ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION

10. The following, except one, are basic principles of a sound tax system
1. The process by which the sovereign raises income to defray the A. It should be capable of being effectively enforced.
expenses of the government is called (RPCPA) B. It must be progressive
A. subsidy C. Sources of revenue must be sufficient to meet government
B. tariff expenditures and other public needs.
C. taxation D. It should be exercised to promote public welfare.
D. tribute
11. Which theory in taxation states that without taxes, a
2. One of the characteristics of internal revenue taxes is that they are government would be paralyzed for lack of power to
(RPCPA) activateand operate it, resulting in the destruction? (BEQ)
A. Criminal in nature A. Power to destroy theory
B. Penal in nature B. Lifeblood Theory
C. Political in nature C. Sumptuary theory
D. Generally prospective in application D. Symbiotic doctrine

3. Which of the following has no power of taxation? (RPCPA) 12. Congress passed a sin tax law that increased tax rates on
A. provinces cigarettes by 1,000%. The law was thought to be sufficient
B. cities to drive many cigarette companies out of business, and
C. barangays was questioned in court by a cigarette company thatwould
D. Barrios go online out of business because it would not be able to
pay the increased tax.
4. “Schedular system of income taxation” means The cigarette company is
A. All types of income are added together to arrive at gross income.
B. Separate graduated rates are imposed on different types of income (BEQ)
C. Capital gains are excluded in determining gross income A. wrong because taxes are the lifeblood of the government
D. Compensation income and business/professional income are added
together in arriving at gross income. B. wrong because the recognizes that the power to tax is the power to
destroy
5. Which of the following statements is true? C. correct because no government can deprive a person of his livelihood
A. Opinions of legal luminaries are sources of tax laws. D. correct because Congress, in this case, exceeded the power to tax
B. The Constitution grants exemption from all kinds of taxes to religious
and charitable organizations. 13. The requirement of equality or theoretical justice is complied with if
C. Because the power to tax is unlimited, comprehensive, plenary the tax is
and supreme, the power to tax can reach over into any A. progressive
jurisdiction to seize upon person or property. B. regressive
D. The “benefits-protection theory” is the source of the “doctrine of C. ad valorem
symbiotic relationship”. D. specific

