MCQs - TAX - General Principles

TAXATION
General Principles of Taxation
1. The principal purpose of taxation is

a. To encourage the growth of home industries through the proper use of tax exemptions and tax
incentives
b. To implement the police power of the state
c. The reduce excessive inequalities of wealth
d. To raise revenues for governmental needs
2. The aspects of taxation are

a. Legislative in character
b. Executive in character
c. Shared by the legislative and executive departments
d. Judicial in character
3. Taxation as distinguished from police power and power of eminent domain

a. Property is taken to promote the general welfare
b. May be 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
4. Which of the inherent powers may be exercised even by public service corporations and public
entities
a. Power of taxation c. Power of eminent domain
b. Police power d. A and C
5. Which of the following statements is correct?

a. Income tax is an indirect tax.
b. Our National Internal Revenue Laws are criminal in nature.
c. The theory of taxation states that the power of taxation is supreme, plenary, unlimited, and
comprehensive.
d. Taxation is subject to inherent and constitutional limitations.
6. 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 public purpose
7. 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
8. The power to acquire private property upon payment of just compensation for public purpose
a. a. Power of taxation c. Power of eminent domain
b. b. Police power d. Power of love
9. The power to regulate liberty and property to promote the general welfare
a. Police power c. Power of eminent domain
b. Power of taxation d. Super power rangers
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10. The tax imposed should be proportionate to the taxpayer’s ability to pay
a. Fiscal adequacy c. Administrative feasibility
b. Equality or theoretical justice d. Economic consistency
11. The sources of revenue as a whole, should be sufficient to meet the demands of public expenditures
b. Equality or theoretical justice d. Revenue generation
13. Statement 1 — The point on which a tax is originally imposed is impact of taxation
Statement 2 - Police power is superior to the 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 False
b. True True False True
c. True True False False
d. False True False False
14. Enforced proportional contributions from persons and property levied by the state by virtue of its
sovereignty for the support of the government and for all public needs
a. Toll c. Taxes
b. License fee d. Assessment
15. Persons or things belonging to the same class shall be taxed at the same rate
a. Simplicity in taxation c. Equality in taxation
b. Reciprocity in taxation d. Uniformity in taxation
16. Which is not an essential characteristic of a tax?

a. It is unlimited as to amount c. It is proportionate in character
b. It is payable in money d. It is an enforced contribution
17. Special assessment is an enforced proportional contribution from owners of land especially benefited
by the public improvement. Which one of the following is not considered as one of its characteristics?
a. It is levied on land
b. It is based on the government’s need of money to support its legitimate objectives
c. It is not a personal liability of the persons assessed
d. It is based solely on the benefit derived by the owners of the land
18. It is the privilege of not being imposed a financial obligation to which others are subject
a. Tax incentive c. Tax amnesty
b. Tax exemption d. Tax credit
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19. 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, the House of Representatives 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, if not
restricted by the constitution.
d. The sole arbiter of the purpose for which taxes shall be levied is the Commissioner of Internal
Revenue (CIR), provided the purpose is public. However, the courts may review the levy of the tax to
determine whether or not the purpose is public.
20. Which of the following is a nature of taxation?

a. The power is exercised by legislative action c. It is generally payable in money.
b. It is essentially an administrative function d. The state can exist without it.
21. The use of illegal or fraudulent means to avoid or defeat the payment of tax
a. Shifting c. Avoidance
b. Exemption d. Evasion
22. The use of legal or permissible means to minimize or avoid taxes

23. Synonymous to tax evasion

a. Tax dodging c. Tax exemption
b. Tax minimization d. Tax shield
24. Synonymous to tax avoidance

b. Tax minimization d. Tax evasion
25. In case of doubt, tax statutes are construed

a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
26. In case of doubt, tax exemptions are construed

27. In case of conflict between the Tax Code and the Philippine Accounting Standards (PAS)
a. PAS shall prevail over the Tax Code
b. Tax Code shall prevail over PAS
c. PAS and Tax Code shall be both disregarded
d. The taxpayer may choose between the PAS or the Tax Code
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28. Tax of a fixed amount imposed upon all persons residing within a specified territory without regard to
their property, income, or occupation they may be engaged in
a. Personal, poll or capitation c. Excise
b. Property d. Regressive
29. Tax imposed on. personal or real property in proportion to its value or on some other reasonable method
of apportionment
30. Tax imposed upon the performance of an act, the enjoyment of privilege or the engaging in an
occupation.
b. Property d. Progressive
31. Tax which is demanded from the person whom the law intends or desires to pay it
a. Direct b. Indirect c. Excise d. Income
32. Tax which is demanded from one person in the expectation and intention that he shall indemnify himself
at the expense of another
a. Direct b. Indirect c. Property d. Income
33. Tax which imposes a specific sum by the head or number or by some standard of weight or
measurement and which requires no assessment other than a listing or classification of the objects to be
taxed
a. Specific b. Ad-valorem c. Excise d. Income
34. Tax of a fixed proportion of the amount or value of the property with respect to which the tax is assessed
a. Specific c. Excise
b. Ad-valorem d. Percentage
35. Tax based on a fixed percentage of the amount of property, income or other basis to be taxed
a. Proportional c. Regressive
b. Progressive d. Indirect
36. Tax where the rate decreases as the tax base increases
a. Proportional b. Progressive c. Regressive d. Indirect
37. Tax where the rate increases as the tax base increases
38. Which of the following statements is not correct?

a. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute
expressly and clearly states because tax statutes should be construed strictly against the
government.
b. Tax exemptions, tax amnesty, tax condonations and their equivalent provisions are not presumed
and, when granted, are strictly construed against the taxpayer because such provisions are highly
disfavored by the government.
c. Exemptions from taxation are highly disfavored in law and he who claims tax exemption must be
able to justify his claim or right.
d. The Bureau of Internal Revenue has the duty and the exclusive power of enacting, implementing and
interpreting tax laws.
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39. 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 Greystone
40. This power is superior to the non—impairment clause and is broader in application because it is the
power to make and implement the laws.
a. Power of Taxation c. Power of Eminent Domain
b. Power of Recall d. Police Power

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
be imposed prospectively.
d. Tax laws are either political or penal in nature.
42. Which of the following is not a constitutional limitation on the Power of Taxation?
a. No person shall be deprived of life, liberty or property without due process of law.
b. No person shall be denied the equal protection of the law.
c. No person shall be imprisoned for debt or non-payment of tax.
d. No law granting any tax exemption shall be passed without the concurrence of a majority of all the
members of Congress.
43. The distinction of a tax from permit or license fee is that a tax is:
a. Imposed for regulation.
b. One which involves an exercise of police power.
c. One in which there is generally no limit on the amount that may be imposed.
d. Limited to the cost of regulation.
44. Police power as distinguished from the power of eminent domain:

a. Just compensation is received by the owner of the property.
b. May be exercised by private individuals.
c. May regulate both liberty and property
d. Property is taken by the government for public purpose.
45. A tax wherein both the impact of or the liability for the payment of the tax as well as the burden of the
tax falls on the same person.
a. Direct tax b. VAT c. Indirect tax d. Percentage tax
46. Which one of the following is not a characteristic or element of a tax?

a. It is an enforced contribution.
b. It is legislative in character.
c. It is based on the ability to pay.
d. It is payable in money or in kind.
47. Tax as distinguished from license fees:

a. Limited to cover cost of regulation.
b. A regulatory measure.
c. Non-payment does not necessarily render the business illegal
d. Imposed in the exercise of police power
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TAXATION
48. The power to impose taxes is exercised by the

a. President b. Supreme Court c. BIR d. Congress
49. One of the characteristics of internal revenue laws is that they are:
a. Criminal in nature c. Political in nature
b. Penal in nature d. Generally, prospective in application
50. Which of the following is not an example of excise tax:

a. Transfer tax b. Sales tax c. Real property tax d. Income tax
51. The following are similarities of the inherent power of taxation, eminent domain, and police power, except
one:
a. Are necessary attributes of sovereignty
b. Superior to the non-impairment clause of the constitution
c. Compensation/benefit is received
d. Are legislative in character

a. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the
state
b. The state can have the power of taxation even if the Constitution does not expressly give it the power
to tax
c. For the exercise of the power of taxation, the state can tax anything at any time
d. The provisions of taxation in the Philippine Constitution are grants of power enabling the state to
impose taxes.
53. License fee as distinguished from tax:

a. Non-payment does not necessary render the business illegal;
b. A revenue raising measure;
c. Imposed in the exercise of taxing power
d. Limited to cover cost of regulation
54. Value-added tax is an example of a:

a. Graduated tax b. Progressive tax c. Regressive tax d. Proportional tax
55. Which tax principle is described in the statement “The more income earned by the taxpayer, the more
tax he has to pay.
b. Theoretical justice/Equitability d. Inherent in sovereignty
56. One of the characteristics of a tax is that:

a. It is generally based on contract.
b. It is generally payable in money.
c. It is generally assignable.
d. It is generally subject to compensation.
57. The following are the characteristics of our internal revenue laws except:
a. Political in nature
b. Civil in nature
c. Generally prospective in application
d. May operate retrospectively if Congress so provides
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58. Which of the following statements is wrong? A revenue bill:

a. Must originate from the House of Representatives and on which same bill the Senate may propose
amendments.
b. May originate from the Senate and on which same bill the House of Representatives may propose
amendments;
c. May have a House version and a Senate version approved separately, and then consolidated, with
both houses approving the consolidation version.
d. May be recommended by the President to Congress.
59. Tax as distinguished from special assessment:

a. not a personal liability of the person assessed
b. based wholly on benefits
c. exceptional as to time and place
d. based on necessity and the purpose is to raise revenues
60. Under this basic principle of a sound tax system, the Government should not incur a deficit:
a. Theoretical justice c. Fiscal adequacy
b. Administrative feasibility d. Uniformity in taxation
61. Which of the following may not raise money for the government?
b. Police power d. License fees
62. No person shall be imprisoned for non-payment of this:

a. Excise tax b. VAT c. Income tax d. Poll tax
63. This is a demand of ownership:

a. License fee b. Tax c. Toll d. Customs duties
64. Income tax is generally regarded as

