Fundamental Principles of Taxation

Fundamental Principles of Taxation
C. Both statements are correct
The State, having sovereignty can enforce contributions (tax) upon its
citizens even without a specific provision in the Constitution authorizing
it.
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
D. Both statements are incorrect
B. The State can exercise the power of taxation only if it is expressly

mentioned in the Constitution
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.
A. The power of taxation may be exercised by the government, its

political subdivisions, and public utilities
Which statement is wrong?
A. The power of taxation may be exercised by 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 the public funds.
D. The power of tax is subject to inherent and constitutional limitations
D. Power of recall
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
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
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

The power to demand proportionate contribution from persons and

property to defray the necessary expenses of the government
B. Police Power
D. Power of recall
B. Police Power
The power to regulate liberty and property to promote the general

welfare
B. Police Power
D. Power of recall
C. Power of eminent doman
The power to acquire private property upon payment of just

compensation for public purpose
B. Police Power
D. Power of recall
C. III only
Which of the following requires public improvement?
I. Taxation
II. Police Power
III. Eminent Domain
A. I only
B. I and III only
C. III only
D. II and III only
A. Power of Taxation
The strongest of all inherent powers of the government is
B. Police Power
D. Power of recall
A. They can be abolished by the Constitution
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 State 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.
B. Eminent domain does not require constitutional grant but taxation

being formidable, does in order to limit its exercise by the legislature.
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 exercise 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 affects only property rights.
D. The power of the taxation in the Philippine Constitution are grants of
power and not limitations on taxing power
Which of the following statements 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
anytime.
D. The power of the taxation in the Philippine Constitution are grants of

power and not limitations on taxing power.
D. T: Attribute of sovereignty
ED: Fundamental Power
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: Go't 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
B. The government can enforce contribution upon its citizens only when
the Constitution grants it
Which of the following statements 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.
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.

D. Answers 1 and 2 are true
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 and 2 are false.
B. Answer 1 is true but answer 2 is false.
C. Answer 1 is false but answer 2 is true.
D. Answers 1 and 2 are true.
C. I and II only
Which of the following statements 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
B. II only
C. I and II only
D. I, II, III
A. I and II only
I. A tax cannot be imposed without clear and express words for that
purpose.
II. The provisions of a taxing act are not to 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
B. II and III only
C. All of the above
D. None of the above
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 in the cos of
processing the transfer of property from private entities and/or
individuals to the government.
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
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 local government units by the law making
body.
Statement 1: People pay taxes which their government uses to expand

its powers and territorial domination.
Statement 2: People demand from their government certain
responsibilities and then provide the government with the means to
carry them out.
Statement 1: Taxation and Police Power may be exercised

simultaneously
Statement 2: In the exercise if taxation, the State can tax anything at

anytime and at any amount
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 governments are located to real property taxes.
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.
C. Eminent Domain
Which of the inherent powers maybe exercised even by public utility

companies?
A. Taxation
B. Police Power
C. Eminent Domain
D. A and C
Which of the following may not raise money for the government?
B. Police power
D. Privitization of government's capital assets
C. I, III, and IV only
Which of the following entities, in some circumstances, may exercise

the power of eminent domain?
I. Electric Cooperatives
II. Lending Cooperatives
III. Water Cooperatives
IV. Telecommunication Companies

A. I and III only
B. I, II and III only
C. I, III and IV only
D. All of the above
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.
D. Theory of Taxation
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
The reciprocal duties of support and protection between the people and
the government
B. The underlying basis of taxation is government necessity, for without

taxation, a government can't either exist not endure
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
D. To raise revenue for governmental needs

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
D. Police power and power of taxation
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 tax ordinance subjecting massage parlors within its
jurisdiction to such "onerous taxes" that leave them no other
alternatives but to stop operating. The passage of the ordinance is a
valid exercise of:
A. Taxation
B. Police power
C. Eminent Domain
D. Power power and power of taxation
D. Statement 1 and 3 are false; 2 is true
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. Statement 1, 2, 3 are true
B. Statement 1 and 2 are true; 3 is false
C. Statement 2 and 3 are true; 1 is false
D. Statement 1 and 3 are false; 2 is true
C. Only statement 2 is true
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. Statements 1 and 2 are true
B. Only statement 1 is true
C. Only statement 2 is true
D. Statements 1 and 2 are false
D. None of the choices
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
B. Aspects of taxation
The levying and imposition of tax and the collection of tax are processes
which constitute the taxation system
B. Aspects of taxation
C. Nature of taxation
B. I and II only
The following are the aspect of taxation
I - Levying or imposition of the tax on persons, property or exercises
II - Collection of taxes already levied
III - Sufficiency of government sources to satisfy expenditures
A. I, II, III
B. I and II only
C. I and III only
D. II and III only
A. Assessment
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. Deliquency
C. Deficiency
D. Distraint
D. Assessment of tax liability
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. Assess ment of tax liability
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B. Tax legislative function
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
B. Valuation of property for taxation
All of the following are legislative aspect of taxation except
A. Selection of the object or subject of tax
B. Valuation of property of taxation
C. Fixing of tax rates
D. Prescribing the general rules of taxation
A. Selection of object of tax
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
D. Assessment of tax liability (legislative:N; Administrative:Y)
Which of the following is correct?
A. Fixing of tax rates (legislative:Y; Administrative:Y)
B. Valuation of object of tax (legislative:Y; Administrative:N)
C. Collection of tax (legislative:Y; Administrative:N)
D. Assessment of tax liability (legislative:N; Administrative:Y)
C. Enact tax laws and make amendments
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
B. The BIR has the authority to prescribe additional

procedural/documentary requirements for taxpayers
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 liabilities
A. Constitutional grant
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
A. By local legislation
How will the local government units be able to exercise their taxing
powers?
A. By local legislation
B. By authority conferred by the Congress

C. By the issuance of the Department of Finance
D. By the help of the Bureau of Internal Revenue
C. The local executive and the legislative branch of the local government
can exercise the power
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 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
B. The legislative branch of the local government only
Levying of local government taxes may be exercised by:
A. The local executives 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
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D. Interpretation of Tax Laws is done by the Legislative branch of

government
A. Only the national government exercises the inherent power of

taxation
B. Local government units could exercise the power of taxation through

legislated delegation
C. National legislation is exercise by Congress
D. Interpretation of Tax Laws is done by the Legislative branch of

government
C. Both I and II
The legislative body enact laws to raise revenues in the absence of a

constitutional provision granting said body the power to tax. Which of
the following statements will justify the enactment of such law?
I. The legislative body may enact tax laws even in the absence of a
constitutional provision because the power to tax is inherent in the
government and not a constitutional grant.
II. The power of taxation is an essential and inherent attribute of

sovereignty belonging as a matter of right to every independent
government without being expressly granted by the people.
A. I only
B. II only
C.I and II only
D. Neither I nor II
D. No, because it is not the law but the revenue bill which is required by
the constitution to originate exclusively in the House of Representatives
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.
The Congress enacted a new law, known as the Expanded Value Added
Tax Law. 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 it s in fact
the result of the consolidation of two distinct bills, one from the House
of Representatives 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 of Representatives.
B. Yes, because the Senate has no authority t propose or concur any

amendments with the revenue or tax bill proposed by the House of
Representatives.
C. No, because all appropriation, revenue or tariff bills, bills authorizing

the 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 of Representatives
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.
C. Both I and II
The Constitution requires that all revenue bills shall originate

"exclusively" from the House of Representatives. Assume that in 2018,
Congressman Pedro Dela Cruz proposed an expansion of the coverage
of the VAT 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.
Which of the following statements will justify the enacted EVAT law?
I. The Constitution simply means that the initiative for filing revenue,
tariff o 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 the 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
B. II only
C. Both I and II
D. Neither I nor II
C. I, I and III
Assuming Senator Juan Maharlika filled 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. Which
of the following statements justify the filing of a substitute bill by
Honorable Senator Maharlika?
I. To insist that a revenue statute not only the bill which initiated 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
"propose amendment"
II. It would be to violate the coequality 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 bil
A. I only
B. II only
C. I, II and III
B. II and III only
The Congress, after much public hearing and consultations with various
sectors of society, came to the conclusion that it will be good for the
country to have only one system of taxation by centralizing the
imposition and collection of all taxes in the national government.
Accordingly, passed law that would abolish the taxing power of all local
government units. Would such law be valid under the the present
Constitution?
I. Yes, the law centralizing the imposition and collection of all taxes in
the national government would not contravene the Constitution as long
as a new law is enacted for the common good of the people.
II. No because under the present Constitution, each local government

