Exam Drill Problems:

1. The primary purpose of taxation is:

a. To enforce contribution from its subject for private purpose
b. To raise revenue for the government
c. To achieve economic and social stability
d. To regulate the conduct of business or profession
b

2. This theory underscores that taxes are indispensable to the existence of the
state.
a. Doctrine of equitable recoupment c. The benefit received theory
b. The lifeblood doctrine d. The Holmes Doctrine
b

3. Select the correct statement.

a. The benefit received theory explains that the government is obliged to serve
the people since it is benefiting from the tax collection from its subjects
b. The lifeblood theory underscores that taxation is the most superior power of
the state
c. The police power of the state is superior to the non-impairment clause of the
Constitution .
d. The power of taxation is superior to the non-impairment clause of the
Constitution
c

4. The income effect of taxation is exhibited in

a. Forward shifting of tax c. Percentage taxes
b. Value added tax d. Transformation
d

5. That tax laws should be certain and consider the taxpayers ability to pay
denotes
a. Fiscal adequacy c. Theoretical justice
b. Administrative feasibility d. Compatibility with economic
objectives
c

6. What is the theory of taxation?

a. Necessity c. reciprocal duties of support and
protection
b. Constitutionality d. public purpose
c

7. What is the basis of taxation?

a. Constitutionality c. necessity
b. public purpose d. reciprocal duties of support and
protection
c

8. Which of the following inappropriately describe the nature of taxation?

a. inherent in sovereignty c. subject to inherent and
constitutional limitation
b. essentially a legislative function d. generally for public purpose
a

9. I. Forward Shifting will result in increase prices

II. Tax evasion is also known as tax dodging
a. I is correct c. I and II are correct
b. II is correct d. I and II are not correct
c

10. When tax is recovered by the manufacturer or producer by finding out means
of improvement in production so as savings would compensate for taxes, this is
known as?
a. Capitalization c. backward shifting
b. onward shifting d. transformation
d

11. The point in which tax is levied is called?

a. Impact of taxation c. Incidence of taxation
b. Situs of taxation d. Assessment
a

12. When the impact and incidence of taxation are merged into the statutory
taxpayer, the tax is called?
a. personal tax c. indirect tax
b. direct tax d. national tax
c

13. The following are inherent limitation on the power to tax. Which is the
exception?
a. Territoriality of taxes c. Public purpose
b. Legislative in character d. Non-appropriation for
religious purpose
d

14. Which of the following is an administrative act in taxation?

a. Collection of taxes c. Determination of the subject of the
tax
b. Fixing the rate of the tax d. Determination of the purpose of the
tax
a

15. Select the correct statement.

a. The substitution effect makes people economically efficient since the impact
of the tax is spread forward to the consumers.
b. Only taxation and eminent domain presupposes a form compensation when
exercised by the government since police power merely involves confiscation.
c. Any tax laws which violate the principles of a sound tax system renders itself
unconstitutional.
d. Taxation means the apportionment of the costs of the government among
those who are benefited from its existence.
d

16. Select the correct statement.

A. Since taxation presupposes an equivalent form of compensation, there should
be a direct and proximate advantage received by any taxpayer before he could be
required to pay tax.
B. Compensation under police power is the intangible feeling of contribution to
the general welfare of the people.
a. A c. Both A and B
b. B d. Neither A nor B
d

17. Public improvement is a requisite to the exercise of which power of the state?
a. Police power c. Eminent domain
b. Taxation d. Eminent domain and taxation
d

18. Public utility entities may in some circumstance exercise the power of
eminent domain. Which of the following is not a public utility?
a. Electric cooperatives c. Telecommunication business
b. Water cooperatives d. Manufacturing business
d

19. I. Police power and the power of taxation are exercised primarily by the
legislature but not eminent domain
II. Taxation and eminent domain interferes with private right and property but not
with police power
a. I is true c. I and II are true
b. II is true d. I and II are not true
d

20. Select the incorrect statement.

a. the power of eminent domain may be exercised by private entities
b. by police power, the property taken is destroyed
c. by eminent domain, the property taken is destroyed
d. eminent domain and taxation affects only property rights
a

21. The inherent powers of the state are similar in the following respect, except?
a. inherent to the existence of the state
b. exercisable without the need for an express constitutional grant
c. all affects property rights
d. exercised primarily by the legislature
c

22. The following statement correctly states the differences among the inherent
powers of the state, except?
a. the property taken under eminent domain and taxation are preserved but
that of police power is destroyed
b. eminent domain do not require constitutional grant but taxation being
formidable does in order to limit its exercise by the legislature
c. police power and taxation is exercised only by the government but eminent
domain may be exercised by private entities
d. Police power regulates both property and liberty; eminent domain and
taxation affects only property rights
b
23. Select the incorrect Statement.
a. since just compensation is involved, eminent domain raises money for the
government
b. once a government is established, taxation is exercisable
c. the most important of the power is taxation
d. police power is more superior than the non-impairment clause of the
Constitution
a

