H1 Taxation Review

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
2. This theory underscores that taxes are indispensable to the existence of the state.
a. Doctrine of equitable recoupment
b. The lifeblood doctrine
c. The benefit received theory
d. The Holmes Doctrine
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
4. The income effect of taxation is exhibited in
a. Forward shifting of tax
b. Value added tax
c. Percentage taxes
d. Transformation
5. That tax laws should be certain and consider the taxpayer's ability to pay denotes
a. Fiscal adequacy
b. Administrative feasibility
c. Theoretical justice
d. Compatibility with economic objectives
6. What is the theory of taxation?
a. Necessity
b. Constitutionality
c. reciprocal duties of support and protection
d. public purpose
7. What is the basis of taxation?
a. Constitutionality
b. public purpose
c. necessity
d. reciprocal duties of support and protection
8. Which of the following inappropriately describe the nature of taxation?
a. inherent in sovereignty
b. essentially a legislative function
a. C. subject to inherent and constitutional limitation
c. generally for public purpose
9. I. Forward Shifting will result in increase prices
II. Tax evasion is also known as tax dodging
a. I is correct
b. II is correct
c. I and II are correct
d. I and II are not correct
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
b. onward shifting
c. backward shifting
d. transformation
11. The point in which tax is levied is called?
a. Impact of taxation
b. Situs of taxation
c. Incidence of taxation
d. Assessment
12. When the impact and incidence of taxation are merged into the statutory taxpayer, the tax is
called?
a. personal tax
b. direct tax
c. indirect las
d. national tax
13. The following are inherent limitation on the power to tax. Which is the exception?
a. Territoriality of taxes
b. Legislative in character
c. Public purpose
d. Non-appropriation for religious purpose
14. Which of the following is an administrative act in taxation?
a. Collection of taxes
b. Firing the rate of the tax
c. Determination of the subject of the tax
d. Determination of the purpose of the tax
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.
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 or B
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
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 cooperative d. Manufacturing business
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 b. II is true
c. I and II are true d. I and II are not true
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
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
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
23. Select the incorrect Statement.
a. since just compensation is involved, eminent domain mises 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
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
25. Which is not a legislative act?
a. Assessment of the tax b. setting the amount of the tax
C. determination of the subject of the tax d. determining the purpose of the tax
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
28. Agreement among nation to lessen tax burden of their respective subject is called:
a. Reciprocity
b. international comity
c. territoriality
d. tax minimization
29. I. No one shall be imprisoned for non-payment of tax.
II. Double taxation is not prohibited by the Constitution.
a. a. I is true c. I and II are true
b. b. II is true d. I and II are not true
30. The constitutional exemption of religious or charitable institution refers only to:
a. a. real property tax C. real property tax and income tax
b. b. income tax d. business tax
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. a. Equity c. due process
b. b. Uniformity d equal protection clause
32. 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 not incur a deficit
c. ensure approval of all tax bills prior to becoming tax laws
d. unethical lobbying in the lawmaking body
33. 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
34. 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 goverment
c. tax statutes are construed against the government in case of doubt
d. taxes should be collected only for public improvement
35. 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
36. 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 in
personal tax aside from his basic tax of P5. If Mr. Sorotski intentionally disregard to pay his total
personal tax, which of the following is correct?
a. Mc. Sorotski can be imprisoned for non-payment of the P5 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 personal tax, he cannot be imprisoned.
d. Non-payment of the additional tax could cause imprisonment.
37. DEF Shipping Lines operates a fleet of ship from Metro Manila to Zambonga. DEF was exempted
from payments of the franchise bas 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, can't be revoke if it prejudices the
taxpayer
d. The new law is valid since tax is dictated by the needs of the government.