6. One of the following is a primary purpose of taxation 14. The power of taxation can only be exercised by the lawmaking body
A. Protection of local industries against foreign competition through A. subject to constitutional and inherent limitations
imposition of high customs duties on imported goods B. equality or theoretical justice
B. Reduction of inequalities in wealth and income by imposing C. legislative in character
progressively higher tax rates D. inherent in sovereignty
C. To secure revenue for the support of the government
D. Strengthening of anemic enterprises by giving tax exemptions. 15. The President of the Philippines and the Prime Minster of
Japan entered into an executive agreement in respect of a
loan facility to the Philippines from Japan whereby it was
7. Which of the following is not a secondary purpose of tax?
stipulated that interest on loans granted by private Japanese
A. To serve as key instrument of social control
financial institutions in the Philippines shall not be subject to
B. To effect more equitable distribution of wealth among people
the Philippine income taxes. What basic characteristic of
C. To achieve social and economic stability
taxation has been violated by this agreement?
D. To raise revenue to defray the necessary expenses of the
A. inherent limitation
government.
B. theoretical justice
C. legislative in character
8. All of the following, except one, are canons of a. sound tax system
D. administrative feasibility
A. Fiscal adequacy
B. theoretical justice
16. Although the power of taxation is basically legislative in character, it is
C. Administrative feasibility
not the function of the Congress to (BEQ)
D. inherent sovereignty
A. fix with certainty the amount of taxes
B. collect the tax levied under the law
9. Under the basic principle of sound tax system, the government should
C. identify who should collect the tax
not incur a deficit. (RPCPA)
D. determine who should be subject to the tax
A. Theoretical justice
B. Administrative feasibility
17. The power of taxation is inherent in sovereignty being
C. Fiscal Adequacy
essential to the existence of every government. Hence, even
D. None of the above
if not mentioned in the Constitution, the state can still
exercise the power.
 ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION
billboard or sign anywhere in the country.
It is essentially a legislative function. Even in the absence of any
constitutional provision, taxation power falls to Congress as part 25. Which of the following statements is not correct?
of the general power of lawmaking A, An inherent limitation of taxation may be disregarded by the application
A. False, False of a constitutional limitation.
B. False, True B. The property of an educational institution operated by a
C. True, True religious order is exempt from property tax, but its income is
D. True, False subject to income tax.
C. The prohibition of delegation by the state of power of taxation
18. Those restrictions on the exercise of the power of will still allow the Bureau of Internal Revenue to modifythe
taxation that are found in the constitution or implied rules on time for filing of returns and payment of taxes.
from itsprovisions D. The power of taxation is shared by the legislative and executive
A. theoretical justice departments of government.
B. legislative in character
C. inherent limitations 26. The head priest of the religious sect Tres Personas Solo
d. constitutional limitations Dios, as the corporation sole, rented a 5,000 sq. m. lot
registered its name for use as school site of a school
19. Which of the following statements is not correct? organized for profit. The sect used the rentals for the
A. Taxes may be imposed to raise revenue or to provide disincentives to support andupkeep of its priests. The rented lot is (BEQ)
certain activities within the state. A. not exempt from real property taxes because the user is organized for
B. The state can have the power of taxation even if the Constitution profit
does not expressly give it the power to tax. B. exempt from real property taxes since it is actually, directly and
C. For the exercise of the power of taxation, the state can tax anything exclusively used for religious purposes
at any time. C. not exempt from real property taxes since it is the rent, not the land,
D. The power of taxation in the Philippine Constitution are grants of that is used for religious purposes
power and not limitations on taxing powers. D. exempt from real property taxes since it is actually, directly and
exclusively used for educational purposes
20. One of the following is not an inherent limitation on the exercise of
the power of taxation— 27. The Municipality of Monte Cristo has a ten hectare cemetery
A. international comity consisting of four different cemeteries which are ownedby
B. double taxation different entities. Which of the following is subject to real estate
C. non-delegation of the legislative power to tax tax?
D. Territoriality A. Cemetenterio Municipal del Monte Cristo – a government
cemetery owned by the municipality which was established for
21. Those who have more income should pay more income tax, while the purpose of using it as a burial ground of the paupers in
minimum wage earners should be exempt Monte Cristo.
A. Uniformity of taxation B. Monte Cristo Catholic Cemetery – owned by the catholic church;
B. Equality of taxation payments are remitted to the catholic church and for the
C. Due process of law improvement of the cemetery.
D, Non-delegation of legislative power C. Last Trip Memorial Park – owned by a corporation where
dividends are distributed to the shareholders at the end of the
22. All subject or objects that are similarly situated are year.
treated alike as to the burden that may be imposed and D. Quita-Quita Memorial Park – owned by an association consisting
thebenefits that may result one hundred different families; each family owns severalsquare
A. equitable meters of lot; not a single portion is held for sale to either member
B. proportional or non-member of the association.
C. uniformity
D. progressive 28. Lualhati Educational Inc., a stock educational institution
organized for profit, decided to lease for a commercial usea
1,500 sq. m. portion of its school. The school actually, directly
23. A tax law is not violative of the due process clause when it is
and exclusively use the rents for the maintenance of itsschool’s
A. arbitrary
building, including payment of janitorial services. Is the leased
B. discriminatory
portion subject to real property tax?
C. excessive
A. Yes, since Lualhati is a stock and for profit educational institution
D. proportionate
B. No, since the school actually, directly and exclusively use the rents for
educational purposes
24. Which of the following is violative of the uniformity rule in taxation?
C. No, but it may be subject to income taxation on the rents it receives
A. Different tax rates on boarding stables for racehorses and boarding
D. Yes, since the leased portion is not actually, directly and exclusively
horses are not for racing;
used for educational purposes
B. Wholesale dealers in oil are subject to occupation tax while
wholesale dealers in other articles such as sugar, bacon, coal,iron
and other things are not so subject; 29. They restrict the exercise of the power of taxation although they are
C. A road users’ tax imposed on all motor vehicles registered not embodied in the Constitution
and operating in the City of Manila but does not subject A. theoretical justice
vehicles not registered therein but also operating B. legislative in character
temporarily in the said city. C. inherent limitation
D. A tax of P2 per square meter or fraction thereof is imposed on every D. constitutional limitations
 ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION

30. A tax must be appropriated and spent for public purpose. Which of 40. A tax that is imposed upon a person who is directly bound to pay it—
the following is not a public purpose? A. direct tax
A. dole-out to victims of calamity B. indirect tax
B. PantawidPamilyang Pilipino Program (4 Ps) C. excise tax
C. improvement of sugar industry D. poll tax
D. construction of a barangay chapel
41. One is not a direct tax
31. Which of the following activities is not a public purpose? A. immigration tax
A. Construction of bridges B. transfer tax
B. Payment of Christmas bonuses of government officials and employees C. income tax
C. Opening of road on a tract of land owned by a private individual D. contractor’s tax
D. Scholarship to poor but deserving students
42. The basic community tax of P5.00 of an individual is a (an)
32. Question 1: Can the state tax the Armed Forces of the Philippines? A. property tax
Question 2: Are the government-owned and controlled corporations B. direct tax
subject to tax? C. national tax
A. Yes, No D. ad valorem tax
B. Yes, Yes
C. No, Yes 43. Which of the following statements is wrong?
D. No, No A. Non-payment of additional community tax is a ground for
imprisonment
33. Constituted of the provisions of law which prescribe the B. In case of conflict between a tax law and a revenue regulation, the
manner of enforcing the obligation on the part of those latter shall prevail
taxed to pay demand thus created C. A revenue regulation can expand the provision of law by
A. collection imposing a penalty even if the law that it implements does not
B. proportionate in character impose a penalty
C. enforced contribution D. Revenue bills shall originate exclusively from the Senate
D. levy