a. an excise tax
b. a tax on persons
c. a property tax
d. tax on profits
65. Which of the following is not acceptable for legally refusing to pay the tax?
a. That the right of the state to collect the tax has prescribed
b. That there is no jurisdiction to collect the tax
c. That the tax law was declared as unconstitutional
d. That there is no benefit derived from the tax
66. A law granting tax exemption requires the concurrence of

a. Majority vote of all members of Congress
b. 2/3 vote of members of Congress
c. % vote of members of Congress
d. unanimous vote of members of Congress
67. No person shall be imprisoned for debt or non-payment of a poll tax. This is a (an)
a. Inherent limitation c. International limitation
b. Constitutional limitation d. Territorial limitation
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68. The Department of Finance thru its officers entered into a contract with foreign investors, granting them
exemption from all forms of taxes to encourage investments in the Philippines. The contract is
a. Void, unless the President ratifies
b. Void, because the power to grant tax exemption is vested in Congress
c. Valid, if the President has authorized the officers to enter into such contract
d. Valid, because the purpose is to promote public welfare
69. Tax as distinguished from debt

a. no imprisonment for non-payment c. based on contract
b. may be paid in kind d. based on law
70. Congress can impose a tax at any amount and at any time shows that
a. Taxation is an inherent power of the estate
b. Taxation is essentially a legislative power
c. Taxation is a very broad power of the state
d. Taxation is based on taxpayers’ ability to pay
71. A charge imposed on land for special benefits derived resulting from public improvements
a. Tax b. Toll c. License d. Special assessment
72. Which of the following are National Internal 'Revenue Taxes?

I. Income tax III. Donor’s tax V. OPT VII. DST
II. Estate tax IV. VAT VI. Excise tax
a. I, II, III, IV
b. I, II, III, IV, V
c. I, II, III, IV, V, VI
d. I, II, III, IV, V, VI, VII
73. The three fundamental powers of the state are

I. Inherent in the state and may be exercised by the state without need of any constitutional grant.
II. Not only necessary but indispensable.
III. Methods by which the state interferes with private rights.
IV. Exercised primarily by the legislature.
a. All true c. Half true, half false
b. All false d. None of the above
74.
I. Police power regulates both liberty and property while the power of eminent domain and the power
of taxation affect only property rights.
II. Police power and the power of taxation may be exercised only by the government while the power of
eminent domain may be exercised by some private entities.
III. The property taken in police power is destroyed while the property taken under the power of eminent
domain and power of taxation is not destroyed.
IV. In the power of taxation, the compensation received is the protection of the state afforded to its
citizens; in police power, a higher standard of living is enjoyed by the citizens; and in the power of
eminent domain, a citizen receives just compensation for the property taken from him.
a. All true b. All false c. Half true d. None of the above
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75.
I. The point on which a tax is originally imposed is impact of taxation.
II. The point on which a tax burden finally rests or settles down is incidence of taxation.
III. Police power is superior to the non-impairment clause of the constitution.
IV. Power of taxation is not superior to the non-impairment clause of the constitution
76.
I. No person shall be imprisoned for debt or non-payment of tax.
II. Tax laws are civil and penal in nature because there are criminal penalties when they are violated.
III. Taxes may be collected in an unlimited amount.
IV. License fees may be collected in an unlimited amount.
a. One statement is true b. Two statements are true.
c. Three statements are true d. All statements are true.
77.
I. Tax is imposed on persons, property, and property rights.
II. Special assessment is imposed on persons, property and property rights.
III. Tax collection is a legislative act.
IV. Imposition of tax is an administrative act.
78.
I. There can only be a tax if there is a law imposing the tax.
II. The power to tax may include the power to destroy.
a. True, true b. True, false c. False, true d. False, false
79.
I. Due process of law in taxation under the constitution is a grant of power.
II. Provisions in the Philippine constitution on taxation are grants of power.
III. There may be double taxation in the Philippines.
IV. Taxation may be used to implement the police power of the state.
80.
I. License fee is a charge imposed under police power.
II. Special assessment is levied on lands only.
III. Tax is imposed regardless of public improvements.
IV. Special assessment is imposed regardless of public improvements.
81.
I. One of the essential characteristics of a tax is it is unlimited in amount.
II. A tax is generally unlimited because it is based on the needs of the state.
82. A system of taxation where the amount of revenue from indirect taxes are more than the direct taxes is
a. Progressive b. Regressive c. Proportional d. Schedular
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83. Congress passed a law which granted tax amnesty to those who have not paid their income taxes in
2010 but did not provide for the refund to those who paid. Is the law valid?
a. No, this will encourage taxpayers not to pay their taxes
b. Yes, Congress has the sole discretion of determining whom to tax
c. No, the grant of amnesty is the sole prerogative of the President
d. Yes, Congress provided for a valid classification.
84. Money collected from taxation shall not be paid to any religious dignitary EXCEPT when
a. The religious dignitary is assigned to the Philippine Army.
b. It is paid by a local government unit.
c. The payment is passed in audit by the COA.
d. It is part of a lawmaker’s pork barrel.
85. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power
to activate and operate it, resulting in its destruction?
a. Power to destroy theory c. Sumptuary theory
b. Lifeblood theory d. No money, no honey theory
86. The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is
known as
a. Assessment c. Payment
b. Levy d. Collection
87. Although the power of taxation is basically legislative in character, it is NOT the function of Congress to
a. Fix with certainty the amount of taxes
b. Collect the tax levied under the law
c. Identify who should collect the tax
d. Determine who should be subject to the tax
88. An example of a tax where the concept of progressivity finds application is the
a. Graduated income tax rates on individuals
b. Excise tax on petroleum products
c. Value-added tax on certain articles
d. Amusement tax on boxing exhibitions
89. The power to tax is the power to destroy. Is this always so?
a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory.
b. Yes. The tax collectors should enforce a tax law even if it results to the destruction of the property
rights of the taxpayer.
c. Yes. The tax laws should always be enforced because without taxes the very existence of the State
is endangered.
d. No. The Supreme Court may nullify a tax law; hence, property rights are not affected.
90. This is not an inherent limitation on the power of taxation:

a. Double taxation, though not prohibited, is disfavored.
b. Equality and uniformity in taxation
c. Public purpose of taxation
d. Territoriality
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91. Revenue regulations (RRs) are:

a. Issuances signed by the Secretary of Finance, upon recommendation of the CIR, that specify,
prescribe or define rules and regulations for the effective enforcement of the provisions of the
National Internal Revenue Code (NIRC) and related statutes.
b. Issuances. that publish pertinent and applicable portions, as well as amplifications, of laws, rules,
regulations and precedents issued by the BIR and other agencies/offices.
c. Issuances that provide directives or instructions; prescribe guidelines; and outline processes,
operations, activities, workflows, methods and procedures necessary in the implementation of
stated policies, goals, objectives, plans and programs of the Bureau in all areas of operations, except
auditing.
d. None of the above.
92. Revenue Memorandum Circulars (RMCs) are:

a. Issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of
Internal Revenue, that specify, prescribe or define rules and regulations for the effective enforcement
of the provisions of the National Internal Revenue Code (NIRC) and related statutes.
auditing.
93. Revenue Memorandum Orders (RMOs) are:

b. Issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules,
auditing.
d. None of the above
94. The following are the powers of the CIR except:

a. After a return has been filed or when no return is filed, the CIR may authorize the examination of any
taxpayer, and the assessment of the correct amount of tax.
b. The CIR has the power to issue Summons or Subpoena Duces Tecum to a taxpayer, an officer or
employee of a taxpayer, or to any person having possession of records relating to the business of a
taxpayer.
c. The CIR has the power to take the testimony of a person, under oath, that may be relevant or material
to the inquiry.
d. The CIR has the power to inquire into a taxpayer’s bank deposits in all instances.
95. What is tax mapping?

a. It is equivalent to tax assessment within the applicable reglementary periods depending on whether
the taxpayer is guilty of fraud or not.
b. It is a mere verification made by the BIR of a taxpayer’s compliance with registration and other
requirements prior to, during, and after its business operations such as the following: (a) registration
of the head office and branches; (b) payment of annual registration fee and posting of the same in
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the place of business; (c) authority to print receipts and invoices; (d) the issuance of receipts and
invoices on every sale; (e) the contents of such receipts and invoices; (1) registration of cash register
machines, point-of-sale machines, and computerized accounting systems; and (g) registration of
books of accounts.
c. This is the directory of the Revenue District Offices of the BIR with a listing of all officers and revenue
agents.
96. Dante Company is a hotel company registered as a local economic enterprise (“LEE”) of the City of
Dapitan. The company is asserting that, as an LEE owned and operated by a local government unit (“LGU”),
it should no longer be required to pay income taxes to the BIR. It argues that all revenues collected by it
must accrue exclusively to the city government of Dapitan. Is the company correct?
a. Yes. Since the company is owned by an LGU which itself is exempt from taxes imposed by the Tax
Code, the same privileges must also be accorded to it.
b. Yes. Under Section 18 of the Local Government Code, LGUs are authorized to generate their own
sources of revenues, and the allocation of the same shall accrue exclusively to them.
c. No. The company is not one of those corporations exempt from taxes under Section 30 of the Tax
Code or under any special laws. Besides, the acts of an LGU in its corporate capacity and 'for the
purpose of economic gain may be subject to tax just like any other private or government
corporation.
97. Mr. Compton sells shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR
and the municipal license tax based on the same gross sales to the City of Makati. He comes to you for
advice because he thinks he is being subjected to double taxation. What advice will you give him?
a. Yes, there is double taxation and it is progressive.
b. The City of Makati has no taxing power.
c. Yes, there is double taxation and this is illegal in the Philippines.
d. Double taxation is allowed where one tax is imposed by the national government and the other by
local government.
ANSWERS
1. The principal purpose of taxation is
a. To encourage the growth of home industries through the proper use of tax exemptions and tax
incentives
b. To implement the police power of the state
c. The reduce excessive inequalities of wealth
d. To raise revenues for governmental needs
2. The aspects of taxation are

a. Legislative in character
b. Executive in character
c. Shared by the legislative and executive departments
d. Judicial in character
3. Taxation as distinguished from police power and power of eminent domain

a. Property is taken to promote the general welfare
b. May be 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
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4. Which of the inherent powers may be exercised even by public service corporations and public
entities
b. Police power d. A and C
5. Which of the following statements is correct?