38. The Constitutional exemption of religious or charitable institutions refers only to
a. Real property tax c. Property tax and income tax
b. lncome tax d. Business tax
39. The Constitutional exemption of non-stock, non-profit educational institutions refers to
a. Real property tax c. Property tax and income tax
b. Income tax d. Business tax
40. Which of the following is violative of the principle of non-delegation?
 a. Requiring that legislative enactment must exclusively pertain to Congress
b. Authorizing the President to fix the amount of impost on imported and exported
commodities
c. Authorizing certain private corporation to collect taxes
d. Allowing the Secretary of Finance and the BIR to issue regulation or rulings which go beyond
the scope of a tax law
41. Which of the following violates Constitutional provisions?
a. Payment of salaries to priests or religious ministers employed by the Armed Forces of the
Philippines
b. Imposing tax on properties of religious institutions which are not directly and exclusively
used for religious purposes
c. Imposition of license for the sale of religious literature
d. Authorizing the President of the Philippines to fix the rates of tariffs or imposts
42. In order to phase-out a huge deficit, the President of the Philippines passed a law offering all
taxpayers with previous tax delinquency to pay a minimum tax in exchange for relief from tax
assessment in the period of delinquency. Is this a valid exercise of taxation power?
a. Yes, because the measure adopted is grounded upon necessity.
b. Yes, because the President is merely exercising his presidential discretion
c. No, because the power of taxation is non-delegated
d. No, because only the Department of Finance can issue such ruling.
43. Concerned with increasing unemployment rates in the country, the President of the Philippines
encouraged the Philippine Senate to pass a law granting special tax privileges to foreign investors
who will establish businesses in the country. The Senate accordingly drafted the bill and passed to
Congress for approval.
Is this valid exercise of taxation power?
a. a Yes. It is the discretion of the President to adopt any measures he deemed necessary to
alleviate poor conditions in the country.
b. Yes. Any means beneficial to the public interest should be given optimum priority.
c. Yes. The President's proposal will have to be finally approved and passed by the legislature.
The rule on non delegation of taxation would not be violated.
d. No. Tax bills shall originate from the house of Representatives.
44. is the only practicing lung transplant specialist in Baguio City. The City Government of Baguio
passed a local ordinance subjecting the practice of lung transplant to 2% tax based on receipts. Ram
objected claiming that other transplant specialists in other regions of the country are not subjected
to tax.
Is Ram's contention valid?
a. Yes, because the rule of taxation should be uniform and equitably enforced
b. Yes, because Ram is the only one subject Other practitioner who would later practice would
not be covered by the ordinance.
c. No, because the ordinance would cover all transplant specialist who would practice in
Baguio City. The uniformity rule would not be violated.
d. No, because subjecting the new industry to taxation would hamper economic growth.
45. With the country under incessant shortage of sugar, the Philippine Congress enacted a law
providing tax exemptions and incentives to cane farmers without at the same time granting tax
exemptions to rice farmers who produce the staple food of the Philippines. Is the new law valid?
 a. Yes, since there is a valid classification of the taxpayers who would be exempted from tax.
b. Yes, since sugar is more important than dice.
c. No, since the grant of exemption is construed in favor of taxpayers.
d. No, because there is no uniformity in the grant of tax exemption.
46. Congress passed a law subjecting government-owned and controlled corporations (GOCCs) to
income tax. Is the law valid?
a. Yes, because all government agencies and instrumentalities are subject to tax.
b. Yes, because GOCCs are not government agencies and are essentially commercial in nature.
a. C. No, because government agencies are exempt. This would pose a violation of the equality
clause in the constitution.
c. No, because GOCCs are constitutionally exempted from paying taxes.
47. An educational institution operated by a religious organization was being required by a local
government to pay real property tax. Is the assessment valid?
a. Yes, with respect to all properties held by such educational institution.
b. Yes, with respect to properties not actually devoted to educational purposes.
b. C. No, with respect to any properties held by such educational institution.
c. No, with respect to properties not actually devoted to educational purposes.
48. The Philippine Congress enacted a law requiring foreign banks to withhold taxes earned by
Filipino residents in their country and to remit the same to the Philippine government. Is this a valid
exercise of taxation power?
a. Yes, because foreign banks are within the territorial jurisdiction of the Philippines.
b. Yes, the Philippines can enforce tax requirements to subjects of foreign sovereignty even if
they are outside the country.
c. No, as this leads to encroachment of foreign sovereignty.
d. No, this is prohibited by the Constitution.
49. Which of the following normally pays real property tax?
a. Bantay Bata, a non-profit charitable institution
b. Jesus Crusade movement, a religious institution
c. University of Pangasinan, a private proprietary educational institution
d. AM Property Holdings, a registered property development company
50. Tar exemption bills are approved by
a. Majority of all members of Congress
b. Solely by the President of the Republic
c. 2/3 of all members of Congress
d. Majority of the representatives constituting a quorum
51. The Japanese government invested P100,000,000 in a Philippine local bank and earned
P10,000,000 interest. Which is correct?
a. The income is exempt on grounds of territoriality.
b. The income is exempt due to international comity.
c. The income is subject to tax on the basis of sovereignty.
d. The income is subject to tax because the income is earned within the Philippines.