34. The amount required is dictated by the needs of the government in 44. Statement 1: The value-added tax is property tax
A. license fee Statement 2: The estate tax is a direct tax
B. tax A. the two statements are correct
C. toll B. the two statements are wrong
D. tariff C. statement 1 is correct; statement 2 is wrong
D. statement 1 is wrong; statement 2 is correct
35. One of the characteristics of a tax is that
A. It is generally base on a contract 45. Forms part of the purchase price of the commodity or service and
B. It is generally payable in money passed on to customers
C. It is generally assignable
D. Optional A. direct tax
B. indirect tax
C. excise tax
36. No person shall be imposed for non-payment of
D. poll tax
A. property tax
B. excise tax
46. A tax on business is
C. poll tax
A. direct tax
D. income tax
B. indirect tax
C. property tax
37. An example of a property tax is
D. none of the above
A. additional community tax on income of real properties
B. real estate tax on real properties
47. Fermin is a mining operator. His mineral lands are not
C. estate tax on inherited personal as well as real properties
covered by any lease contact. The tax Fermin has to pay
D. donor’s tax on donation of property
based on the actual value of the gross output or mineral
products extracted is
38. Which of the following is not an example of excise tax?
A. mining tax
A. transfer tax
B. royalties
B. Sales tax
C. rental
C. Real property tax
D. ad valorem tax
D. Income tax
48. The tax that is imposed solely to raise revenue for government
39. Sharon, CPA has just obtained her CPA license. Before she can
expenditures
lawfully pursue her occupation, she should pay
A. revenue tax
A. Professional tax
B. regulatory tax
B. Percentage tax
C. specific tax
C. CPA’s income tax
D. ad valorem tax
D. Value-Added tax
 ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION
49. Tax levied for particular or specific purpose irrespective of whether C. Affect all persons or the public
revenue is actually raised or not D. Are legislative in their implementation
A. revenue tax
B. regulatory tax 59. Which statement refers to police power as distinguished from
C. specific tax taxation?
D. ad valorem tax A. It can only be imposed on specific property or properties
B. The amount imposed depends on whether the activity is useful or not.
50. Tax imposed by the national government and is effective within the C. It involves the taking of property by the government
entire jurisdiction thereof D. The amount imposed has no limit
A. national tax
B. local tax 60. Police power as distinguished from taxation or eminent domain
C. proportional tax A. Just compensation is received by the owner of the property
D. general tax B, Maybe exercised by private individuals
C. Superior to the non-impairment clause of the constitution
51. Taxes imposed by a political subdivision of the state and is effective D, Property is taken by the government for public use
only within the territorial boundaries thereof
A. national tax 60. Which of statements is wrong?
B. local tax A. The power of taxation may be exercised by the government, its
C. progressive tax political subdivisions, and public utilities
D. regressive tax 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
52. Which of the following taxes is proportional? D. The power of taxation is subject to certain constitutional limitations.
A. value-added tax
B. income tax 61. Mr., No Null is exempt from all taxes
C. estate tax Q1: Is he exempt from customs duties on the importation of goods?
D. donor’s tax Q2: Is he exempt from
parking fees on the
53. The following are kinds of taxes as to graduation. Which one is not? parking areas owned
A, Digressive by the government?
B. Uniform Q3: Is he exempt
C. Regressive from Mayor’s Permit
D. Progressive Fees?
Which of the above questions is/are answerable by “No”?
54. An example of a tax where the concept of progressively finds A. Q2 only
application is the B. Q1 &Q2
A. income tax on individuals C. Q2 & Q3
B. excise tax on petroleum products D. Q1, Q2 and Q3
C. value-added tax on certain articles
D. amusement tax on boxing exhibitions 62. After having been informed that some massage parlors are being
used as fronts for prostitution, the SangguiniangPanlngsod of
55. The power of the state or those to whom the power has been Manila passed a tax ordinance subjecting to massage parlors
delegated to take private property for public use uponpaying within its jurisdiction to such onerous taxes that leave them no
to the owner a just compensation other alternative but to stop operating. The passage of the
A. power of eminent domain ordinance is a valid exercise of
B. police power –
C. power of taxation A. taxation
D. people power B. eminent domain
C. police power
56. There can be classification of the subject matter being required to D. police power and power of taxation
shoulder the burden. Which is the exception?
A. tax 63. Which of the following statements is correct?
B. license fee A. Non-payment of tax and debt is ground for imprisonment
C. toll B. The power of taxation may include the power to destroy
D’ eminent domain C. Provisions in the Public Constitution on taxation are grants of power
D. Lands and buildings being used actually, directly and
57. The power of state to enact laws in relation to persons and exclusively for religious and charitable purposes by churches
property as may promote public health, public morals, andcharitable institutions are exempt from income and
public safety and the general welfare of the people. property taxes.
A. power of eminent domain
B. police power 64. The following statements are correct. Which is the exception?
C. power of taxation A. The rule of taxation shall be uniform and equitable
D. people power B. Taxation may be used to implement the police power of the state
C. Police power is superior to the non-impairment clause of the
58. The following are similarities of the inherent power of taxation,
constitution
eminent domain and police power except one
D. The salary of the justices of the Supreme Court are exempt from
A. Are necessary attributes of sovereignty
income tax
B. Interferes with private rights and property
 ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION

65. Statement 1: An Executive order by the President of the 73. This is A demand of ownership
Philippines directing the Commission on Higher Education to A. License fee
regulate the operation of review centers is a valid exercise B. Tax
of power. C. Toll
Statement 2: Construction of a church building is exempt from the D. Franchise
payment of building permit fees because the constitution provide
that churches are exempt from property taxes. 74. One of the following is not a characteristic of a special
Which of the above statements is true? assessment/levy
A. Statement 1 only A. It has special application only to a particular time and place.
B. Statement 2 only B. It is levied only on land
C. Neither statements C. May be levied on business
D. Both statements D. Based wholly on benefits

66. Statement 1: The Congress can enact tax laws even in the 75. Which statement is wrong?
absence of a constitutional provision granting said bodythe A. A tax is a demand of sovereignty
power of tax. B. A toll is demand of ownership
Statement 2: A tax may be validly imposed in the exercise of police power C. A special levy is a tax
and not the power of tax. D. Customs duty is a tax
A. False, False
B. False, True 76. Which of the following is not a characteristic of debt?
C. True, True A. Generally arises from contract
D. True, False B. Payable only in money
C. Assignable
67. In this power of the State, the person who is parting with his money D. Imprisonment is not a sanction for non-payment
or property is presumed to receive a benefit
A. Taxation 77. All funds or income derived by the government om any other source
B. Police power A. Tax
C. Eminent domain B. Customs duty
D. Forfeiture power C. Revenue
D. Ordinary revenue
68. Which of the following inherent powers of the
government is inferior to the non-impairment 78. Which of the following constitute objectionable double taxation?
clause of theconstitution? A. A license fee and a tax imposed on the same business or occupation
A. Taxation for selling the same articles.
B. Police power B. A tax imposed both on the occupation of fishing and on fishpond
C. Eminent domain operation
D. None C. Persons engaged in leasing or selling real property are subject to
real estate dealers’ tax and their sales are also subjectto 10%
69. Tax as distinguished from license fee VAT
A. Non-payment does not necessarily render the business illegal D. A tax of 1% is imposed for bank reserve deficiency while a
B. a regulatory measure penalty of 1/10 of 1% is also imposed as a consequence of
C. Imposed in the exercise of police power such reserve.
D. Limited to cover cost of regulation
79. Which of the following is not an element of direct duplicate
70. The distinction of a tax from permit or license fee is that a tax is taxation which is violative of the equal protection and
A. Imposed for regulation uniformity clauses in the constitution?
B. One which involves exercise of police power A. Same property is taxed twice
C. One in which there is generally no limit on the amount that may be B. Same taxing authority
imposed C. Same amount
D. Answer not given D. Same purpose

