answer: A

79. No person should be imprisoned for non-payment of this.

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

Answer: B

80. This requires that all subjects or objects of taxation, similarly situated are to be treated alike
or put on equal footing booth in privileges and liabilities.

a. Due process
b. Uniformity
c. Progressive taxation
d. None of the choices

Answer: B

81. 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.

Answer: A

Exemption from Taxation

82. No law granting any tax exemption shall be passed without the concurrence of-
Majority of all members of Congress

2/3 vote of all members of Congress

3/4 vote of all members of Congress

Unanimous vote of all members of Congress

Answer: A

83. 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
 Answer: A

[Link] 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.
 Answer: D

85. A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not
acceptable for legally refusing to pay the tax?
A. That he has been deprived of due process of law.
B. That there is lack of territorial jurisdiction.
C. That the prescriptive period for the tax has lapsed.
D. That he will derive no benefit from the tax.
Answer: D

Situs Taxation
86. 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
Answer: B

87. Which among 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
Answer: B

88. The least source of tax laws:

A. Statutes
B. Presidential decrees
C. Revenue regulations
D. Tax treaties or conventions
Answer: C

89. Statement 1: A revenue regulation must not be country to the provision of the law that it
implement. Statement 2: A revenue regulation cannot expand the provision of the law that it
implements by imposing a penalty when the law that authorizes the revenue regulation does not
impose a penalty.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
[Link] statements are incorrect
Answer: C

90. Which of the following is not a source of our tax laws?

I. Supreme Court Judicial decisions
II. SEC Regulations and Rulings
III. Bureau of Customs Memorandum Orders
IV. Administrative rules and regulations
V. Legislations, tax treaties and tax ordinances
VI. Opinion of authors
a. II, III and VI only
b. II, III and VI only
c. II, and VI only
d. None of the above
Answer: C

91. Which of the following statement is correct?

A. Revenue regulations have the force and effect of law and a memorandum order of the
Commissioner of Internal Revenue, approved by the Secretary of Finance, has the same force
and effect as revenue regulations.
B. The revenue regulations which are in conflict with law(s) are null and void.
C. The interpretations of the former Secretary of Finance do not necessarily bind their
successors.
D. All of the above.
Answer B

Types of Taxation
92. The Philippine income tax system has the following features, except
A. Comprehensive tax situs by using the nationality, residence, and source rules.
B. The individuals income tax system is mainly progressive in nature.
C. Indirect rather than direct system.
D. Semi-global and semi-schedular system.
93. Tax of a fix amount imposed among all persons residing within a specified territory without
regard to their property or occupation they may be engage
A. Personal, poll or capitation tax
B. Property
C. Excise tax
D. Regressive
Answer: A

94. 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
Answer: B

95. Which of the following is not an example of excise tax?

A. Transfer tax
B. Sales tax
C. Real property tax
D. Income tax
Answer: C

96. Tax which is demanded from the persons whom the law intends or desires to pay it
A. Direct
B. Indirect
C. Excise
D. Income
Answer: A

97. 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
Answer: B

98. One is not a direct tax

A. Immigration tax
B. Transfer tax
C. Income tax
D. Value-added tax
Answer: D

99. A tax on business is

A. Direct tax
B. Indirect tax
C. Property tax
D. None of the above
Answer: B

100. Tax which imposes a specific sum by the head or number or by some standards of weight
or measurement and which requires no assessment other than a listing or classification of the
objects to be taxed.
A. Ad-valorem
B. Specific
C. Excise
D. Revenue
Answer: B

101. 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
Answer: A

102. This type of tax requires an assessment of the value of the subject of tax.
A B C D
Ad valorem tax true true False False
Specific tax true False True False
Answer: B

103. JJ is a mining operator. The tax he has to pay is based on the actual value of the gross
output or mineral products extracted is
A. Mining tax
B. Royalties
C. Rentals
D. Ad valorem tax
Answer: D

