Multiple Choice

1. Statement 1: The three fundamental powers of the state may be exercised only by
the government.

Statement 2: Taxation is a process or means by which the sovereign, through its

law-making body raises income to defray the expenses of the government.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

2. Statement 1: Eminent domain may be exercise even by public service corporation

and public entities.

Statement 2: Police power regulates both liberty and property.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

3. Statement 1: Taxes are raised to cover the cost of governance.

Statement 2: Toll is one of the taxes collected by the government.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

4. Statement 1: License fees are imposed in the exercise of police power.

Statement 2: License fee is imposed to raise revenue.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

5. Statement 1: Tax is generally unlimited because it is based on the needs of the

State.

Statement 2: The amount imposed in the exercise of police power depends on

whether the activity is useful or not.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

6. Statement 1: The distinction of a tax from permit or license fee is that a tax is one in
which there is generally no limit on the amount that may be imposed.

Statement 2: Debt, as distinguished from tax, may be paid in kind.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

7. Statement 1: Under the equal protection clause of the constitution, all persons
subject to legislation shall be treated alike under dissimilar circumstances and
conditions, both in the privileges conferred and liabilities imposed.

Statement 2: Tax laws are civil and penal in nature because there are penalties
provided in the case of violation.

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 a. Both statements are true c. Only statement 1 is true
b. Both statements are false d. Only statement 2 is true

8. Statement 1: Special assessment is a tax.

Statement 2: Special assessment is imposed on persons, property and property

rights.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

9. Statement 1: The Philippine government may be subject the land where embassies
of foreign governments are located to real property taxes.

Statement 2: A revenue bill may originate from the Senate and on which same bill
the House of Representatives may propose amendments.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

10. Statement 1: A person may refuse to pay on the ground that he will not receive a
benefit from the tax.

Statement 2: In the exercise of the power of taxation, the State can tax anything at
any time.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

11. Statement 1: In cases of deductions and exemptions, doubts shall be resolved

liberally in favor of the government.

Statement 2: Levying of local government taxes should be exercise only by the

legislative branch of the local government.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

12. Statement 1: The taxing power of provinces, municipalities and cities precede from a
constitutional grant.

Statement 2: Taxation is regressive when their rate goes up depending on the

resources of the person affected.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

13. Statement 1: No law granting any tax exemption shall be passed without the
concurrence of 2/3 of all members of Congress.

Statement 2: There is no constitutional prohibition against double taxation in the

Philippines. It is something not favored, but nevertheless permissible.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

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14. Statement 1: “Global system of income taxation” means separate graduated rates
are imposed on different types of income.

Statement 2: One of the schemes of shifting the incidence of tax burden is by

transferring the sales tax of a manufacturer to the distributor, then in turn to the
wholesaler, to the retailer and finally to the consumer.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

15. Statement 1: Transformation is a method by which the manufacturer or producer

upon whom the tax is imposed pays the tax and strives to recover such expenses
through lower production cost without sacrificing the quality of his product.

Statement 2: In case of ambiguity, tax laws shall be interpreted liberally in favor of

the government.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

16. Which of the following statements are incorrect?

a. Taxes are the revenues raised in the exercise of the police power of the State.
b. One of the special characteristics of tax is it is unlimited in amount.
c. The three fundamental powers of the State are inherent in the State and may be
exercised without the need of any constitutional grant.
d. All of the above

17. 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?
a. It is so because the State has the supreme power to command and enforce
obedience to its will from the people within its jurisdiction.
b. Any violation in the Constitution regarding taxation does not create rights for the
sovereign to have the power to tax but it merely constitutes limitations upon the
supremacy of tax power.
c. Both “a” and “b”.
d. Neither “a” nor “b”.