unit shall have the power to create their own sources of revenue and to
levy taxes, fee, and charges subject to such guidelines and limitations
as Congress may provide consistent with the basic policy of local
autonomy.
III. No. It is clear that Congress can only give the guidelines and
limitations on the exercise by the local governments of the power to tax
but what was granted by the fundamental law cannot be withdrawn by
Congress.
A. I only
B. II and III only
C. I, II and III
D. The ordinance is a valid exercise of the council's power to enact tax

ordinance to raise revenue under the Local Government Code.
The city council passed a tax ordinance imposing an occupation tax or

profession or occupation of an "industrial engineer". GJ is the only
person with such an 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.
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 or penal in nature.
C. The "ex post facto" rule is not applicable in taxation.
B. No, because the 40% interest rate is violation of due process of law
for being excessive and unreasonable.
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 Constitution 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 the 40% interest rate 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.
B. No, because the it is exercised directly for public purpose and the
benefit to a private entity is only incidental.
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 the taxing power must be exercised exclusively for

public purpose without any incidental benefit to any private entity.
B. No, because the 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.
B. It is payable in money or in kind
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
D. All of the choices
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
D. Inherent in sovereignty
All of the following, except one, are the basic principles of a sound
taxation system:
A. Fiscal Adequacy
B. Administrative feasibility
C. Theoretical justice
D. Inherent in sovereignty
C. Fiscal adequacy
Under the basic principle of a sound taxation system, the government

should not incur a deficit:
A. Theoretical justice
B. Administrative feasibility
C. Fiscal adequacy
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
B. Ability to pay theory
D. Equity in Taxation
C. Administrative feasibility
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
A. Both taxes are imposed in the same amount
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
D. All of the above
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
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
One of the following is a false statement about double taxation. Which is

it?
A. There is not 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 duplicate 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
C. Indirect double taxation is legal as long as there is no violation of

equal protection and uniformity of the Constitution
Which of the following statements is incorrect?
A. Indirect double taxation violates the Constitutional provision of

uniformity and equal protection
B. There is direct double taxation in taxing the income of the corporation
and again subject the portion of the 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 of the Constitution
D. All of the above
D. All of the above
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
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 provisions of the fundamental

law of the land that restrict the supreme, plenary, unlimited and
comprehensive exercise by the State of its inherent power to tax.

C. Supreme and absolute power of the State
Which of the following is incorrect description of tax?
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
D. For public purposes
Which 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
B. Equal protection of the law
C. Due process of law
D. For public purposes
B. Constitutional limitations
There are restrictions imposed by the Constitution
A. Inherent limitations
B. Constitutional limitations
C. Basic principles of sound tax system
B. IV only
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
B. IV only
C. II and IV only
D. III and IV only
D. I, II and III
"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
B. II only
C. III only
D. I, II and III
Statement 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 same rate. This requirement is complied with when
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.

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.
D. I, II, and III
Which of the following statements correctly describe "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 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
B. I and III only
C. II and III only
D. I, II and III
C. International comity
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
B. No, because if 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 would in
effect require that the American government be constituted as the
withholding agent of the the Philippine government insofar as the taxes
on the salaries of the Filipino employees are concerned
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 if 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 would in
effect require that the American government be constituted as the
withholding agent of the the Philippine government insofar as the taxes
on the salaries of the Filipino employees are concerned
C. Both "a" and "b"
C. Exemption of the government from taxes
One of the following is not a Constitutional limitation of 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
C. Exemption of the government from taxes
D. Non-infringement of religious freedom and worship
C. The power to tax is limited to the territorial jurisdiction of the taxing

government
This stems from the principle that we pay taxes for the protection and
services provided outside the territorial boundaries of the taxing state.
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
A. Due process of law
Compliance with procedural requirements must be followed strictly to