a. Income tax is an indirect tax.
b. Our National Internal Revenue Laws are criminal in nature.
c. The theory of taxation states that the power of taxation is supreme, plenary, unlimited, and
comprehensive.
d. Taxation is subject to inherent and constitutional limitations.
6. 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 public purpose
7. 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
8. The power to acquire private property upon payment of just compensation for public purpose
b. Police power d. Power of love
9. The power to regulate liberty and property to promote the general welfare
a. Police power c. Power of eminent domain
b. Power of taxation d. Super power rangers
10. The tax imposed should be proportionate to the taxpayer’s ability to pay
b. Equality or theoretical justice d. Economic consistency
11. The sources of revenue as a whole, should be sufficient to meet the demands of public expenditures
b. Equality or theoretical justice d. Revenue generation
13. Statement 1 — The point on which a tax is originally imposed is impact of taxation
Statement 2 - Police power is superior to the 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 False
b. True True False True
c. True True False False
d. False True False False
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14. Enforced proportional contributions from persons and property levied by the state by virtue of its
sovereignty for the support of the government and for all public needs
a. Toll c. Taxes
b. License fee d. Assessment
15. Persons or things belonging to the same class shall be taxed at the same rate
a. Simplicity in taxation c. Equality in taxation
b. Reciprocity in taxation d. Uniformity in taxation
16. Which is not an essential characteristic of a tax?

a. It is unlimited as to amount c. It is proportionate in character
b. It is payable in money d. It is an enforced contribution
17. Special assessment is an enforced proportional contribution from owners of land especially benefited
by the public improvement. Which one of the following is not considered as one of its characteristics?
a. It is levied on land
b. It is based on the government’s need of money to support its legitimate objectives
c. It is not a personal liability of the persons assessed
d. It is based solely on the benefit derived by the owners of the land
18. It is the privilege of not being imposed a financial obligation to which others are subject
a. Tax incentive c. Tax amnesty
b. Tax exemption d. Tax credit
19. 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, the House of Representatives 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, if not
restricted by the constitution.
d. The sole arbiter of the purpose for which taxes shall be levied is the Commissioner of Internal
Revenue (CIR), provided the purpose is public. However, the courts may review the levy of the tax to
determine whether or not the purpose is public.
20. Which of the following is a nature of taxation?

a. The power is exercised by legislative action c. It is generally payable in money.
b. It is essentially an administrative function d. The state can exist without it.
21. The use of illegal or fraudulent means to avoid or defeat the payment of tax
22. The use of legal or permissible means to minimize or avoid taxes

23. Synonymous to tax evasion

b. Tax minimization d. Tax shield
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24. Synonymous to tax avoidance

b. Tax minimization d. Tax evasion
25. In case of doubt, tax statutes are construed

26. In case of doubt, tax exemptions are construed

27. In case of conflict between the Tax Code and the Philippine Accounting Standards (PAS)
a. PAS shall prevail over the Tax Code
b. Tax Code shall prevail over PAS
c. PAS and Tax Code shall be both disregarded
d. The taxpayer may choose between the PAS or the Tax Code
28. Tax of a fixed amount imposed upon all persons residing within a specified territory without regard to
their property, income, or occupation they may be engaged in
29. Tax imposed on. personal or real property in proportion to its value or on some other reasonable method
of apportionment
30. Tax imposed upon the performance of an act, the enjoyment of privilege or the engaging in an
occupation.
b. Property d. Progressive
31. Tax which is demanded from the person whom the law intends or desires to pay it
a. Direct b. Indirect c. Excise d. Income
32. Tax which is demanded from one person in the expectation and intention that he shall indemnify himself
at the expense of another
a. Direct b. Indirect c. Property d. Income
33. Tax which imposes a specific sum by the head or number or by some standard of weight or
measurement and which requires no assessment other than a listing or classification of the objects to be
taxed
a. Specific b. Ad-valorem c. Excise d. Income
34. Tax of a fixed proportion of the amount or value of the property with respect to which the tax is assessed
a. Specific c. Excise
b. Ad-valorem d. Percentage
Page 15 of 24
TAXATION
35. Tax based on a fixed percentage of the amount of property, income or other basis to be taxed
a. Proportional c. Regressive
b. Progressive d. Indirect
36. Tax where the rate decreases as the tax base increases
37. Tax where the rate increases as the tax base increases

a. Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute
expressly and clearly states because tax statutes should be construed strictly against the
government.
b. Tax exemptions, tax amnesty, tax condonations and their equivalent provisions are not presumed
and, when granted, are strictly construed against the taxpayer because such provisions are highly
disfavored by the government.
c. Exemptions from taxation are highly disfavored in law and he who claims tax exemption must be
able to justify his claim or right.
d. The Bureau of Internal Revenue has the duty and the exclusive power of enacting, implementing and
interpreting tax laws.
39. 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 Greystone
40. This power is superior to the non—impairment clause and is broader in application because it is the
power to make and implement the laws.
a. a. Power of Taxation c. Power of Eminent Domain
b. b. Power of Recall d. Police Power