104. Tax levied for particular or specific purpose irrespective of whether revenue is actually
raised or not
A. Revenue tax
B. Regulatory tax
C. Specific tax
D. Ad valorem tax
Answer: B

105. Tax based on a fix percentage of the amount of property, income or other basis to be taxed
A. Progressive
B. Proportional
C. Regressive
D. Indirect
Answer: B

106. Tax where the rate decreases as the tax base increases
A. Progressive
B. Proportional
C. Regressive
D. Indirect
Answer: C

107. Tax where the rate increase as the tax base increases
A. Progressive
B. Proportional
C. Regressive
D. Indirect
Answer: A

108. A tax classified as a regressive tax.

A. Excise tax
B. Real estate tax
C. Value added tax
D. None of the choices
Answer: D

109. Which of the following taxes is always proportional?

A. Value added tax
B. Income tax
C. Estate tax
D. Donor's tax
Answer: A

110. Which of the following individual taxpayers is not covered by progressive tax?
A. Resident citizen
B. Residenr alien
C. Nonresident alien engaged in trade
D. Nonresident alien not engaged in trade
Answer: D
NRAs- NET are subject to proportional tax of 25% of their gross income

Tax vs. Other Impositions

111. 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.
Answer: A

112. The distinction of a tax from permit or license fee is that a tax is
A. Imposed for regulation.
B. One which involves exercise of police power.
C. One in which there is generally no limit on the amount that may be imposed.
D. Answer not given.
Answer: C

113. 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-used
activity?
A. Tax
B. License fee
C. Toll
D. Customs duty
Answer: B
The basis for impositions of the charges above are as follows:
Tax = Needs of the State
Police Power = Cost of regulation and usefulness of the activity
Toll = Cost of construction
Custom's duty = valuation of imported goods

[Link] as distinguished from tax.

A. Demand of sovereignty
B. Imposed by government only
C. Amount is based on the cost of construction of public improvement used
D. Paid for the support of the government
Answer: C

115. 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.
Answer: C
The amount collected in special assessment is not intended for public use but rather for the
maintenance of the improvements introduced by the government. Only the owners of the
properties subjected to special assessment are the ones benefiting from such assessment,
hence, not a tax.

116. Which of the following is not a characteristics of debt?

A. Generally arises from contract
B. Payable only in money
C. Assignable
D. Imprisonment is not a section for non-payment
Answer: B

117. 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 subjected to set-off or compensation
Answer: B

118. "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.
Answer: B
Choice "A" refers to "glibal tax system"

119. Under the Creditable Withholding Tax system, which of the following statements is
incorrect?
A. Taxes withheld in certain income payments ate intended to equal or at least approximate the
tax due of the payee on said income.
B. The recipient of the income is no longer required to file an income tax return as prescribed
under the 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 unded this system are creditable in nature
Answer: B

120. Which of the following statements is correct?

A. Withholding tax liability may arise only when the agent has possession, custody or control of
the funds withheld.
B. The withholding tax system was devised to provide the taxpayer a convenient manner to
meet his probable income tax liability and to ensure collection of the income tax which could
otherwise be lost or substantially reduced through failure to file the corresponding returns.
C. Withholding tax system is designed to improve the government's cash flow
D. All of the above
Answer: D

121. Under the final withholding tax system, which of the following statements is not correct?
A. Income tax withheld by the withholding agent is constituted as a full and final payment of the
income tax due from the payee on the said income.
B. The liability for payment of the tax rests primarily on the payee as a recipient of income.
C. In case of failure to withhold the tax, the deficiency tax shall be collected from the withholding
agent.
D. The payee is no longer required to file an income tax return for the particular income.
Answer: B

122. 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. This doctrine is called
A. Set-off doctrine
B. Doctrine of reciprocity
C. Tax sparring doctrine
D. Equitable recoupment
Answer: D

