CHAPTER 1- Introduction to Consumption Taxes

MULTIPLE CHOICE- Theory Part 1

1. Which type of consumption will pay consumption tax?

a. Domestic consumption

b. Foreign consumption

c. Both domestic and foreign consumption

d. Neither domestic nor foreign consumption

2. Which is a tax upon the usage of income?

a. Savings tax

b. Investment tax

c. Consumption tax

d. Business tax

3. Which is subject to the VAT on importation?

a. Foreign consumption from resident sellers.

b. Foreign consumption from foreign sellers.

c. Domestic consumption from resident sellers.

d. Domestic consumption from foreign sellers.

4. Which is subject to business tax?

a. Foreign consumption from resident sellers.

b. Foreign consumption from foreign sellers.

c. Domestic consumption from resident sellers.

d. Domestic consumption from foreign sellers.

5. Which is an incorrect statement regarding consumption taxes?

a. They are always indirect in nature.

b. They effectively tax everyone in the state.

c. Apply only when the goods or services are destined for consumption within the Philippines.

d. Consumption taxes may encourage savings formation.

6. Which is correct regarding consumption tax?

a. It may help in the redistribution of wealth in the society.

b. It is entirely based upon the ability to pay of consumers.

c. It applies to both domestic and foreign consumption.

d. It applies only when the seller is non-resident.

7. Domestic consumption is taxable when the seller is

a. A non-resident
b. A resident
 c. Either resident or non-resident

d. Neither resident nor non-resident

8. Foreign consumption shall

a. Pay consumption tax if the seller is a resident.

b. Pay consumption tax if the seller is non-resident.

c. Not pay consumption tax if the seller is non-resident.

d. Not pay consumption tax regardless of the residency of the seller.

9. The tax on domestic consumption is referred to as

a. VAT on importation

b. Business tax

c. Either A or B

d. Neither A or B

10. The tax on domestic consumption from foreign suppliers is

a. VAT on importation

b. Business tax

c. Either A or B

d. Neither A or B

11. The tax on domestic consumption from resident suppliers is

a. VAT on importation

b. Business tax

c. Either A or B

d. Neither A or B

12. Which is not a business tax?

a. VAT on importation

b. VAT on sales

c. Percentage tax

d. Excise tax

13. The percentage tax is generally

a. 3% of sales or receipts

b. 3% of purchases

c. 3% of mark-up

d. 12% of mark-up

14. The VAT as a business tax is

a. 12% of sales or receipts
b. 12% of purchases
 c. 12% of mark-up

d. 3% of mark-up

15. The VAT on importation is

a. 12% of sales

b. 12% of purchases

c. 12% of mark-up

d. 3% of mark-up

16. Which form of consumption is tax-free?

a. Sales to a resident.

b. Sales to non-resident.

c. Importation by an importer engaged in business

d. Importation by an importer not engaged in business

17. As to incidence of tax, the VAT on importation is a form of

a. Direct tax

b. Indirect tax

c. Ad valorem tax

d. Specific tax

18. Which of these import consumption is tax free?

a. Importation from seller not engaged in trade or business

b. Importation from seller engaged in trade or business

c. Both A and B

d. Neither A nor B

19. Which importation is subject to the VAT on importation?

a. Importation by a person engaged in business

b. Importation by a person not engaged in business

c. Both A or B

d. Neither A nor B

20. Who is the statutory taxpayer to the VAT on importation?

a. Foreign seller

b. Domestic buyer

c. Both A and B

d. None of these
MULTIPLE CHOICE- Theory Part 2
1. Generally, the tax basis of business tax is
 a. Sales or receipts

b. Purchase cost

c. Either A or B

d. Both A and B

2. Who is the statutory taxpayer of business taxes?

a. The seller who must be engaged in trade or business.

b. The seller, whether or not engaged in trade or business.

c. The buyer, who must be engaged in trade or business.

d. The buyer, whether or not engaged in trade or business.

3. The economic taxpayers of consumption taxes are

a. Sellers who are engaged in trade or business.

b. Sellers, whether or not engaged in trade or business.

c. Buyers who are engaged in trade or business.

d. Buyers, whether or not engaged in trade or business.

4. What is the method used to determine the VAT due and payable?

a. Direct method

b. Indirect method

c. Tax credit method

d. Withholding method

5. Which statement is conceptually incorrect?

a. The buyer pays the consumption tax with its purchase to the seller.

b. The buyer pays the consumption tax to the government.

c. The seller pays the consumption tax to the government.

d. The seller collects consumption tax for the government.

6. Which is correct?

a. The sales to foreigners must include a business tax.

b. The sales to residents must include a business tax.

c. The purchases from abroad must include a business tax.

d. All of these.

7. The deduction from output VAT is called

a. Percentage tax

b. VAT due and payable

c. Input VAT
 d. VAT on importation
8. Which is pure form of a sales of tax?
 a. Percentage of tax

b. Value added tax

c. Both A and B

d. Neither A nor B

9. Statement 1: A business which pays VAT normally does not pay percentage tax.

Statement 2: A business which pays percentage tax also pays VAT.

Which statement is correct?

a. Statement 1

b. Statement 2

c. Both statements.

d. Neither statement.

10. Which of the following business taxes applies only for domestic consumption?

a. VAT on sales

b. Percentage tax

c. Excise tax

d. All of these

11. Excise tax is paid by

a. Sellers

b. Buyers

c. Importers or manufacturers.

d. Seller or buyer depending on who is agreed to pay the excise tax.

12. Export sale is (select the incorrect one)

a. Exempt to percentage tax

b. Exempt from VAT

c. Exempt form excise tax

d. All of these.

13. Statement 1: Excise tax is always paid together with VAT or percentage tax.

Statement 2: Excise tax is paid at the point of sale.

Which statement is false?

a. Statement 1

b. Statement 2

c. Both statements.

d. Neither statement.
14. Which is imposed with a tax of zero percent (0%)?
a. All export sales.
 b. Export sales of VAT-registered taxpayers.

c. Import sales of VAT-registered taxpayers.

d. Export sales of non-VAT registered taxpayers only.

15. Which is not subject to excise tax?

a. Sin products.

b. Non-essential commodities.

c. Food products.

d. Mineral products.

16. The tax basis of consumption tax on foreign purchase is

a. Sales or receipts.

b. Purchase costs

c. Either A or B

d. Both A and B

17. The consumption tax on domestic purchases is imposed upon the

a. Sales or receipts

b. Purchase costs

c. Either A or B

d. Both A and B

18. Technically, the excise tax on the manufacture of certain articles is payable only when the articles is
intended for

a. Domestic consumption

b. Foreign consumption

c. Both A and B

d. Neither A nor B

19. Which is correct with the VAT on importation?

a. Payable only when the importer is engaged in business

b. Payable only when the foreign seller is engaged in business.

c. Payable regardless of the purpose of the importation.

d. Payable only when the resident seller is not engaged in business.

20. The VAT on domestic sales is an example of

a. A direct tax

b. An indirect tax

c. A regulatory tax

d. A specific tax