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
be imposed prospectively.
d. Tax laws are either political or penal in nature.
42. Which of the following is not a constitutional limitation on the Power of Taxation?
a. No person shall be deprived of life, liberty or property without due process of law.
b. No person shall be denied the equal protection of the law.
c. No person shall be imprisoned for debt or non-payment of tax.
d. No law granting any tax exemption shall be passed without the concurrence of a majority of all the
members of Congress.
43. The distinction of a tax from permit or license fee is that a tax is:
a. Imposed for regulation.
b. One which involves an exercise of police power.
c. One in which there is generally no limit on the amount that may be imposed.
d. Limited to the cost of regulation.
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TAXATION
44. Police power as distinguished from the power of eminent domain:

a. Just compensation is received by the owner of the property.
b. May be exercised by private individuals.
c. May regulate both liberty and property
d. Property is taken by the government for public purpose.
45. A tax wherein both the impact of or the liability for the payment of the tax as well as the burden of the
tax falls on the same person.
a. Direct tax b. VAT c. Indirect tax d. Percentage tax
46. Which one of the following is not a characteristic or element of a tax?

a. It is an enforced contribution.
b. It is legislative in character.
c. It is based on the ability to pay.
d. It is payable in money or in kind.
47. Tax as distinguished from license fees:

a. Limited to cover cost of regulation.
b. A regulatory measure.
c. Non-payment does not necessarily render the business illegal
d. Imposed in the exercise of police power
48. The power to impose taxes is exercised by the

a. President b. Supreme Court c. BIR d. Congress
49. One of the characteristics of internal revenue laws is that they are:
a. Criminal in nature c. Political in nature
b. Penal in nature d. Generally, prospective in application
50. Which of the following is not an example of excise tax:

a. Transfer tax b. Sales tax c. Real property tax d. Income tax
51. The following are similarities of the inherent power of taxation, eminent domain, and police power, except
one:
a. Are necessary attributes of sovereignty
b. Superior to the non-impairment clause of the constitution
c. Compensation/benefit is received
d. Are legislative in character

a. Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the
state
b. The state can have the power of taxation even if the Constitution does not expressly give it the power
to tax
c. For the exercise of the power of taxation, the state can tax anything at any time
d. The provisions of taxation in the Philippine Constitution are grants of power enabling the state to
impose taxes.
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TAXATION
53. License fee as distinguished from tax:

a. Non-payment does not necessary render the business illegal;
b. A revenue raising measure;
c. Imposed in the exercise of taxing power
d. Limited to cover cost of regulation
54. Value-added tax is an example of a:

a. Graduated tax b. Progressive tax c. Regressive tax d. Proportional tax
55. Which tax principle is described in the statement “The more income earned by the taxpayer, the more
tax he has to pay.
b. Theoretical justice/Equitability d. Inherent in sovereignty
56. One of the characteristics of a tax is that:

a. It is generally based on contract.
b. It is generally payable in money.
c. It is generally assignable.
d. It is generally subject to compensation.
57. The following are the characteristics of our internal revenue laws except:
a. Political in nature
b. Civil in nature
c. Generally prospective in application
d. May operate retrospectively if Congress so provides
58. Which of the following statements is wrong? A revenue bill:

a. Must originate from the House of Representatives and on which same bill the Senate may propose
amendments.
b. May originate from the Senate and on which same bill the House of Representatives may propose
amendments;
c. May have a House version and a Senate version approved separately, and then consolidated, with
both houses approving the consolidation version.
d. May be recommended by the President to Congress.
59. Tax as distinguished from special assessment:

a. not a personal liability of the person assessed
b. based wholly on benefits
c. exceptional as to time and place
d. based on necessity and the purpose is to raise revenues
60. Under this basic principle of a sound tax system, the Government should not incur a deficit:
a. Theoretical justice c. Fiscal adequacy
b. Administrative feasibility d. Uniformity in taxation
61. Which of the following may not raise money for the government?
b. Police power d. License fees
62. No person shall be imprisoned for non-payment of this:

a. Excise tax b. VAT c. Income tax d. Poll tax
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TAXATION
63. This is a demand of ownership:

a. License fee b. Tax c. Toll d. Customs duties
64. Income tax is generally regarded as

a. an excise tax
b. a tax on persons
c. a property tax
d. tax on profits
65. Which of the following is not acceptable for legally refusing to pay the tax?
a. That the right of the state to collect the tax has prescribed
b. That there is no jurisdiction to collect the tax
c. That the tax law was declared as unconstitutional
d. That there is no benefit derived from the tax
66. A law granting tax exemption requires the concurrence of

a. Majority vote of all members of Congress
b. 2/3 vote of members of Congress
c. % vote of members of Congress
d. unanimous vote of members of Congress
67. No person shall be imprisoned for debt or non-payment of a poll tax. This is a (an)
a. Inherent limitation c. International limitation
b. Constitutional limitation d. Territorial limitation
68. The Department of Finance thru its officers entered into a contract with foreign investors, granting them
exemption from all forms of taxes to encourage investments in the Philippines. The contract is
a. Void, unless the President ratifies
b. Void, because the power to grant tax exemption is vested in Congress
c. Valid, if the President has authorized the officers to enter into such contract
d. Valid, because the purpose is to promote public welfare
69. Tax as distinguished from debt

a. no imprisonment for non-payment c. based on contract
b. may be paid in kind d. based on law
70. Congress can impose a tax at any amount and at any time shows that
a. Taxation is an inherent power of the estate
b. Taxation is essentially a legislative power
c. Taxation is a very broad power of the state
d. Taxation is based on taxpayers’ ability to pay
71. A charge imposed on land for special benefits derived resulting from public improvements
a. Tax b. Toll c. License d. Special assessment
72. Which of the following are National Internal 'Revenue Taxes?

