PHILIPPINE LAW SCHOOL

Mid-Term Examination
Taxation Law Review (2023-2024)
Atty. Domingo D. Vela II

Instructions: Answer each items concisely with legal basis. A simple YES or NO answer, or a
mere restatement of the question will merit a single point only.

A. May the current Congress abolish the power to tax of local governments? (5 %)

B. Adam is the owner of a residential lot situated in Boni Avenue, Mandaluyong City. The
lot has an area of 500 sq. meters. On August 10, 2015, 100 square meters of the said
lot was expropriated by the government for road widening, for PHP 500,000.00,
representing the assessed value of said portion of the lot. From 2010 to 2015, Adam
who is a business owner, has not been paying his income tax. He is now being
assessed for the unpaid income tax amounting to PHP 350,000.00. Adam now claims
his income tax liability has already been compensated by the amount of PHP
500,000.00 which the government owes him for the expropriation of his property. Is
the contention of Adam tenable? (10%)

C. May taxes be the subject of set-off or compensation? Explain why or why not. (5%)

D. A law was enacted by Congress imposing taxes on the manila hemp due to the threat
to the industry by the imminent imposition of export taxes upon manila as provided
under the recent laws of the European Union and the United States. Section 2 of the
newly enacted tax law provide for the increase of existing tax on the manufacture of
abaca fiber and abaca ropes on a graduated basis. Meanwhile Section 3 of the la
levies on owners or persons in control of lands devoted to the cultivation and
propagation of abaca plants and ceded to others for a consideration on lease or
otherwise, a tax equivalent to the difference between money value of the rental or
consideration collected and the amount representing 12% of the assessed value of
the land. All collections made under the Act shall accrue to a special fund in the
Treasury and shall be paid out only for any and all of the purposes of helping the fiber
industry of the country.

JAS one of the affected landowners alleged that such tax is unconstitutional, and void
being levied for the aid and support of the fiber industry exclusively which in his
opinion is not a public purpose for which a tax may be constitutionally levied.
Is the contention of JAS tenable? Why or why not? (10%)

E. Explain the requirement of uniformity as a limitation in the imposition and/or

collection of taxes. (5%)

F. (a) Distinguish schedular treatment from global treatment as used in income

taxation. (5%)
 (b) To which system would you say that the method of taxation under the NIRC
belongs? (5%)

G. MP, a sitting Senator of the Philippines and a boxer by profession, went to the United
Stated for a boxing match in 2018. In said event, he won a prize money in US Dollars
equivalent to PHP 500,000,000.00. Is the prize money paid to and received by MP in
the US taxable in the Philippines? Why or why not? (10%)

H. A, YA, and LA, all lawyers formed a partnership called AYALA Law so they can practice
their profession as lawyers. For the year 2018, AYALA Law received earnings and paid
expenses among which are as follows:

Earnings: 1. Professional/legal fees

2. Cash prize received from a religious society in recognition of
the exemplary service of AYALA Law
3. Gains derived from sale of excess computers and laptops

Payments: 1. Salaries of office staff

2. Rentals for office space
3. Representation expenses incurred in meetings with clients

(a) What are the items in the abovementioned earnings which should be included in
the computation of AYALA Law’s gross income? Explain. (5%)

(b) What are the items in the abovementioned payments which may be considered as
deductions from the gross income of AYALA Law? Explain. (5%)

(c) If AYALA Law earns net income in 2018, what, if any, is the tax consequence in the
part of AYALA Law in so far as payment of income tax is concerned? What, if any, is
the tax consequence on the part of A, YA, and LA as individual partners, insofar as the
payment of income tax is concerned? (10%)

I. JUAN CORP was registered with the BIR on January 2, 2015. It has the following
Income tax payable for each year of operation:
2015 2019 2020 2021 2022
Regular Corporate
50,000 75,000 180,000 350,000 300,000
Income Tax
Minimum Corporate
75,000 150,000 205,000 230,000 350,000
Income Tax

Explain how much is the corporation’s final income tax liability for:
(a) Taxable year 2015; (5%)
(b) Taxable year 2019; (5%)
(c) Taxable year 2020; (5%)
(d) Taxable year 2021; (5%)
(e) Taxable year 2022; (5%)
(e) Can the imposition of MCIT be suspended? If yes, how? (5%)

Bonus: in what bar subject did your professor get the highest grade? (5%)