52. 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
53. The fundamental rule to taxation that the property of one county may not be taxed by another
country is known as
a. International law c. Reciprocity
b. International comity d. International limitation
54. The City of Manila, claiming that it can impose taxes under the Local Government Code, imposed
a tax on banks (in addition to percentage tax on banks imposed in the National Internal Revenue
Code). The banks within the City of Manila objected for the various reasons given below. Which
would justify the objection of the banks?
a. a. The power of taxation cannot be delegated c. Uniformity in taxation
b. b. The rule of double taxation d. None of these
55. Some franchise holders who are paying the franchise tax are being required by an amendatory
law to pay the value added tax, while others remain subject to franchise tax. Which of the following
provisions makes the law unconstitutional?
a. No law shall be passed impairing the obligations of contract
b. The rule of taxation shall be uniform
c. No person shall be deprived of property without due process of law
d. None of the above.
56. Which of the following cases constitute an objectionable double taxation?
a. A license fee and a tax imposed on the same business or occupation for selling the same
articles.
b. A tax imposed both on the occupation of fishing and fishpond operation.
c. A person engaged in leasing or selling real property are subject to income tax on their
income and their sales are also subject to 12% VAT.
d. A tax of 1% is imposed for bank reserve deficiency while penalty of /2 of 1% a day is also
imposed as consequence of such reserve deficiency.
57. A taxpayer who had gross receipts derived from business in the preceding year did not declare it
when he paid the poll tax. He paid only the basic and tax and did not pay the additional community
tax based on gross receipts. Will he be imprisoned?
a. No. No person shall be imprisoned for non-payment of poll tax.
b. Yes. This is a case of tax evasion. Tax evasion is a criminal offense.
c. No. Paying the basic poll tax is enough. The additional poll tax is discretionary.
d. Yes. Non-payment of poll tax is punishable by imprisonment.
58. All forms of tax exemptions can be revoked except tax exemption based on
I. Constitution II. Contract III. Law
a. I only c. I and II only
b. II only d. I, II and III
59. License fee levied on the sale of bibles and other religious literature is violative of
a. Non-infringement of religious freedom
b. No appropriation for religious purposes
c. Exemption of religious, charitable or educational entities, non-profit cemeteries and
churches from property taxation.
d. Exemption of revenues and assets of non-stock, non-profit educational institution and
donations for educational purpose from taxes and duties.
60. The test of exemption of real properties owned by religious or charitable entities from real
property taxes is
a. Usage c. Location
b. Ownership d. Either ownership of location
61. A person made several misrepresentations in securing a loan despite his clear inability to repay
the same. When he defaulted, the creditor filed for legal action. Can he be imprisoned?
a. No. Non-payment of debt would not lead to imprisonment.
b. Yes. This is estafa, a criminal offense subject to imprisonment.
a. C. No. Non-payment of debt is a civil, rather than a criminal case.
b. d Yes. One can be imprisoned for non-payment of tax.
62. Which of the following is not legally tenable in refusing to pay a tax imposition?
a. Violation of taxpayer's right of due process of law.
b. The taxing authority has no tax jurisdiction.
c. The prescriptive period of assessment has elapsed.
d. That there is no benefit that can be derived from the tax.
63. A law was passed by Congress which granted tax amnesty to those who have no paid income tax
for a certain year without at the same time providing for the refund of taxes to whose who have
already paid them. The law is:
a. Valid because there is a valid classification.
b. Not valid because those who did not pay their taxes are favored over those who have paid
their taxes.
c. Valid because it was Congress who passed the law and it did not improperly delegate the
power to tax.
d. Not valid because only the President with the approval of Congress may grant amnesty
64. Which of the following forms of escapes to taxation will more likely to result in direct loss of
revenue government?
a. Shifting c. transformation
b. Capitalization d. tax exemption
65. 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.
66. 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.
67. 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
68. 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 only frequently available.
d. Tas condonation operates on the whole tax due of the assessed tax and not only to the
unpaid portion.

End of handout