18. Statement 1: The distinction of a tax from permit or license fee is that a tax is
imposed for regulation.

Statement 2: Non-payment of tax does not necessarily render a business illegal.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

19. The primary purpose of taxation is to raise revenue for the support of the
government. However, taxation is often employed as a devise for regulation by
means of which, certain effects or conditions envisioned by the government may be
achieved such as:
a. Taxation may be used to provide incentive to greater production through grant of
tax exemptions.
b. Taxation can strengthen weak enterprises by creating conditions conducive to
their growth through grant of tax exemptions.
c. Taxes may be increased in periods of prosperity to curb spending power and halt
inflation or lowered in periods of slump to expand business and ward off
depression.
d. All of the above

20. Which is not an object of taxation?

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 a. The purpose of taxation may also be “compensatory” meaning, it may be used to
make up for the benefit received.
b. Taxes may be imposed for the equitable distribution of wealth and income in
society.
c. Both “a” and “b”
d. Neither “a” and “b”

21. Which theory in taxation states that without taxes, a government would be paralyzed
for lack of power to activate and operate it, resulting in its destruction?
a. Power to destroy theory c. Sumptuary theory
b. Lifeblood theory d. Symbiotic doctrine

22. On theoretical basis of taxation, which of the following statements is true?

a. People pay taxes which their government uses to expand its powers and
territorial domination.
b. People demand from their government certain responsibilities and then provide
this government with the means to carry them out.
c. State needs taxation to exist, while people must support taxation because they
need the presence of the state.
d. “b” and “c”

23. Incidence of taxation means:

a. Shifting of tax. c. Payment of tax.
b. Refunds of tax. d. Imposition of tax.

24. The actual effort exerted by the government to effect the exaction of what is due
from the taxpayer is known as:
a. Assessment. c. Payment.
b. Levy. d. Collection.

25. Statement 1: Symbiotic relation is the reason why the government would impose
taxes on the income of resident citizens derived from sources outside the Philippines.

Statement 2: Jurisdiction is the reason why citizen must provide support to the state
so the latter could continue to give protection.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

26. A law was passed by Congress which granted tax amnesty to those who have not
paid income taxes for a certain year and at the same time providing for the refund of
taxes to those who have already paid them. The law is:
a. valid because there is a valid classification.
b. not valid because those who did not pay their taxes are favored over those who
have paid their taxes.
c. valid because it was Congress that passed the law and it did not improperly
delegate the power to tax.
d. not valid because only the President with the approval of Congress may grant
amnesty.

27. Congress passed a law imposing taxes on income earned out of particular activity
that was not previously taxed. The law, however, taxed incomes already earned
within the fiscal year when the law took effect. Is the law valid?
a. No, because the laws are intended to be prospective, not retroactive.
b. No, the law is arbitrary in that it taxes income that has already been spent.
c. Yes, since the tax laws are the lifeblood of the government.
d. Yes, tax laws are an exception; they can be given retroactive.

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 28. Due to an uncertainty whether or not a new tax law is applicable to printing
companies. ARB Printers submitted a legal query to the BIR on that issue. The BIR
issued a ruling that printing companies are not covered by the new law. Relying on
this ruling that printing companies are not covered by the new law. Relying on this
ruling, ARB Printer did not pay the said tax. Subsequently however, the BIR reversed
the ruling and issued a new one stating that the tax covers printing companies.
Could the BIR assess ARB Printers for back taxes corresponding to the years before
the new ruling?
a. Yes, because taxation is the rule and exemption is the exception.
b. Yes, because taxes are the lifeblood of the government.
c. No, the BIR is not allowed to reverse its ruling.
d. No, reversal of a ruling shall not be given a retroactive application if it will be
prejudicial to the taxpayer.
Questions 29 and 30 are based on the following information:
The Constitution requires that all revenue bills shall originate “exclusively” from the House
of Representative. Assume that in 2014, Congressman Pete proposed an expansion of the
coverage of the value added tax to be known as e-vat law. The proposed bill was approved
by the House of Representatives later that year. However, the EVAT version of the Senate
became the EVAT law.