123. Rule of "No estoppel against the government" means:

A. Rule of law that in the performance of its governmental functions, the State cannot be
estopped by the neglect of its agents and officers.
B. The government is not estopped by the mistakes or errors of its agents; erroneous
application of statutes.
C. Both a and b
D. Neither a or b
Answer: C

Interpretation of Ambiguities in Taxation

124. 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
Answer: B

125. Which of the following propositions may be untenable?

A. The court should construe a law granting tax exemption strictly against the taxpayer.
B. The court should construe a law granting a municipal corporation the power to tax most
strictly.
C. The Supreme Court has jurisdiction to review decisions of the Court of tax Appeals
D. None of the above
Answer: B

126. Which of the following is incorrect?

A. Where doubts exist in determining the intent of legislature, the doubt must be resolved strictly
against the taxpayer and liberally in favor of the taxing authority.
B. The exemption contained in the tax statutes must be strictly contrued against the one
claiming the exemption.
C. Tax cannot be imposed without clear and express words for that purpose.
D. All of the above.
Answer: A

127. 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
Answer: A

128. Statement 1: In case of conflict between a revenue regulation and the provision of the
national internal revenue code, the latter shall prevail.
Statement 2: The revocation of a revenue regulation cannot be made retroactive even if the
reason for its revocation is that it is erroneous or contrary to law.
A. Statement 1 is correct; statement 2 is wrong
B. Both statement are correct
C. Statement 1 is wrong; statement 2 is correct
D. Both statements are wrong
Answer: A

129. Which of the following is required for validity of rules and regulations?
I. They must not be contrary to law and the Constitution.
II. They must be published in the Official Gazette or a newspaper of general circulation.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
Answer: C
Tax Avoidance vs. Tax Evasion
Escape from Taxation and Other Topics
130. The use of illegal or fraudulent means to avoid or defeat the payment of tax
A. Exemption
B. Shifting
C. Avoidance
D. Evasion
Answer: D

131. The exploitation by the taxpayer of legally permissible alternative tax rates or methods of
assessing taxable property or income, in order to reduce tax liability. It is otherwise known as
tax minimization
A. Tax exemption
B. Tax evasion
C. Tax avoidance
D. Transformation
Answer: C

132. Statement 1: Tax avoidance is a scheme used outside of those lawful means to escape tax
liability Statement 2: Tax avoidance is a tax saving device within the means sanctioned by law,
and when availed of, it usually subjects the taxpayer to further or additional civil or criminal
liabilities.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Answer: D

133. Transfer of the tax burden by one whom the tax is assessed to another

A. Shifting B. Capitalization
C. Transformation D. Tax exemption
Answer: A

134. Pedro sold a parcel of land classified as capital asset to Juan. The parties agreed that the
capital gains tax shall be shouldered by Juan. Is this a form of Shifting? Is the Stipulation valid?
A B C D
Shifting Yes No Yes No
Stipulation Yes No No Yes

Answer: D

135. Which of the following is correct?

I. Shifting will result in increase prices
II. Tax evasion is also known as tax dodging
A. I only
B. II only
C. I and II
D. Neither I nor II
Answer: C
136. Is finding out means of improvement in production so as savings would compensate for
taxes paid by manufacturers or producers.
A. Shifting
B. Capitalization
C. Transformation
D. Tax dodging
Answer: C

137. Which of the following statements regarding "Taxpayers Suit" is incorrect?

A. It is one brought or filed by a taxpayer arguing the validity of a tax statute and its enactment
or the constitutionality of its alleged public purpose.
B. It is a case where the act complained of directly involves the illegal disbursement of public
funds derived from taxation.
C. Taxpayers have "locus stand" to question the validity of tax measures or illegal expenditures
of public money.
D. A taxpayer is relieved from the obligation of paying a tax because of his belief that it is being
misappropriated by certain officials
Answer: D

138. 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.
Answer: C