UNIVERSITY OF LUZON

COLLEGE OF ACCOUNTANCY
CPA REVIEW CENTER

GENERAL PRINCIPLES OF TAXATION

Multiple Choice Questions

1. One of the characteristics of internal revenue taxes is that they are
a. Criminal in nature
b. Penal in nature
c. Political in nature
d. Generally prospective in application

2. In case of conflict between tax laws and generally accepted accounting principles (GAAP)
a. Both tax laws and GAAP shall be enforced
b. GAAP shall prevail over tax laws
c. Tax laws shall prevail over GAAP
d. The issue shall be resolved by the court

3. One of the following is a primary purpose of taxation

a. Protection of local industries against foreign competition through imposition of high customs
duties on imported goods
b. Reduction of inequalities in wealth and income by imposing progressively higher tax rates
c. To secure revenue for the support of the government
d. Strengthening of anemic enterprises by giving tax exemptions

4. All of the following, except one, are canons of a sound tax system
a. Fiscal adequacy
b. Theoretical justice
c. Administrative feasibility
d. Inherent sovereignty

5. The power to tax is the power to destroy. Is this always so?

a. No. The executive branch may decide not to enforce a tax law which it believes to be
confiscatory.
b. Yes. The tax collectors should enforce a tax law even it results to the destruction of the property
rights of taxpayer.
c. Yes. Tax laws should always be enforced because without taxes the very existence of the State
if endangered.
d. No. The Supreme Court may nullify a tax law hence, property right are not affected.

6. The following are similarities of the inherent power of taxation, eminent domain, and police power,
except one:
a. Are necessary attributes of sovereignty
b. Interfere with private rights and property
c. Affect all persons or the public
d. Are legislative in implementation

7. The City Council passed an ordinance imposing occupation to an air conditioning technician.
Conde is the only person with such in the city. He challenged the validity of the ordinance as being
discriminatory since he is the only one adversely affected.
a. The contention of Conde is tenable
b. The ordinance is unconstitutional because Conde is denied of his right to equal protection of
the law.
 c. The contention of Conde is not justified because the rule on uniformity is not violated
considering that the ordinance would also be imposed on all air conditioning technicians who
may come within the jurisdiction of the city.
d. The issue on validity on invalidity of the ordinance should be set aside.

8. All subjects or objects that are similarly situated are treated alike as to the burden that may be
imposed and the benefits that may result
a. Equitable
b. Proportional
c. Uniformity
d. Progressive

9. A tax law is not violative of the process clause when it is

a. Arbitrary
b. Discriminatory
c. Excessive
d. Proportionate

10. Which statement is wrong?

a. Must originate from the House of Representatives and on which same bill the Senate may
propose amendments
b. May originate from the senate and on which the same bill the House of Representatives may
propose amendments
c. May have a house version and senate version approved separately
d. May be recommended by the president to Congress

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

12. Which of the following statement is incorrect with respect to the power of the President?
a. Congress may authorize the presidents to fix within specified limits tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties and imposts within the framework
of National Development Program of the government
b. The president can veto any particular item in a revenue or tariff bill, but the veto shall not affect
the items which he does not object
c. The power of taxation can be delegated to the President of the Philippines
d. The President of the Philippines is empowered to grant tax exemption on certain class of
taxpayers

13. Which of the following is not a public purpose?

a. Construction of bridges
b. Payment of Christmas bonuses of government officials and employees
c. Opening of road on a tract of land owned by a private individuals
d. Scholarship to poor but deserving students

14. Which of the following statements is not correct?

a. An inherent limitation of taxation may be disregarded by the application of a constitutional
limitation
b. The property of an educational institution operated by a religious order is exempt from property
tax, but its income is subject to income tax
c. The prohibition of delegation by the state of the power of taxation will still allow the Bureau
of Internal Revenue to modify the rules on time for filing of returns and payment of taxes
d. The power of taxation is shared by the legislative and executive departments of government

15. A religious order, a lessee of a piece of land, constructed a seminary and church on a portion of
the land. On the portion of the land not used as seminary and church, it constructed a one-story
 building that it sub-leased to private individuals selling religious materials, food and refreshments.
The rent income is used to finance teaching materials at the seminary.

Statement 1: The income of the religious order is subject to income tax.

Statement 2: The exemption from taxation provided in the Philippine Constitution prohibits the
imposition of any tax on the religious order.
a. True, true
b. False, False
c. True, False
d. False, True

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

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

18. A taxpayer gives in the following reasons for refusing to pay a tax. Which of the following reasons
is not acceptable for legally refusing to pay the tax?
a. That he has been deprived of due process of law.
b. The he will derive no benefit from the tax.
c. That the prescriptive period for the tax has lapsed.
d. That there us lack of territorial jurisdiction.

19. Which of the following 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 taxation is subject to certain constitutional limitations

20. Faith, CPA has obtained her CPA license. Before she can lawfully pursue her occupation, she
should pay
a. Professional tax
b. Percentage tax
c. CPA’s income tax
d. Value-added tax

21. An example of a tax where the concept of progressively find application is the
a. Income tax on individuals
b. Excise tax on petroleum products
c. Value-added tax on certain articles
d. Amusement tax on boxing exhibitions

22. One of the following is not a characteristics of a special assessment/levy

a. It has special application only to a particular time and place
b. It is levied only on land
c. May be levied on business
d. Based wholly on benefits

23. The proportional contribution by persons and property levied by the law-making body of the State
by virtue of its sovereignty for the support of the government and all public needs is referred to as:
 a. Taxes
b. Special assessment
c. License fees
d. Toll

24. Debt as distinguished from tax

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

25. The distinction of a tax from permit or license is that a tax is:
a. Imposed for regulation
b. One which involves an exercise of police power
c. One in which there is generally no limit on the amount that may be imposed
d. None of the above

26. Which of the following is not a scheme of shifting the incidence of taxation?
a. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the
goods sold.
b. The purchaser asks for a discount or refuses to buy at regular prices unless it is reduced by the
amount equal to the tax he will pay.
c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination
abroad, so that the title passes abroad instead of in the Philippines.
d. The manufacture transfers the sales tax to the distributor, then in turn to the wholesaler, in turn
to the retailer and finally to the consumer.

27. The Philippine income tax system has the following features, except
a. Comprehensive tax suits b 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.

28. A real property tax is payable

a. In the city or municipality where the owner is domiciled.
b. In the place where the property is located.
c. Anywhere in the Philippines.
d. In the revenue office where the property is located.

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

30. Which of the following is not an element of direct duplicate taxation which is violative of the equal
protection and uniformity clauses in the constitution?
a. Same property is taxed twice
b. Same taxing authority
c. Same amount
d. Same purpose

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

a. Liberally in favor of the taxpayer
b. Strictly against the taxpayer
c. Strictly against the government
d. None of the above
32. In case of ambiguity, tax laws imposing a tax shall be interpreted
a. Liberally in favor of the taxpayer
b. Liberally in favor of the government
c. Strictly against the taxpayer
d. None of the above

33. The least source of tax law

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

34. Which of the following is correct regarding the purpose(s) of revenue regulations issued by the
Department of Finance through 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 details of administration and procedure.
d. All of the above.

35. Which of the following is not considered as a step in making a revenue regulation effective?
a. Recommended by the Commissioner of Internal Revenue to the Secretary of Finance
b. Approval by the Secretary of Finance
c. Legislation by Congress
d. Publication in a newspaper of general circulation

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