CHAPTER EXERCISES
True or False
TRUE 1. The three fundamental powers of the state
may be exercised only by the government.
TRUE 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.
TRUE 3. Eminent domain may be exercised even by
public service corporations and public
entities.
TRUE 4. Police power regulates both liberty and
property.
TRUE 5. Taxes are raised to cover the cost of
governance.
FALSE 6. Toll is one of the taxes collected by the
government.
TRUE 7. License fees are imposed in the exercise of
police power.
FALSE 8. License fee is imposed to raise revenue.
TRUE 9. Tax is generally unlimited because it is
based on the needs of the State.
TRUE 10. The amount imposed in the exercise of
police power depends whether the activity is
useful or not.
TRUE 11. 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.
TRUE 12. debt , as distinguished from tax may be
paid in kind.
FALSE 13. Special assessment is a tax.
FALSE 14. Special assessment is imposed on
persons, property and property rights.
TRUE 15. In the exercise of the power of taxation, the
State can tax anything at any time.
Multiple Choice
Definition, Purpose, Theory and Basis
1. Which of the following statements is 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.
2. 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 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
c. Both a and b
d. Neither a nor b
3. Statement 1: The distinction of a tax from permit or
license fee is that a tax is imposed for
regulation.
a. Statement 2: Non-payment of tax does not
necessarily render a business illegal.
b. Only statement 1 is correct.
c. Only statement 2 is correct.
d. Both statements are correct.
e. Both statements are incorrect.
4.The primary purpose of taxation is to raise revenue
for the support of the government.
However, taxation is often employed as a device 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. Tax 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.
5. Which of the following statements is correct?
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 nor b
6. 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
b. Lifeblood theory
c. Sumptuary theory
d. Symbiotic doctrine
7. On a 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
8. Incidence of taxation means
a. Shifting of tax
b. Refunds of tax
c. Payment of tax
d. Imposition of tax
9. The actual effort exerted by the government to
effect the exaction of what is due from the
taxpayer is known as
a. Assessment
a. Levy
b. Payment
c. collection
10. 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.
a. Statement 2: Jurisdiction is the reason why citizens
must provide support to the
state so the latter could continue to give protection.
b. Only Statement 1 is correct.
c. Only Statement 2 is correct.
d. Both statements are correct.
e. Both statements are incorrect.
11. 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.
12. Congress passed a new 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 been already 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 effect.
13. Being a legislative in nature, the power to tax may
not be delegated except
a. To local governments or political subdivisions
b. When allowed by constitution
c. When delegation related 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 above
Scope and Aspect of Taxation
14. Statement 1: The aspects of taxation are shared
by the legislative and executive branches
of the government.
a. Statement 2: Taxes should be prospective and
should not be given retroactive
effects because they are burdens.
b. Only Statement 1 is correct.
c. Only Statement 2 is correct.
d. Both statements are correct.
e. Both statements are incorrect.
15. 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 government sources to satisfy its
expenditure
a. I, II & III
b. I & II only
c. I & III only
d. II & III only
16. 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
17. 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
Inherent Powers of the State
18. Statement I: Inherent powers of the state exist
independent of the constitution.
Statement II: The taxing power of the local
government units precede from a
constitutional grant.
a. Statements I&II are false.
b. Statement I&II are true.
c. Statement I is true but Statement II is false.
d. Statement I is false but Statement II is true.
19. The following are the characteristics of the State’s
power to tax except
a. The strongest of all inherent powers of the State
b. Involves power to destroy
c. Both a and b
d. Neither a nor b
20. 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.
21. Where does taxing power of provinces,
municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or executive act
d. Local legislation
22. 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. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true.
Nature , Characteristics and Construction of Tax Laws
23. 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
24. 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 applies 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 nor b
25. 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 of tax
d. All of the above
26. The tax should be based on the 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, ability to pay theory.
d. As a basic principle of taxation, this is called
“theoretical justice”
27. Rule of “no estoppel against the government”
means
a. Rule of law that in the performance of its
governmental functions, the state cannot
be estopped by the neglect of its agents and officers.
b. The government is not estopped by the mistakes or
errors of its agents; erroneous
application and enforcement of law by public officers
do not block the subsequent
correct application of statutes.
c. Both a and b
d. Neither a nor b
28. 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 taxpayer’s ability to pay.
Statement 2: Taxation is progressive when their rates
go up depending on the resources of
the person affected.
a. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true,
29. One of the characteristics of our internal revenue
law is that they are
a. Political in nature
b. Penal in nature
c. Generally prospective in operation although the tax 37. Which of the following is a characteristic of
statute may nevertheless operate retrospectively taxation which distinguishes it from police
provided it is clearly the legislative intent. power and eminent domain?
d. Criminal in nature a. For public purposes
30. Which of the following distinguishes tax from b. Legislative in nature
license fee? c. Generally payable in money
a. Non-payment does not necessarily render the d. Inferior to non-impairment clause in the
business illegal Constitution
b. A regulatory measure Sound Tax System
c. Imposed in the exercise of police power 38. The following are the basic principles of sound tax
d. Limited to cover cost of regulation system
31. The least source of tax laws: I. It should be capable of being effectively enforced.
a. Statutes II. It must be progressive
b. Presidential Decrees III. Sources of revenue must be sufficient to meet
c. Revenue regulations government expenditures and other
d. Tax treaties or conventions public needs.
32. In every case of doubt, tax statutes are construed IV. It should be exercised to promote public welfare.
a. Strictly against the government and the taxpayer a. I and II only
b. Liberally in favor of the government and the b. III and IV only
taxpayer c. I, II and III only
c. Strictly against the government and liberally in favor d. All of the above
of the taxpayer 39. The sources of revenue should be sufficient to
d. Liberally in favor of the government and strictly meet the demands of public expenditures.
against the taxpayer This refers to
33. In every case of doubt, tax exemption are a. Equality or theoretical justice
construed b. Fiscal adequacy
a. Strictly against the government and the taxpayer c. Administrative feasibility
b. Liberally in favor of the government and the d. Rule of apportionment
taxpayer 40. The tax should be imposed proportionate to the
c. Strictly against the government and liberally in favor taxpayer’s ability to pay
of the taxpayer a. Equality or theoretical justice
d. Liberally in favor of the government and strictly b. Fiscal adequacy
against the taxpayer c. Administrative feasibility
34. Tax of a fix amount imposed among all persons d. Rule of apportionment
residing within a specified territory 41. The tax law must be capable of convenient just
without regards to their property or occupation they and effective administration
may be engaged a. Equality or theoretical justice
a. Personal, poll or capitation tax b. Fiscal adequacy
b. Property c. Administrative feasibility
c. Excise d. Rule of apportionment
d. regressive tax Inherent and Constitutional Limitations
35. Tax of fixed proportion of the amount or value of 42. Equality in taxation means
property with respect to which the tax I. Progressive system of taxation shall be applied.
assessed II. The tax laws and their application must be fair, just,
a. Ad valorem reasonable and proportionate to
b. Specific one’s ability to pay.
c. Excise III. The tax laws shall give emphasis on direct rather
d. Revenue than indirect taxes or on the
36. Tax base on a fix percentage of the amount of ability-to-pay principle of taxation.
property, income or other basis to be taxed a. I only
a. Progressive b. II only
b. Proportional c. III only
c. regressive tax d. I, II & III only
d. Indirect
43. Which of the following restrictions on the power of Tax Avoidance/Double Taxation
taxation recognizes that the country’s 48. Which of the following is to be regarded as tax
tax laws shall not be applied to the property of foreign minimization through legal means?
governments? a. Not declaring all taxable income
a. Taxation is inherently a legislative function b. Padding of expenses for deduction from income
b. Exercise of taxation is subject to international c. Opting to transfer the property through sale rather
comity than through donation where tax liability is higher
c. Due process of law d. All of the above
d. Equal protection of law 49. Which of the following is correct?
44. This is an inherent limitation on the power of a. Tax avoidance or tax minimization through legal
taxation. means is not punishable by law.
a. The rule on taxation shall be uniform and equitable. b. Deliberate reduction of taxable income that has
b. No law impairing the obligations and contracts shall been received is an example of
be enacted tax avoidance.
c. Charitable institutions, churches, personages or c. Evasion of tax takes place only when there are no
convents belonging thereto, mosque and non-profits proceeds on the part of the
cemeteries and all kinds of lands, building and government
improvements actually, directly and exclusively used d. All of the above
for religious and charitable purposes shall be exempt 50. Double taxation in its general sense means taxing
from taxation the same subject twice during the same
d. The tax laws cannot apply to the property of foreign taxing period. In this sense, double taxation
government a. Violates substantive due process.
Exemption versus Amnesty b. Does not violate substantive due process.
45. Exemption from tax is a privilege which is being c. Violates the right to equal protection.
looked upon by law with disfavor d. Does not violate the right to equal protection
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
46. Tax exemption is made different from tax
amnesty:
a. It is a privilege or freedom from tax burden;
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 past, present and future obligations.
47. 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. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true.