24. Select the correct statement

a. the provision on taxation in the Philippine Constitution are grant of power
b. the power to tax includes the power to destroy
c. when taxation is used as a tool for general and economic welfare this is
called fiscal purpose
d. sumptuary purpose of taxation is to raise funds for the government
b

25. Which is not a legislative act?

a. Assessment of the tax c. determination of the subject of the
tax
b. setting the amount of the tax d. determining the purpose of the tax
a

26. Which of the following is not an inherent limitation of the power to tax?
a. tax should be levied for public purpose
b. taxation is limited to its territorial jurisdiction
c. tax laws shall be uniform and equitable
d. exemption of government agencies and instrumentalities

27. Which of the following is not a constitutional limitation of the power to tax?
a. non-impairment of obligation or contracts
b. due process and equal protection of the law
c. non-appropriation for religious purposes
d. non-delegation of the taxing power
d

28. Agreement among nation to lessen tax burden of their respective subject is
called:
a. Reciprocity c. territoriality
b. international comity d. tax minimization
b

29. I. No one shall be imprisoned for non-payment of tax.

II. Double taxation is not prohibited by the Constitution.
a. I is true c. I and II are true
b. II is true d. I and II are not true
a

30. The constitutional exemption of religious or charitable institution refers only

to:
a. real property tax c. real property tax and income tax
b. income tax d. business tax
a

31. When a legislative body taxes persons and property, rights and privilege
under the same taxable category at the same rate, this is referred to as compliance
with the constitutional limitation of:
a. Equity c. due process
b. Uniformity d. equal protection clause
b
32. When a certain tax imposed base tax burden on the ability of the subject to
pay the tax, this is construed as complying with the inherent limitation of taxation
which is:
a. Equity c. due process
b. Uniformity d. none
a

33. The constitutional requirement for non-provision of any tax-exempt

legislation without the concurrence of the majority of all the members of Congress is
intended to prevent:
a. legislation of burdensome or oppressive tax laws
b. to ensure that the government will no incur a deficit
c. ensure approval of all tax bills prior to becoming tax laws
d. unethical lobbying in the lawmaking body
d
34. I. Taxation is the rule; exemption is the exception.
II. Taxation may be used to implement the police power of the state.
a. I is true c. I and II are true
b. II is true d. I and II are not true

35. Select the incorrect statement.

a. the power to tax includes the power to exempt
b. exemption are construed against the taxpayer and in favor of the government
c. tax statutes are construed against the government in case of doubt
d. taxes should be collected only for public improvement
a

36. This refer to the privilege or immunity from a tax burden of which others are
subjected to:
a. Exclusion c. tax holiday
b. Deduction d. reciprocity
a

37. Mr. Sorotski, is a professional practitioner as a management adviser. In

addition, he held various properties and currently engaged in diverse business
operations. As a result, he has P1,895,000.00 in personal tax aside from his basic
tax of P5.00. If Mr. Sorotski intentionally disregard to pay his total personal tax,
which of the following is correct?
a. Mr. Sorotski can be imprisoned for non-payment of the P5.00 personal tax.
b. Mr. Sorotski cannot be imprisoned for non-payment of the personal tax
because he is a professional wherein his imprisonment could cause economic loss to
the country.
c. If Mr. Sorotski pays only the P5.00 personal tax, he cannot be imprisoned.
d. Non-payment of the additional tax could cause imprisonment.
d

38. DEF Shipping Lines operates a fleet of sheep from Metro Manila to
Zambonga. DEF was exempted from payments of the franchise tax but in return it
has to transport government mails and other government correspondence to and
from Metro Manila and Zamboanga. Subsequently, a new law was passed removing
such exemptions and requiring DEF to pay the franchise tax. Which of the following
is correct?
a. The tax law is valid since the power of taxation is broad.
b. The new law is invalid being unconstitutional.
c. The new law is invalid since exemption, once given, cant be revoke if it
prejudice the taxpayer.
d. The new law is valid since tax is dictated by the needs of the government.
a

39. Wolf has many tax evasion cases. For most, he was found guilty by the
courts. Which of the following can be his sanctions?
A. Capital punishment B. Imprisonment C. Confiscation of his
properties
a. A,B; C c. B; C
b. A; C d. C only
a

40. Owl has a P5,000,000.00 tax evasion case with the BIR. BIR rendered him an
assessment but his appeal failed to meet the deadline due to his undue hesitation
to answer for the notice of assessment. As a result, the assessment became final
and demandable. Which of the following is correct?
a. Owl should be allowed an extension since the amount of the tax is highly
material so as his right for equal protection of the law will not be denied
b. Due process is not violated so long as the consideration is to be given by the
BIR.
c. Due process is not violated.
d. Owl should demand for compromise so as he will be overburdened.
b
41. The tax imposed upon the performance of an act, the enjoyment of a
privilege or engaging in a profession is known as?
a. Income tax c. Excise tax
b. License d. Transfer tax
c

42. When the determination of the amount of the tax requires an assessment of
the value of the subject of tax, this type of tax is known as?
a. proportional tax c. ad valorem tax
b. specific tax d. progressive tax
c

43. Tax as to graduation or rate include the following, except?

a. Progressive c. pro-rata
b. Proportional d. regressive
c

44. A tax base and tax rate of an imposition is shown as follows:

Income Tax Rate
 P 1,000,000.00 20%
800,000.00 30%
600,000.00 40%
This taxation scheme makes use of a?
a. progressive rate c. digressive rate
b. proportional rate d. regressive rate
a

45. Which of the following is a local tax?

a. value added tax c. other percentage taxes
b. documentary stamp tax d. real property tax
d

46. I. As a rule, taxes are not assignable.

II. Debt earns interest only when stipulated or when there is legal delay.
a. I is true c. I and II are true
b. II is true d. I and II are not true
c

47. Select the incorrect statement.

a. Tax may be unlimited in amount.
b. License make the business illegal when not paid while taxes do not.
c. Special assessment is not the liability of the person owning the property.
d. Special assessment can be imposed on building and other real right attaching
pertaining to land.
d

48. I. One of the essential characteristic of tax is its being unlimited in amount.
II. The State has complete discretion on the amount of license to be imposed after
distinguishing between useful and non-useful activity.
a. I is true c. I and II are true
b. II is true d. I and II are not true
b

49. Which of the following is correct regarding the tax table for individual taxable
income for residents and citizens?
a. the table shows purely progressive tax rates
b. the tax table is a combination of proportional and progressive tax rates
c. low income earners are subject to proportional rate while high income
earners are subject to both proportional and progressive tax rates
d. none of the above
b

50. Which of the following is not a local tax?

a. Community tax c. Tax on banks and other financial
institutions
b. Documentary stamp tax d. Business taxes, fees and charges
b

51. A license that is imposed for revenue purposes is known as?

a. A license tax c. Professional tax
b. Sin tax d. Mixed tax
a

52. Select the incorrect statement.

A. Tax is a demand of sovereignty just as toll is a demand of ownership
B. No one shall be imprisoned for non-payment of debt or poll tax
a. A c. A and B are true
b. B d. Neither A nor B
c

53. Distinguishing between tax and debt, which is assignable? Which cannot be
set-off?
a. Tax; debt c. Tax, tax
b. Debt; tax d. Debt, debt
b

54. Select the correct statement.

a. The doctrine of estoppel operates against the taxpayer, not against the
government.
b. Non-compensation or set-off violates the principle of administrative feasibility.
c. Taxes are always imprescriptible.
d. The principle of strictissimi juris simply states that exemption is the rule,
taxation is the exemption.
a

55. Which of the following is a power of the Commissioner of Internal Revenue?

a. Assessment and collection of taxes
b. Enforcement of all forfeitures, penalties and fines
c. Interpretation of the provisions of the NIRC
d. Giving effects to and administering the supervisory and police powers
conferred by the NIRC and other laws

56. Which of the following powers of the Commissioner of Internal Revenue

cannot be delegated?
a. The examination of tax return and tax due thereon
b. To refund or credit tax liabilities in certain cases
c. The power to compromise or abate any tax liability involving basic deficiency
tax of P500,000 and minor criminal violations
d. The power to reverse a ruling of first impression
b
57. The following are the limitation on the taxing power of the state. Which of
the following inherent limitation of taxation is also categorized as a constitutional
limitation?
A. Territoriality of taxation
B. Exemption of the government
C. Public purpose of taxation
D. Non-impairment of contracts
E. Non-delegation of the power to tax
a. A and B c. C and E
b. B and C d. D and E

58. Which of the following forms of escapes to taxation will more likely to result
in direct loss of revenue to the government?
a. Shifting c. transformation
b. Capitalization d. tax exemption

59. When exemption from a tax imposition is silent or not clearly stated, which
statement is true?
a. Taxation applies since exemptions are construed against the government.
b. Exemption still applies since this is exemption by omission.
c. Taxation applies since exemptions are to be construed against the taxpayer.
d. Exemption applies since obligation arising from law cannot be presumed and
hence construed against the government.

60. When the provisions of tax laws are silent as to the taxability of an item,
which is true?
a. Taxation applies since taxation is the rule, exemption is the exception.
b. Exemption applies since vague tax laws are construed against the
government.
c. Taxation applies in accordance with the Lifeblood doctrine.
d. Exemption applies since obligation arising from law is presumed; ignorance of
the law is not an excuse.
61. Which statement is correct?
A. Tax assessment are presumed to be correct and done in good faith.
B. Tax laws should not operate retrospectively.
C. Refund of taxes should earn interest since as a principle, no one shall be
enriched at the expense of another; the state should be the model of good faith
among its constituents.
a. A, B and C c. A only
b. A and B d. B and C

62. Select the incorrect statement regarding tax amnesty and condonation.
a. In tax amnesty, violators are required to pay a portion of the tax assessed.
b. When the remaining unpaid portion of the tax is condoned, the taxpayer
cannot ask for refund for the balance already paid.
c. Tax amnesty operates as a general pardon and is always not available.
d. Tax condonation operates on the whole balance of the assessed tax and not
only to the unpaid portion.