I. Income tax III. Donor’s tax V. OPT VII. DST
II. Estate tax IV. VAT VI. Excise tax
a. I, II, III, IV
b. I, II, III, IV, V
c. I, II, III, IV, V, VI
d. I, II, III, IV, V, VI, VII
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TAXATION
73. The three fundamental powers of the state are

V. Inherent in the state and may be exercised by the state without need of any constitutional grant.
VI. Not only necessary but indispensable.
VII. Methods by which the state interferes with private rights.
VIII. Exercised primarily by the legislature.
a. All true c. Half true, half false
b. All false d. None of the above
74.
V. Police power regulates both liberty and property while the power of eminent domain and the power
of taxation affect only property rights.
VI. Police power and the power of taxation may be exercised only by the government while the power of
eminent domain may be exercised by some private entities.
VII. The property taken in police power is destroyed while the property taken under the power of eminent
domain and power of taxation is not destroyed.
VIII. In the power of taxation, the compensation received is the protection of the state afforded to its
citizens; in police power, a higher standard of living is enjoyed by the citizens; and in the power of
eminent domain, a citizen receives just compensation for the property taken from him.
75.
V. The point on which a tax is originally imposed is impact of taxation.
VI. The point on which a tax burden finally rests or settles down is incidence of taxation.
VII. Police power is superior to the non-impairment clause of the constitution.
VIII. Power of taxation is not superior to the non-impairment clause of the constitution
76.
V. No person shall be imprisoned for debt or non-payment of tax.
VI. Tax laws are civil and penal in nature because there are criminal penalties when they are violated.
VII. Taxes may be collected in an unlimited amount.
VIII. License fees may be collected in an unlimited amount.
77.
V. Tax is imposed on persons, property, and property rights.
VI. Special assessment is imposed on persons, property and property rights.
VII. Tax collection is a legislative act.
VIII. Imposition of tax is an administrative act.
78.
III. There can only be a tax if there is a law imposing the tax.
IV. The power to tax may include the power to destroy.
79.
V. Due process of law in taxation under the constitution is a grant of power.
VI. Provisions in the Philippine constitution on taxation are grants of power.
Page 20 of 24
TAXATION
VII. There may be double taxation in the Philippines.

VIII. Taxation may be used to implement the police power of the state.
80.
V. License fee is a charge imposed under police power.
VI. Special assessment is levied on lands only.
VII. Tax is imposed regardless of public improvements.
VIII. Special assessment is imposed regardless of public improvements.
81.
III. One of the essential characteristics of a tax is it is unlimited in amount.
IV. A tax is generally unlimited because it is based on the needs of the state.
82. A system of taxation where the amount of revenue from indirect taxes are more than the direct taxes is
a. Progressive b. Regressive c. Proportional d. Schedular
83. Congress passed a law which granted tax amnesty to those who have not paid their income taxes in
2010 but did not provide for the refund to those who paid. Is the law valid?
a. No, this will encourage taxpayers not to pay their taxes
b. Yes, Congress has the sole discretion of determining whom to tax
c. No, the grant of amnesty is the sole prerogative of the President
d. Yes, Congress provided for a valid classification.
84. Money collected from taxation shall not be paid to any religious dignitary EXCEPT when
a. The religious dignitary is assigned to the Philippine Army.
b. It is paid by a local government unit.
c. The payment is passed in audit by the COA.
d. It is part of a lawmaker’s pork barrel.
85. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power
to activate and operate it, resulting in its destruction?
a. Power to destroy theory c. Sumptuary theory
b. Lifeblood theory d. No money, no honey theory
86. The actual effort exerted by the government to effect the exaction of what is due from the taxpayer is
known as
a. Assessment c. Payment
b. Levy d. Collection
87. Although the power of taxation is basically legislative in character, it is NOT the function of Congress to
a. Fix with certainty the amount of taxes
b. Collect the tax levied under the law
c. Identify who should collect the tax
d. Determine who should be subject to the tax
88. An example of a tax where the concept of progressivity finds application is the
a. Graduated income tax rates on individuals
Page 21 of 24
TAXATION
b. Excise tax on petroleum products

c. Value-added tax on certain articles
d. Amusement tax on boxing exhibitions
89. The power to tax is the power to destroy. Is this always so?
a. No. The Executive Branch may decide not to enforce a tax law which it believes to be confiscatory.
b. Yes. The tax collectors should enforce a tax law even if it results to the destruction of the property
rights of the taxpayer.
c. Yes. The tax laws should always be enforced because without taxes the very existence of the State
is endangered.
d. No. The Supreme Court may nullify a tax law; hence, property rights are not affected.
90. This is not an inherent limitation on the power of taxation:

a. Double taxation, though not prohibited, is disfavored.
b. Equality and uniformity in taxation
c. Public purpose of taxation
d. Territoriality
91. Revenue regulations (RRs) are:

a. Issuances signed by the Secretary of Finance, upon recommendation of the CIR, that specify,
prescribe or define rules and regulations for the effective enforcement of the provisions of the
National Internal Revenue Code (NIRC) and related statutes.
auditing.
92. Revenue Memorandum Circulars (RMCs) are:

auditing.
Page 22 of 24
TAXATION
93. Revenue Memorandum Orders (RMOs) are:

b. Issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules,
auditing.
d. None of the above
94. The following are the powers of the CIR except:

a. After a return has been filed or when no return is filed, the CIR may authorize the examination of any
taxpayer, and the assessment of the correct amount of tax.
b. The CIR has the power to issue Summons or Subpoena Duces Tecum to a taxpayer, an officer or
employee of a taxpayer, or to any person having possession of records relating to the business of a
taxpayer.
c. The CIR has the power to take the testimony of a person, under oath, that may be relevant or material
to the inquiry.
d. The CIR has the power to inquire into a taxpayer’s bank deposits in all instances.
95. What is tax mapping?

a. It is equivalent to tax assessment within the applicable reglementary periods depending on whether
the taxpayer is guilty of fraud or not.
b. It is a mere verification made by the BIR of a taxpayer’s compliance with registration and other
requirements prior to, during, and after its business operations such as the following: (a) registration
of the head office and branches; (b) payment of annual registration fee and posting of the same in
the place of business; (c) authority to print receipts and invoices; (d) the issuance of receipts and
invoices on every sale; (e) the contents of such receipts and invoices; (1) registration of cash register
machines, point-of-sale machines, and computerized accounting systems; and (g) registration of
books of accounts.
c. This is the directory of the Revenue District Offices of the BIR with a listing of all officers and revenue
agents.
96. Dante Company is a hotel company registered as a local economic enterprise (“LEE”) of the City of
Dapitan. The company is asserting that, as an LEE owned and operated by a local government unit (“LGU”),
it should no longer be required to pay income taxes to the BIR. It argues that all revenues collected by it
must accrue exclusively to the city government of Dapitan. Is the company correct?
a. Yes. Since the company is owned by an LGU which itself is exempt from taxes imposed by the Tax
Code, the same privileges must also be accorded to it.
b. Yes. Under Section 18 of the Local Government Code, LGUs are authorized to generate their own
sources of revenues, and the allocation of the same shall accrue exclusively to them.
c. No. The company is not one of those corporations exempt from taxes under Section 30 of the Tax
Code or under any special laws. Besides, the acts of an LGU in its corporate capacity and 'for the
purpose of economic gain may be subject to tax just like any other private or government
corporation.
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TAXATION
97. Mr. Compton sells shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR
and the municipal license tax based on the same gross sales to the City of Makati. He comes to you for
advice because he thinks he is being subjected to double taxation. What advice will you give him?
a. Yes, there is double taxation and it is progressive.
b. The City of Makati has no taxing power.
c. Yes, there is double taxation and this is illegal in the Philippines.
d. Double taxation is allowed where one tax is imposed by the national government and the other by
local government.
Page 24 of 24

MCQs - TAX - General Principles

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TAXATION

General Principles of Taxation

1. The principal purpose of taxation is

2. The aspects of taxation are

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

5. Which of the following statements is correct?

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

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

16. Which is not an essential characteristic of a tax?

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

20. Which of the following is a nature of taxation?

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

23. Synonymous to tax evasion

24. Synonymous to tax avoidance

25. In case of doubt, tax statutes are construed

26. In case of doubt, tax exemptions are construed

38. Which of the following statements is not correct?

41. Which of the following statements is not correct?

44. Police power as distinguished from the power of eminent domain:

46. Which one of the following is not a characteristic or element of a tax?

47. Tax as distinguished from license fees:

48. The power to impose taxes is exercised by the

50. Which of the following is not an example of excise tax:

52. Which of the following statements is not correct?

53. License fee as distinguished from tax:

54. Value-added tax is an example of a:

56. One of the characteristics of a tax is that:

58. Which of the following statements is wrong? A revenue bill:

59. Tax as distinguished from special assessment:

62. No person shall be imprisoned for non-payment of this:

63. This is a demand of ownership:

64. Income tax is generally regarded as

66. A law granting tax exemption requires the concurrence of

69. Tax as distinguished from debt

72. Which of the following are National Internal 'Revenue Taxes?

73. The three fundamental powers of the state are

90. This is not an inherent limitation on the power of taxation:

91. Revenue regulations (RRs) are:

92. Revenue Memorandum Circulars (RMCs) are:

93. Revenue Memorandum Orders (RMOs) are:

94. The following are the powers of the CIR except:

95. What is tax mapping?

2. The aspects of taxation are

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

5. Which of the following statements is correct?

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

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

16. Which is not an essential characteristic of a tax?

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

20. Which of the following is a nature of taxation?

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

23. Synonymous to tax evasion

24. Synonymous to tax avoidance

25. In case of doubt, tax statutes are construed

26. In case of doubt, tax exemptions are construed

38. Which of the following statements is not correct?

41. Which of the following statements is not correct?

44. Police power as distinguished from the power of eminent domain:

46. Which one of the following is not a characteristic or element of a tax?

47. Tax as distinguished from license fees:

48. The power to impose taxes is exercised by the

50. Which of the following is not an example of excise tax:

52. Which of the following statements is not correct?

53. License fee as distinguished from tax: