TAXATION 1 – Income Taxation

General Principles of Taxation

1. Taxation as distinguished from police power and power of eminent domain.

A. Property is taken to promote the general welfare.
B. Maybe exercised only by the government.
C. Operates upon the whole citizenry.
D. There is generally no limit as to the amount that may be imposed.

2. The following are constitutional limitations, except

A. No imprisonment for non-payment of poll tax.
B. Non-impairment of the obligation of contracts.
C. Rule of uniformity and equity in taxation.
D. Exemption from income tax of charitable institutions, cemeteries, churches, personage or
convents appurtenant thereto, as well as all lands, buildings and improvements actually, directly
and exclusively used for religious, charitable and educational purposes.

3. Which of the following statements is correct?

A. The President is authorized to increase or decrease national internal revenue tax rates.
B. One of the nature of taxation is the reciprocal duties of protection and support between
the state and subjects thereof.
C. Every sovereign government has the inherent power to tax.
D. Income tax in an indirect tax.

4. A tax must be imposed for public purpose. Which of the following is not a public purpose?
A. National defense
B. Public education
C. Improvement of the sugar and coconut industries.
D. Improvement of a subdivision road.

7. It is the privilege of not being imposed a financial obligation to which others are subject.
A. Tax incentive
B. Tax exemption
C. Tax amnesty
D. Tax credit

8. As to scope of the legislative power to tax, which is not correct?

A. Where there are no constitutional restrictions, and provided the subjects are within the
territorial jurisdiction of the state, Congress has unlimited discretion as to the persons, property
or occupations to be taxed.
B. In the absence of any constitutional prohibition, Congress has the right to levy a tax of any
amount it sees fit.
C. The discretion of Congress in imposing taxes extends to the mode, method or kind of tax,unless
restricted by the constitution.
D. The sole arbiter of the purpose or which taxes shall be levied is Congress, provided the purpose
is public and the courts may not review the levy of the tax to determine whether or not the
purpose is public.

10. Which of the following is not a determinant of the place of taxation?

A. Source of the income
B. Citizenship of the taxpayer
C. Residence of the taxpayer
D. Amount of tax to be imposed

11. Which of the following statements is not correct?

A. An inherent limitation of taxation may be disregarded by the application of a constitutional
limitation.
B. The property of an educational institution operated by a religious order is exempt from property
tax, but its income is subject to income tax.
C. The prohibition of delegation by the state of the power of taxation will still allow the
BIR to modify the rules in time for filing of returns and payment of taxes.
D. The power of taxation is shared by the legislative and executive departments of the
government.

12. Statement 1 – The point on which tax is originally imposed is impact of taxation.
Statement 2 – Eminent domain is inferior to non-impairment clause of the constitution.
Statement 3 – As a rule, taxes are subject to set-off or compensation.
Statement 4 – As a rule, provisions on the validity of tax exemptions are resolved liberally in favor
of the taxpayer.

Statement 1- Statement 2 - Statement 3 - Statement 4

A. True – False – False – True
B. False – True – True – False
C. True – True – False – False
D. False – False – True – True

15. This is an inherent limitation on the power of taxation.

A. Rule on uniformity and equity in taxation.
B. Due process of law and equal protection of the laws.
C. Non-impairment of the jurisdiction of the Supreme Court in tax cases.
D. Tax must be for the public purpose

16. This is a constitutional limitation on the power of taxation.

A. Tax laws must be applied within the territorial jurisdiction of the state.
B. Exemption of government agencies and instrumentalities from taxation.
C. No appropriation of public money for religious purposes.
D. Power to tax cannot be delegated to private persons or entities.

17. They exist independent of the constitution being fundamental powers of the state, except
A. Power of taxation C. Power of imminent domain
B. Police power D. Power of recall

18. The power to acquire private property upon payment of just compensation for public purpose
A. Power of taxation C. Power of imminent domain
B. Police power D. Power of recall

19. The power to regulate liberty and property to promote the general welfare.
A. Power of taxation C. Power of imminent domain
B. Police power D. Power of recall

20. The power to demand proportionate contributions from persons and property to defray the
expenses of the government.
A. Power of taxation C. Power of imminent domain
B. Police power D. Power of recall

27.The following are the nature of taxation, except

A. Inherent in sovereignty
B. Essentially legislative in character
C. Subject to inherent and constitutional limitation
D. Subject to approval by the people.

28. It literally means “place of taxation”; the country that has the power and jurisdiction to levy and
collect the tax.
A. Basis of taxation C. Scope of taxation
B. Situs of taxation D. Theory of taxation

29. The existence of the government is a necessity and that the state has the right to compel all
individuals and property within its limits to contribute
A. Basis of taxation C. Scope of taxation
B. Situs of taxation D. Theory of taxation

30. The reciprocal duties of support and protection between the people and the government.
A. Basis of taxation C. Scope of taxation
B. Situs of taxation D. Theory of taxation

31. Subject to inherent and constitutional limitations, the power of taxation is regarded as supreme,
plenary, unlimited and comprehensive.
A. Basis of taxation C. Scope of taxation
B. Situs of taxation D. Theory of taxation

33. The levying or imposition of tax and the collection of the tax are processes which constitute the
taxation system.
A. Basis of taxation C. Nature of taxation
B. Aspects of taxation D. Theory of taxation

36. An escape from taxation where the tax burden is transferred by the one on whom the tax is
imposed or assessed to another.
A. Shifting C. Transformation
B. Exemption D. Capitalization

37. An escape from taxation where the producer or manufacturer pays the tax and endeavors to
recoup himself by improving his process of production thereby turning out his units of products at
a lower cost.
A. Shifting C. Transformation
B. Exemption D. Capitalization

38. An escape from taxation where there is a reduction in the price of the taxed object equal to the
capitalized value of future taxes which the taxpayer expects to be called upon to pay.
A. Shifting C. Transformation
B. Exemption D. Capitalization

39. The use of illegal or fraudulent means to avoid or defeat the payment of tax.
A. Exemption C. Avoidance
B. Shifting D. Evasion

40. The use of legal or permissible means to minimize or avoid taxes.

A. Exemption C. Avoidance
B. Shifting D. Evasion

41. Synonymous to tax evasion.

A. Tax dodging C. Tax exemption
B. Tax minimization D. Tax evasion

42. Synonymous to tax avoidance.

A. Tax dodging C. Tax exemption
B. Tax minimization D. Tax evasion

57. The strongest of all inherent powers of the state because without it, the government can neither
survive nor dispense any of its other powers and functions effectively.
A. Police Power C. Power of Taxation
B. Power of Eminent Domain D. Power of Recall

58. This power is superior to the non-impairment clause and is broader in application because it is
a power to make and implement laws.
A. Power of Taxation C. Power of Eminent Domain
B. Power of Recall D. Police Power

59. Which of the following statements is not correct?

A. An inherent limitation of taxation may be disregarded by the application of a constitutional
limitation.
B. Income tax liabilities shall be paid by the inhabitants even if foreign invaders occupy our country.
C. Taxes may be imposed retroactively by law, but unless so expressed by such law, these taxes
must only be imposed prospectively.
D. Tax laws are either political or penal in nature.
Answers:

1. D 31. C
2. D 32. D
3. C 33. B
4. D 34. C
5. A 35. C
6. B 36. A
7. B 37. C
8. D 38. D
9. A 39. D
10. D 40. C
11 C 41. A
12. C 42. B
13. D 43. C
14. C 44. D
15. D 45. B
16. C 46. A
17. D 47. B
18. C 48. C
19. B 49. A
20. A 50. B
21. D 51. A
22. B 52. B
23. A 53. A
24. C 54. C
25. D 55. B
26. C 56. D
27. D 57. C
28. B 58. D
29. D 59. D
30. A