avoid collision between the State's power to tax and 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
C. Poll tax
No person shall be imprisoned for non-payment of this.
A. Property tax
B. Excise tax
C. Poll tax
D. Income tax
B. Uniformity
This requires that all subjects or objects of taxation, similarly situated
are to be treated alike of put on equal footing both in privileges and
liabilities
A. Due process
B. Uniformity
C. Progressive taxation
A. Only Congress can exercise the power of taxation
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
B. 2/3 vote of all members of Congress
No law granting any tax exemptions shall be passed without the

concurrence of -
A. Majority of all members of Congress
B. 2/3 vote of all members of Congress

C. 3/4 vote of all members of Congress
D. Unanimous vote of all members of Congress
D. I and II only
Mapagbigay School, a non-stock non-profit educational institution,

bought from Pedro a resident citizen, his residential house and lot.
Pedro will be using the proceeds of the sale to buy his new residential
house and lot. On the other hand, the school will use the parcel of land
to construct a new building for its dormitory for its medical students.
Which of the following statements regarding liability for the payment of
capital gains tax is correct?
I. Pedro is liable to capital gains tax. However, if what was sold was his
principal residence, he may apply for tax exemption, provided that he
complies with the requirements laid down in the Tax Code.
II. Pedro is not liable to CGT because the sale was made in favor of a
non-stock, non-profit education institution and that the property will be
used for educationally-related functions.
III. Pedro is liable to CGT because the tax is imposed on the seller; thus,
notwithstanding any exemption enjoyed by the buyer, the tax shall still
be imposed.
A. No. Exemption from taxes is personal in nature and covers only taxes
for which the taxpayer-grantee is directly liable. VAT is a tax on the
seller who is not exempt from taxes. Since XYZ Inc. is not directly liable
for the vat and no tax exemption privilege is ever given to him, its claim
that the sale is tax exempt is not tenable.
As an incentive for investors, a law was passed giving newly established

companies in certain economic zone exemption from all taxes, duties,
fees, imposts and other charges for a period of three years. ABC
Corporation was organized and was granted such incentive. In the
course of business, ABC purchased mechanical equipment from XYZ
Incorporated. The latter, in its ordinary business dealings, is subject to
vat. XYZ Inc. claims, however, that since it sold the equipment to ABC
Corp. which is tax exempt, it should not be liable to pay the vat. Is this
claim tenable?
A. No. Exemption from taxes is personal in nature and covers only taxes
for which the taxpayer-grantee is directly liable. VAT is a tax on the
seller who is not exempt from taxes. Since XYZ Inc. is not directly liable
for the vat and no tax exemption privilege is ever given to him, its claim
that the sale is tax exempt is not tenable.
B. Yes, exemption from tax should not be discriminatory in nature. A

seller of goods or service to tax exempt individuals or entities shall be
accorded the same exemption provided by law to a buyer.
C. Yes, applying uniformity rule.
C. Both answers are correct.
Juan Dela Cruz Memorial Hospital is a 100-bed domestic hospital

organized for charitable purposes. However, 100-bed capacity, 40-beds
are allotted for paying patients, while the rest are intended for charity
patients. The revenues generated from these paying patients, however,
are being used to improve the facilities of the hospital. Can said hospital
claim exemption from income tax as well as real property tax?
Answer 1: Yes, the hospital can claim exemption from real property tax.
As a general principle, a charitable institution does not lose its character
as such and its exemption from taxes simply because it derives income
from paying patients, whether out-patient, or confined in the hospital, or
receives subsidiaries from the government, so long as the money
received is devoted or used altogether to the charitable object which it is
intended to achieve; and no money inures to the private benefit of the
persons of the person managing or operating the institution
Answer 2: The hospital is subject to 10% tax on its net income, subject
to compliance with the "predominance test".
A. Only the first answer is correct
B. Only the second answer is correct
C. Both answers are correct
D. Both answers are incorrect
C. Yes, because leasing of property is not actually, directly and

exclusively related to educational purposes
Saint Mary's University (SMU) is a non-stock, non-profit educational

institution registered with Securities and Exchange Commission (SEC)
as a corporation. For the year ended December 31, 2018, it reported
rental income amounting to P150M from various tenants leasing
portions of the said corporation. The Bureau of Internal Revenue (BIR)
assessed SMU P45M deficiency income tax for rental income earned. Is
the action of the BIR proper?
A. No, because a proprietary educational institution shall be subject only

to 10% preferential corporate income tax.
B. No, because all revenues of non-stock, non-profit educational

institution shall be exempt from taxes and duties as long as they are
used actually, directly, and exclusively for educational purposes
C. Yes, because leasing of property is not actually, directly and

exclusively related to educational purposes
D. Yes, because taxes are the lifeblood of the government and tax
exemptions are construed strictly against the taxpayer and liberally on
favor of the government
C. The religious congregation is subject to income tax. The

constitutional tax exemptions refer only to real property that are
actually, directly and exclusively used for religious, charitable, or
educational purposes, and that the only constitutionally recognized
exemption from taxation of revenues are those earned by non-profit,
non-stock educational institutions which are actually, directly and
exclusively used for educational purposes.
Mike is the owner of a 5,000 sqm parcel of land located in New Manila,
Quezon City. He leased the property for P500,000 a year to a religious
congregation for a period of ten (10) years. The religious congregation
built on a 1,000 sqm portion a seminary and a chapel which it used in
connection with its religious activities. It also constructed a ten (10)
story building on the remaining 4,000 sqm which it rented out to various
seminaries located throughout the Philippines. These seminaries are
organized as non-profit and non-stock educational institutions.
Which of the following is the correct tax implication of the foregoing

data with respect to payment of income tax?
A. The religious congregation is exempt from payment of income taxes

on rental receipts because the collections were used to support its
various seminaries located throughout the Philippines.
B. The religious congregation is exempt from payment of income taxes

on rental receipts provided not more than 30% of its receipts were used
for administrative purposes.
C. The religious congregation is subject to income tax. The

constitutional tax exemptions refer only to real property that are
actually, directly and exclusively used for religious, charitable, or
educational purposes, and that the only constitutionally recognized
exemption from taxation of revenues are those earned by non-profit,
non-stock educational institutions which are actually, directly and
exclusively used for educational purposes.
A. Use of the real property
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
"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 tax power
The power to tax is limited to the territorial jurisdiction of the taxing

government

D. That he will derive no benefit from the tax
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 territoriality jurisdiction.
C. That the prescriptive period for the tax has lapsed.
D. That he will drive no benefit from the tax.
It literally means "place of taxation" the country that has the power and
jurisdiction to levy and collect the tax
B. Symbiotic relation in taxation
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
C. Revenue regulations
The least source of tax laws:
A. Statues
B. Presidential decrees
C. Revenue regulations
D. Tax treaties or conventions
Statement 1: A revenue regulation must not be contrary 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

C. II and VI only
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 IV only
C. II and VI only
B. The revenue regulations which are in conflict with law(s) are null and
void
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
C. Indirect rather than direct system
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
D. Semi-global and semi-schedular system
A. Personal, poll or capitation tax
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
B. Property
C. Excise tax
D. Regressive
B. Property
Tax imposed on personal or real property in proportion to its value or

some other reasonable method of apportionment
B. Property
C. Excise tax
D. Regressive
C. Real property tax
Which of the following is not example of excise tax?
A. Transfer tax
B. Sales tax
C. Real property tax
D. Income tax
A. Direct
Tax which is demanded from the persons whom the law intends or
desires to pay it
A. Direct
B. Indirect
C. Excise
D. Income
B. Indirect
Tax which is demanded from one person in the exception and intention
that he shall indemnify himself at the expense of another
A. Direct
B. Indirect
C. Excise
D. Income
D. Value-added tax
One is not a direct tax
A. Immigration tax
B. Transfer tax
C. Income tax
D. Value-added tax
B. Indirect tax
A tax on business is
A. Direct tax
B. Indirect tax
C. Property tax
B. Specific
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 or the objects to be taxed
A. Ad-valorem
B. Specific
C. Excise
D. Reveue
A. Ad-valorem
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
B. Ad-valorem tax - TRUE; Specific tax - FALSE
This type of tax requires an assessment of the value of the subject of tax
A. Ad-valorem tax - TRUE; Specific tax - TRUE
B. Ad-valorem tax - TRUE; Specific tax - FALSE
C. Ad-valorem tax - FALSE; Specific tax - TRUE
D. Ad-valorem tax - FALSE; Specific tax - FALSE
D. Ad-valorem tax
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. Rental
D. Ad-valorem tax
B. Regulatory tax
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
B. Proportional
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
C. Regressive
Tax where the rate decreases as the tax base increases
A. Progressive
B. Proportional
C. Regressive
D. Indirect
A. Progressive
Tax where the rate increases as the tax base increases
A. Progressive
B. Proportional
C. Regressive
D. Indirect
A tax classified as a regressive tax
A. Excise tax
B. Real estate tax
C. Value added tax
A. Value added tax
Which of the following taxes is always proportional?
A. Value added tax
B. Income tax
C. Estate tax
D. Donor's tax
D. Nonresident alien not engaged in trade
Which of the following individual taxpayers is not covered by

progressive tax?
A. Resident citizen
B. Resident Alien
C. Nonresident alien engaged in trade
D. Nonresident alien not engaged in trade
A. Non-payment does not necessarily render the business illegal
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
C. One in which there is generally no limit on the amount that may be

imposed
The distinction of a tax 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
B. License fee
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
C. Amount is based on the cost of construction of public improvement

used
Toll 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
C. A special assessment is a tax
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
B. Payable only in money
Which of the following is not a characteristic of debt?
A. Generally arises from contract
B. Payable only in money
C. Assignable
D. Imprisonment is not a sanction for non-payment
B. May be paid in kind
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
B. Separate graduated rates are imposed on different types of income
"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
B. The recipient of the income is no longer required to file an income tax

return as prescribed under the Tax Code
Under the Creditable Withholding Tax system, which of the following

statements is incorrect?
A. Taxes withheld on certain income payments are 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 under this system are creditable in nature
D. All of the above
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
B. The liability for payment of the tax rests primarily on the payee as a
recipient of income
Under the Final Withholding Tax system, which of the following

statements is not correct?
A. Income tax withheld by the withholding agent 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
D. Equitable recoupment
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
C. Both a and b
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 of 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
B. Liberally in favor of the taxpayer
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
B. The court should construe a law granting a municipal corporation the

power to tax most strictly
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 of the Court of Tax

Appeals
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
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

construed against the one claiming the exemption
C. Tax cannot be imposed without clear and express words for that
purpose
D. All of the above
In cases of deductions and exemptions, doubts shall be resolved
B. Strictly against the government
C. Liberally in favor of the taxpayer
A. Statement 1 is correct; Statement 2 is wrong
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 statements are correct
C. Statement 1 is wrong; Statement 2 is correct
D. Both statements are wrong
D. All of the above
Which of the following is correct regarding the purpose(s) of revenue

regulations issued by the Department of Finance through the Bureau of
Internal Revenue?
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
The Secretary of Finance, upon recommendation of the Commissioner

of Internal Revenue, issued a Revenue Regulation using gross income
as the tax base for corporations doing business in the Philippines. The
revenue regulation is:
A. Valid. Corporations are already taxable under our existing tax laws.
Hence, the action of the Secretary constitutes administrative action only
which is within his powers
B. Valid if the tax is limited to gross income without deductions. Such
action is not tantamount to changing the amount of the tax as said
amount ultimately depends on the taxable base.
C. Not valid because the action of the Secretary constitutes legislation

which is exclusively within the powers of the legislative branch of the
government
C. Both I and II
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 or II
D. Evasion
The use of illegal or fraudulent means to avoid or defeat the payment of

tax
A. Exemption
B. Shifting
C. Avoidance
D. Evasion
C. Tax avoidance
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
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

B. Tax avoidance
Pedro's income from leasing his property reaches the maximum rate of
tax under the law. He donated one-half of his said property to a non-
stock, non-profit educational institution whose income and assets are
actually, directly, and exclusively used for educational purposes, and
therefore qualified for tax exemption under Article XIV, Section 4 (3) of
the Constitution and Section 30 (h) of the Tax Code. Having thus
transferred a portion of his said asset, Pedro succeeded in paying a
lesser tax on the rental income derived from his property under the
lower tax bracket. Pedro's action is considered/also known as:
A. Tax evasion
B. Tax avoidance
C. Shifting
D. None
A. Shifting
Transfer of the tax burden by one whom the tax is assessed to another
A. Shifting
B. Capitalization
C. Transformation
D. Tax exemption
D. Shifting - NO; Stipulation - YES
Pedro sold a parcel of land classified as capital assets to Juan. The

parties agreed that the CGT shall be shouldered by Juan. Is this a form
of shifting? Is the stipulation valid?
A. Shifting - YES; Stipulation - YES
B. Shifting - NO; Stipulation - NO
C. Shifting - YES; Stipulation - NO
D. Shifting - NO; Stipulation - YES
C. I and II
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
C. transformation
____________________ 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
D. A taxpayer is relieved from the obligation of paying a tax because of

his belief that it is being misappropriated by certain officials
Which of the following statements regarding "Taxpayer's 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 standi" 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
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
A Filipino citizen is a natural person who is/has:
I. Born by birth with father and/or mother as Filipino citizens
II. Born before January 17, 1973 of Filipino mother who elects Philippine
citizenship upon reaching the age of majority.
III. Acquired Philippine citizenship after birth (naturalized) in accordance

with Philippine Laws
ANSWER: I, II and III
Individual taxpayers are:
I. Natural persons with income derived within the territorial jurisdiction

of a taxing authority.
II. Natural persons classified as citizens and aliens
ANSWER: I and II
Determine the correct classification (NRC or RC) of the following:
I. Manny, a Filipino businessman, went on a business trip abroad and

stayed there most of the time during the year.
II. Kyla, a Filipino professional singer, held a series of concerts in
various countries around the world during the current taxable year. She
stayed abroad most of the time during the year.
III. Efren, a Filipino "cue" artist went to Canada during the taxable year
to train and participate in the world cup of pool. He stayed there most of
the time during the year.
ANSWER: I-RC, II-RC and III-RC
Statement 1: Overseas Filipino Workers duly registered as such with the

Philippine Overseas Employment Administration (POEA) with valid
Overseas Employment Certificate (OEC) refer to FIlipino citizens
emplyed in foreign countries and whose salaries are paid by emploters
abroad and are not borne by entities or persons in the Philippines.
Statement 2: Filipino citizen Seafarers who receive compensation for

services rendered abroad as a member of the complement of a vessel
engaged exclusively for international trade are condirered Overseas
Filipino Workers provided they are duly registered as such with the
Philippine Overseas Employment Administration (POEA) with a valid
Overseas Employment Certificate (OEC) with Seafarers Identification
Record Book (SIRB) or Seaman's Book issued by the Maritime Industry
Authority (MARINA)
ANSWER: I-True and II-True
Bu-dhoy, a Mongolian national, arrived in the Philippines on January 1,

2018 to visit his Filipina girlfriend. He planned to stay in the country until
December 31, 2020, by which time he would go back to his legal wife and
family in Mongolia. Bu-dhoy derived income during his stay here in the
Philippines. For 2018 taxable year, Bu-dhoy shall be classified as a:
(Resident alien, non-resident alien engaged in trade or business in the
Philippines, non-resident alien not engaged in trade or business in the
Philippines, or special alien employee)
ANSWER: Resident Alien

Due to his expertise, Engr. Pedro D. Magiba (a freelancer) was hired by a
foreign petroleum contractor in Thailand to provide technical assistance
for two months from February to March. He was hired again for the
months of June-July and October-December of the same taxable year.
Engr. Pedro D. Magiba is a: (Resident Citizen, Nonresident citizen,
Special filipino employee, or no classification)
ANSWER: Nonresident Citizen
Statement 1: The intention with regard to the length and nature of stay of
an alien determines whether he is a resident or nonresident.
Statement 2: A foreigner who has acquired residency in the Philippines

shall only become a nonresident when he actually departs with the
intention of abandoning his residency in the Philippines (True or false)
ANSWER: Both are true
On October 2018, Mr. Bald Nha, an American basketball coach was hired
as a team consultant by one of the teams in the Philippine Basketball
Association (PBA) for one conference which will last for a period of not
more tahn three (3) months from October to December 2018. His coming
to the Philippines was for a definite purpose. However, he was
subsequently chosen to coach the Philippine men's basketball team for
a period of two (2) years. The American mentor intends to leave the
Philippines as soon as his job is finished. For 2018 taxable year, the
American coach shall be classified as: (Resident Alien, nonresident
alien engaged in trade or business, non resident alien not engaged in
trade or business, or resident citizen)
ANSWER: Resident alien
Rihanna, an American singer, was engaged to sing for one week at the
Western Philippine Plaza after which she returned for USA, For income
tax purposes, she shall be classified as: (Resident Alien, nonresident
alien engaged in trade or business, non resident alien not engaged in
trade or business, or resident citizen)
ANSWER: non resident alien not engaged in trade or business
Mr. Almansor Sebastian, an Iranian and resident of Tehran, Iran stayed

in the Philippines from Nov. 28 to Dec 6, 2018 to watch the 2019 FIBA
World Qualifying tournament held in MOA, Paranaque, Philippines.
During his stay, he bought equity investments from Alpha and Delta
Corporations (domestic corporations). He likewise invested in a mutual
fund of Banko de Isla de Filipinas, a local bank. Mr. Almansir Sebastian
is a: (Resident Alien, nonresident alien engaged in trade or business,
non resident alien not engaged in trade or business, or resident citizen)
ANSWER: non resident alien not engaged in trade or business

Fundamental Principles of Taxation

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Fundamental Principles of Taxation

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Fundamental Principles of Taxation

C. Both statements are correct

Statement 1: It is so because the State has the supreme power to

Statement 2: Any provision in the Constitution regarding taxation does

A. Only statement 1 is correct

B. Only statement 2 is correct

C. Both statements are correct

D. Both statements are incorrect

B. The State can exercise the power of taxation only if it is expressly

The following statements correctly described the power of the State to

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

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

D. It is a way of collecting and apportioning the cost of government

A. The power of taxation may be exercised by the government, its

Which statement is wrong?

A. The power of taxation may be exercised by the government, its

B. Generally, there is no limit on the amount of tax that may be imposed.

C. The money contributed as tax becomes part of the public funds.

D. The power of tax is subject to inherent and constitutional limitations

They exist independent of the constitution being fundamental power of

B. Only statement 2 is correct

Statement 1: The constitution is the source of the State's taxing power.

Statement 2: The police power of the government may be exercised

A. Only statement 1 is correct

B. Only statement 2 is correct

C. Both statements are correct

D. Both statements are incorrect

C. Both statements are correct

Statement 1: The Constitution cannot take away the inherent powers of

Statement 2: No laws are necessary to confer the inherent powers of the

A. Only statement 1 is correct

B. Only statement 2 is correct

C. Both statements are correct

D. Both statements are incorrect

The power to demand proportionate contribution from persons and

C. Power of eminent domain

The power to regulate liberty and property to promote the general

C. Power of eminent domain

C. Power of eminent doman

The power to acquire private property upon payment of just

C. Power of eminent domain

Which of the following requires public improvement?

II. Police Power

III. Eminent Domain

B. I and III only

D. II and III only

The strongest of all inherent powers of the government is

A. They can be abolished by the Constitution

A. They can be abolished by the Constitution.

C. Each presupposes an equivalent compensation to the inhabitants.

D. The emergence of the State carries with it these fundamental powers.

B. Eminent domain does not require constitutional grant but taxation

The following statement correctly states the differences among the

B. Eminent domain does not require constitutional grant but taxation

C. Police power and taxation is exercise only by the government but

D. Police power regulates both property and liberty while eminent

Which of the following statements is not correct?

A. Taxes maybe imposed to raise revenue or to provide disincentives to

D. The power of the taxation in the Philippine Constitution are grants of

ED: Fundamental Power

A. T: Enforced proportionate contribution.

ED: Property to be taken is for public use

B. T: Government has no obligation to pay

ED: Go't is a debtor of the property taken