29. Which of the following statements will justify the enacted EVAT law?
I. The Constitution simply means that the initiative for filing revenue, tariff or
tax bills must come from the House of Representatives on the theory that,
elected as they are from the districts, the Members of the House can be
expected to be more sensitive to the local needs and problems.
II. It is not the law but the revenue bill which is required by the Constitution to
“originate exclusively” in the House of Representatives because a bill
originating in the House may undergo such extensive changes in the Senate
that the result may be a rewriting of the whole, and a distinct bill may be
produced.

a. I only c. Both I and II

b. II only d. Neither I nor II

30. Assuming Senator Bueno filed in the Senate a substitute e-vat bill “in anticipation” of
its receipt of the bill from the House. The proposal is totally different from the
version of the lower house. The proposal is totally different from the version of the
lower house. Which of the following statements will justify the filing of a substitute
bill by Honorable Senator Bueno?
I. To insist that a revenue statute not only the bill which initiate the legislative
process culminating in the enactment of the law – must substantially be the
same as the House bill would be to deny the Senate’s power not only to
“concur with amendments” but also to be “propose amendment.”
II. It would be to violate the co-equality of legislative power of the two houses of
Congress and in fact make the House superior to the Senate given the power
of the Senate to propose amendments, it can propose its own version even
with respect to bills which are required by the Constitution to originate in the
House.
III. Filing in the Senate of a substitute bill in anticipation of its receipt of the bill
from the House is not prohibited under the Constitution, so long as the action
by the Senate as a body is withheld pending receipt of the House bill.

a. I only c. I, II and III

b. II only d. None of the above

31. 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.

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32. Statement 1: The aspects of taxation are shared by the legislative and executive
branches of the government.

Statement 2: Taxes should be prospective and should not be given retroactive effect
because they are burdens.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

33. The power of taxation is basically legislative in character. Which of the following is a
legislative function?
A B C D
Fix with certainty the amount Yes No Yes Yes
Identify who should collect the tax Yes Yes No Yes
Determine who should be subject to tax Yes Yes Yes No

34. As to scope of legislative power to tax, which of the following is correct?

a. The power to tax is supreme, plenary, comprehensive and without any limit
because the existence of the government is a necessity.
b. The discretion of Congress in imposing taxes extends to the mode, method and
kind of tax, even if the constitution provides otherwise.
c. Congress has the right to levy a tax of any kind at any amount as it sees fit, even
in the absence of any constitutional provision.
d. The sole arbiter of the purpose for which taxes shall be levied is Congress,
provided the purpose is public and the courts may not review the levy of the tax
to determine whether or not the purpose is public.

35. The following are the aspects of taxation.

I. Levy 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 II only

b. I and II only d. II and III only

36. Which of the following is incorrect?

Legislative Administrative
a. Selecting the kind of tax Yes No
b. Fixing amount of tax Yes No
c. Prescribing rules of taxation Yes No
d. Assessment of tax liability Yes No

37. 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

38. Statement 1: Inherent powers of the State exist independent of the constitution.

Statement 2: The taxing power of the local government units precedes from
constitutional grant.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

39. The following are the characteristics of the State’s power to tax, except:
a. The strongest of all inherent powers of the State

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 b. Involves power to destroy
c. Both “a” and “b”
d. Neither “a” nor “b”

40. 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 unit
d. Neither the local executive nor the legislative branch of the local government can
exercise the power.

41. 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 legislation

42. Statement 1: Eminent domain may raise money for the government.

Statement 2: Barrios, barangays, municipalities/cities and provinces may collect

taxes from its inhabitants.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

43. The following are the nature of taxation, except:

a. Inherent and sovereignty
b. Essentially a legislative function
c. Subject to inherent and constitutional limitation
d. Subject to the approval of the people

44. “The power to tax involves power to destroy” means:

a. The power to tax is viewed as the power to destroy in the sense that a lawful tax
cannot be defeated just because its exercise would be destructive or would bring
about insolvency to a taxpayer.
b. The principle implies that an imposition of lawful regulatory taxes would be
destructive to the taxpayers and business establishments because the
government can compel payment of tax and forfeiture of property through the
exercise of police power.
c. Both “a” and “b”
d. Neither “a” and “b”

45. There can be no tax unless there is a law imposing the tax is consistent with the
doctrine of:
a. Uniformity in taxation
b. Due process of law
c. Non-delegation of the power to tax
d. All of the above

46. “The tax should be based on taxpayer’s ability to pay”. In relation to this, which of
the following is not correct?
a. No person shall be imprisoned for non-payment of tax
b. A graduated tax table is in consonance with this statement
c. As a theory of taxation, this is called “ability to pay theory”
d. As a basic principle of taxation, this is called “theoretical justice”

47. Rule on “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 and enforcement of law by public officers do not block the
subsequent correct application of statutes.
c. Both a and b
d. Neither a and b

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48. Progressivity of taxation is also mandated in the Constitution.
Statement 1: Our income tax system is one good example of such progressivity
because it is built on the principle of the taxpayer’s ability to pay.

Statement 2: Taxation is progressive when their rate goes up depending on the

resources of the person affected.
a. Both statements are true c. Only statement 1 is true
b. Both statements are false d. Only statement 2 is true

49. One of the characteristics of our internal revenue laws is that they are:
a. Political in nature
b. Penal in nature
c. Generally prospective in operation although the tax statute may nevertheless
operate retrospectively provided it is clearly the legislative intent
d. Criminal in nature

50. Which of the following distinguishes tax from license fee?

a. Non-payment does necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation

51. The least source of tax laws:

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

52. Statement 1: A revenue regulation must not be contrary to the provision of the law
that it implements.

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. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

53. In every case of doubt, tax statues are construed

a. strictly against the government and the taxpayer.
b. liberally in favor of the government and the taxpayer.
c. strictly against the government and liberally in favor of the taxpayer.
d. liberally in favor of the government and strictly against the taxpayer.

54. In every case of doubt, tax exemptions are construed

a. strictly against the government and the taxpayer.
b. liberally in favor of the government and the taxpayer.
c. strictly against the government and liberally in favor of the taxpayer.
d. liberally in favor of the government and strictly against the taxpayer.

55. Which of the following statements is incorrect?

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
IV. Tax law is ex post facto in application

a. I and II only c. All of the above

b. III and IV only d. None of the above

56. Which of the following factors are determine to the “Situs” of taxation?

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 I. Nature, kind, or classification of the tax being imposed.
II. Subject matter of the tax (person, property, rights or activity)
III. Citizenship of the taxpayer
IV. Residence of the taxpayer
V. Place of the excise, privilege, business or occupation
VI. Source of the income subject to tax

a. I and II only c. III, IV and VI only

b. III, IV, V and VI only d. I, II, III, IV, V and VI

57. Tax of a fix amount imposed among all persons residing within a specified territory
without regards to their property or occupation they may be engage
a. Personal, poll or capitation tax c. Excise tax
b. Property d. Regressive

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

59. Tax base on a fix percentage of the amount of property, income or other basis to be
taxed
a. Progressive c. Regressive
b. Proportional d. Indirect

60. Which of the following is a characteristic of taxation which distinguishes it from police
power and eminent domain?
a. For public purpose
b. Legislative in nature
c. Generally payable in money
d. Inferior to non-impairment clause in the Constitution

61. The following are basic principles of sound tax system

I. It should be capable of being effectively enforced
II. It must be progressive
III. Sources of revenue must be sufficient to meet government expenditures and
other public needs
IV. It should be exercised to promote public welfare

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

b. III and IV only d. All of the above

62. The sources of revenue should be sufficient to meet the demands of public
expenditures. This refers to:
a. Equality or theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. Rule of apportionment

63. The tax should be imposed proportionate to the taxpayer ability to:
a. Equality or theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. Rule of apportionment

64. The tax law must be capable of convenient just and effective administration:
a. Equality or theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. Rule of apportionment

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65. Statement 1: Inherent limitations are the nature 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 provisions 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. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

66. “Equality in taxation” means:

I. Progressive system of taxation shall be applied.
II. The tax laws and 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

67. Which of the following statement 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 dissimilar
circumstances and condition, both in the privileges conferred and liabilities
imposed.
II. The purpose is to protect persons belonging 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 c. I, II and III only

b. III and IV only d. All of the above

68. Which of the following restrictions on the power of taxation recognizes that the
country’s tax laws shall not be applied to the property of foreign government?
a. Taxation is inherently a legislative function
b. Exercise of taxation is subject to international comity
c. Due process of law
d. Equal protection of law

69. This is an inherent limitation on the power of taxation.

a. The rule on taxation shall be uniform and equitable.
b. No law impairing the obligations of contracts shall be enacted.
c. Charitable institutions, churches, personages or convents appurtenant thereto,
mosque and non-profit cemeteries and all kinds of lands, buildings and
improvements actually, directly and exclusively used for religious or charitable
purposes shall be exempt from taxation.
d. The tax laws cannot apply to the property of foreign governments.

70. Exemptions from tax is a privilege, which is being looked upon by law with disfavor
because everyone, should be sharing the burden of taxation. On account of this
view, exemption from tax is construed strictly against the taxpayer, except in certain
situation like:
a. Exemption is granted to the impoverished sector in certain situation
b. Exemption relates to a public official
c. Exemption refers to a public property
d. All of the above

71. Tax exemption is made different from tax amnesty:

a. It is a privilege or freedom from tax burden.

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 b. It allows immunity from all criminal, civil and administrative liabilities arising
from non-payment of taxes.
c. Amount foregone by the government is substantial.
d. It applies to all past, present and future tax obligations.

72. Statement 1: Tax exemption applies only to government entities that exercise
proprietary functions.

Statement 2: All government entities regardless of their functions are exempted

from taxes because it would be impractical for the government to be taxing itself

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

73. Which of the following statements correctly described the tax exemption of the
government?
I. The State cannot be taxed without its consent, otherwise, such is derogation
to its sovereignty.
II. The exemption applies only to government entities through which the
government immediately and directly exercises its governmental functions
like the Department of Justice, Department of Foreign Affairs, Philippines
National Police, and the like.
III. Government agencies performing governmental functions are exempt from
tax unless expressly taxed, while those performing proprietary functions are
subject to tax unless expressly exempted.

a. I only c. III only

b. II only d. I, II and III

74. Which of the of the following is to be regarded as tax minimization through legal
means?
a. Not declaring all taxable income
b. Padding of expenses for deduction from income
c. Opting to transfer the property through sale rather than through donation where
tax liability would be higher
d. All of the above

75. Which of the following is correct?

a. Tax avoidance, or tax minimization, through legal means, is not punishable by
law.
b. Deliberate reduction of taxable income that has been received is an example of
tax avoidance.
c. Evasion of tax take place only when there are no proceeds on the part of the
government.
d. All of the above.

76. Statement 1: An attempt to minimize one’s tax constitute fraud, taxpayer may
diminish his liability by any means, which the law permits.

Statement 2: To avoid is legal but to evade is illegal. The legal rights of a taxpayer
to decrease the amount of what otherwise would be his taxes, altogether avoid
them, by means which the law permits, cannot be doubted.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

77. Which of the following is an element of double taxation?

I. Same kind of tax
II. Same subject matter
III. Same taxable period
IV. Same taxing authority

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 a. I and II only c. All of the above
b. I, II and III only d. None of the above

78. Double taxation in its general sense means taxing the same subject twice during the
same taxing period. In this sense, double taxation
a. violates substantive due process
b. does not violate substantive process
c. violates the right to equal protection
d. does not violate the right to equal protection

79. Statement 1: There can be double taxation where the state merely imposes tax on
every separate and distinct business in which a person is engaged.

Statement 2: There is no objectionable double taxation if the tenements in the City

are subjects to real estate tax while the business of leasing said property are also
subject to real dealer’s tax.

a. Both statements are true c. Only statement 1 is true

b. Both statements are false d. Only statement 2 is true

80. Ligaya Educational Foundation, Inc., a stock educational institution organized for
profit, decided to lease for commercial use a 1,500 square meters portion of its
school. The school actually, directly and exclusively used the rents for the
maintenance of its school buildings, including payment of janitorial services. Is the
leased portion subject to real property tax?

a. Yes, since Ligaya is a stock and for profit educational institution.

b. No, since the school actually, directly, and exclusively used the rents for
educational purposes.
c. No, but it may be subject to income taxation on the rents it receives.
d. Yes, since the leased portion is not actually, directly, and exclusively used for
educational purposes.

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