71. Which of the following terms describes this statement “that
the state has compensate 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
72. All of the following, except one, are characteristics of a toll
A. Demand of proprietorship
B. Compensation for the use of another’s property
C. Maybe imposed by private individuals
D. Levied for the support of the government
80. Which of the following statements is correct?
A. Tax laws can never have a retroactive effect
B. The government cannot tax agencies and instruments
C. A taxpayer’s suit can be filed by any taxpayer in any instance against
the government
D. In the Philippines, there may be double taxation.
81. 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
82. 1st Statement: Our Constitution does not prohibit double taxation
 ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION
2nd Statement: If double taxation occurs, the taxpayer may seek
relief under the uniformity clause or the equal protection
guarantee
A. 1st Statement is correct, 2nd Statement is wrong
B. 1st Statement is wrong, 2nd Statement is correct
C. Both Statements are wrong
D. Both Statements are correct
83. Double taxation in its general sense means taxing the
same subject twice during the same taxing period. In this
sense, double taxation
A. Violates substantive due process
B. Does not violate substantive due process
C. Violates the right equal protection
D. Does not violate the right equal protection
84. Your client owns a row of apartments. He complains to you
that he is being required to pay 4 kinds of taxes on thisline of
business alone. From the list given by your client, which of the
following taxes has been wrongly imposed on him?
A. Real estate tax on the land and building
B. Value-Added tax on the gross receipts from rent
C. Community tax based on the assessed value of the apartment house
D. Income tax on income from rent
85. One of the following is a false statement about double taxation.
Which is it?
A. There is no constitutional prohibition on double taxation
B. Direct duplicate taxation is a valid defense against a tax measure if it
is violative of the equal protection clause.
C. Absence of any of the elements of direct double taxation makes it
indirect duplicate taxation
D. A 20% final withholding tax on interest income on bank
deposits and a 5% gross receipts tax on banks is a direct
duplicate taxation
86. Statement 1: An ordinance imposing a tax on the manufacture
of soft drinks and another tax on the sale of the softdrinks
constitute double taxation
Statement 2: Although a deficiency assessment is not necessary, the
fact that a tax is due must first be proved before onecancan be
prosecuted for tax evasion
A. Statement 1 Only
B. Statement 2 only
C. Neither statements
D. Both statements?
89. Which of the following is not a scheme of shifting the incidence of tax
burden?
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 refuse to buy at regular
price unless it is reduced by an amount equal to the tax hewill
pay
C. Changing the term of the sale like FOB shipping point in
the Philippines to FOB destination abroad, so that the title
passes abroad instead in the Philippines
D. The manufacturer transfers the sales tax to the distributor,
then in turn to the wholesaler, to the retailer and finally to the
consumer.
90. The reduction in the selling price of income-producing
property by an amount equal to the capitalized value of the
future taxes that may be paid by the purchaser
A. Shifting
B. Capitalization
C. Transformation
D. Tax exemption
91. The method by which the manufacturer or producer
upon whom the taxes imposed pays the tax and strives
torecover such expense through lower production ost
without sacrificing quality of his product.
A. Shifting
B. Capitalization
C. Transformation
D. Tax exemption
92. The grant of immunity to particular persons or corporation or
to persons or corporations of a particular class from atax which
persons and corporations generally within the same taxing
district are obliged to pay.
A. Tax exemption
B. Tax evasion
C. Tax avoidance
D. Tax amnesty
93. Which of the following are not usually imposed when there is tax
amnesty?
A. Civil criminal and administrative penalties
B. Civil and criminal penalties
C. Civil and administrative penalties
D. Criminal and administrative penalties

87. Mr. Alas shoes in Makati through a retail store. He pays 94. Statement 1: A BIR Ruling issued by a Commissioner of
the VAT on his gross sales to the BIR and the municipal Internal Revenue which grants tax exemption would createa
license tax based on the same gross sales to the City of perpetual exemption in favor of the taxpayer.
Makati. He comes to you for advice because he thinks he Statement 2: A tax exemption may be withdrawn anytime at the pleasure
is subjected to double taxation. of the taxing authority.
What advice will you give him? A. Statement 1 only
A. Yes, there is double taxation and it is oppressive B. Statements 1 & 2
B. The City of Makati does not have this power. C. Statement 2 only
C. Yes, there is double taxation and it is illegal in the Philippines D. Neither of them
D. Double taxation is allowed where one tax is imposed by the national
government and the other by the local government. 95. It is also known as tax dodging
A. Tax exemption
88. Transfer of the tax burden by one whom the tax is assessed to B. Tax evasion
another C. Tax avoidance
A. Shifting D. Transformation
B. apitalization
C. Transformation 96. It is otherwise known as tax minimization
D. Tax exemption A. Tax exemption
B. Tax evasion
 ASSESSMENT MATERIAL – CHAP 1 GENERAL PRINCIPLES OF TAXATION
C. Tax avoidance
D. Transformation

97. Which of the following statements constitute tax avoidance?

A. Deliberate failure of a taxpayer to pay the taxes due to the
government
B. Connotes fraud through the use of pretenses and forbidden devices to
lessen or defeat taxes
C. Punishable by law
D. Maybe contrary to the intent of the legislature but nevertheless do not
violate the law.

98. In case of ambiguity, tax laws shall be interpreted

A. Strictly against the taxpayer
B. Strictly against the government
C. Liberally in favor of the taxpayer
D. Liberally against the government