QUIZ #1: Principles of Taxation

1. By its nature taxation is a legislative power, i.e., such power being

exclusively vested in the legislature, except
a. In case of local governments, to raise their own revenue, within
their own territorial jurisdiction, subject to limitations as may be
provided by Congress.
b. The Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restrictions as it
may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national
development program of the Government.
c. Both A and B
d. Neither A nor B

2. The equal protection clause guarantees that persons and things

similarly situated are treated under the law similarly. However,
constitutional guarantee allows reasonable classification, provided the
conditions are met, except
a. rest on substantial distinctions
b. be germane to the purpose of the law
c. not be limited to existing conditions only
d. apply equally to some members of the same class.

3. An Executive Order (EO) was issued pursuant to law, granting tax and
duty incentives only to businesses and residents within the "secured
area" of the Subic Economic Special Zone, and denying said incentives to
those who live within the Zone but outside such "secured area". Is the
constitutional right to equal protection of the law violated?
a. Yes, the EO gave preferential rights to those located within the SEZA
as against other business located within the Philippines.
b. Yes, the EO being an issuance made by the executive branch of the
Government encroached on the power of the Legislature to exercise the
power of taxation.
c. No. Equal protection of the law clause allows reasonable
classification. There are substantial differences between big investors
being enticed to the "secured area" and the business operators outside
that are in accord with the equal protection clause that does not
require territorial uniformity of laws.
d. No. Equal protection is not the issue on this matter rather the
territoriality limitation has been breached.

4. The following are the usual methods of avoiding the occurrence of

double taxation, except
a. Allowing reciprocal exemption either by law or by treaty;
b. Allowance of tax credit for foreign taxes paid;
c. Allowance of deduction for foreign taxes paid; and
d. Granting of reduced taxation rates by the Department of Finance

5. Our national internal revenue laws are

a. Political in nature
b. Penal and nature
c. Criminal in nature
d. Civil in nature
6. Generally, tax laws are prospective in character. It will be given
retroactive effect under the following circumstances, except:
a. It is necessarily implied from the language used
b. It involves income tax
c. It is expressly provided or the retroactive application is clearly
the intent of Congress.
d. It imposes a criminal liability

7. Which of the following statements is not correct?

a. Taxes maybe imposed to raise revenue 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. In the exercise of the power of taxation, the State can tax anything
at any time.
d. The power of taxation in the Philippine Constitution are grants of
power and not limitations on taxing power.

8. All of the following, except one, are basic principles of a sound

taxation system:
a. Fiscal adequacy
b. Administrative feasibility
c. Social equality
d. Theoretical justice

9. Under this basic principle of a sound taxation system, the government

should not incur a deficit:
a. Theoretical justice
b. Administrative feasibility
c. Fiscal adequacy
d. None of the above

10.The basic principle of a sound taxation system, where, “Taxes must be

based on the taxpayer’s ability to pay” is called:
a. Equality in taxation
b. Ability to pay theory
c. Theoretical justice
d. Equity in taxation

11.The tax law must be capable of convenient, just and effective

administration
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment

12.A taxpayer gives the following reasons for refusing to pay a tax.
Which of his reasons is not acceptable for legally refusing to pay the
tax?
a. That he has been deprived of due process of law.
b. That there is lack of territorial jurisdiction.
c. That the prescriptive period for the tax has lapsed.
d. That he will derive no benefit from the tax

13.No law granting any tax exemption shall be passed without the
concurrence of –
a. Majority of all members of Congress
b. 2/3 vote of all members of Congress
c. ¾ vote of all members of Congress
d. Unanimous vote of all members of Congress

14.Compliance with procedural requirements must be followed strictly to

avoid collision between the State’s power to tax and the individual’s
recognized rights.
a. Due process of law
b. Equality in taxation
c. Non-infringement of religious freedom
d. Non-impairment of obligations and contracts

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

a. Property tax
b. Excise tax
c. Poll tax
d. Income tax

16.Where does the taxing power of the provinces, municipalities and

cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or Executive act
d. Local legislation

17.Which of the following has no power of taxation?

a. Province of Bulacan
b. Quezon City
c. Barangay Holy Spirit
d. Cordillera Administrative Region

18.Levying of local government taxes may be exercised by:

a. The local executive only
b. The legislative branch of the local government only
c. The local executive and the legislative branch of the local
government unit
d. Neither the local executive nor the legislative branch of the local
government can exercise the power.

19. First Statement - Tax evasion is a scheme used outside of those

lawful means to escape tax liability and, when availed of, it usually
subjects the taxpayer to further or additional civil or criminal
liabilities.
Second Statement - Tax avoidance, is a tax saving device within the
means sanctioned by law, hence legal.
a. True, true
b. True, false
c. False, false
d. False, true

20. First Statement - Tax Pyramiding is the imposition of a tax upon

another tax. It is allowed under this jurisdiction.
Second statement - A tax is deemed to have satisfied the uniformity rule
when it operates with the same force and effect in every place where the
subject maybe found.
a. True, true
b. True, False
c. False, False
d. False, True

21.One of the following is NOT an inherent limitation:

a. Taxes must be for public purposes
b. Uniformity of taxation
c. Territoriality rule
d. Government exemption

22. 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 a taxpayer.
c. Yes. 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.

23. 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.

24. Which among the following concepts of taxation is the basis for the
situs of income taxation?
a. Lifeblood doctrine of taxation
b. Symbiotic relation in taxation
c. Compensatory purpose of taxation
d. Sumptuary purpose of taxation

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

a. No law impairing the obligations of contracts shall be enacted
b. Tax laws can not apply to the property of foreign governments
c. Charitable institutions, churches, parsonages, convents and all
lands, buildings and improvements actually, directly and exclusively
used for religious, charitable or educational purposes shall be exempt
from taxation
d. The rule of taxation shall be uniform and equitable

26. 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
b. Lifeblood theory
c. Sumptuary theory
d. Symbiotic doctrine

27. Which one of the following is not an advantage of progressive tax?

A. Cheap to collect.
B. Certainty.
C. Inflationary.
D. Convenience.

28. 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. he payment is passed in audit by the COA.
d. It is part of a lawmaker’s pork barrel.

29. The actual effort exerted by the government to effect the exaction
of what is due from the taxpayer is known as
a. assessment.
b. levy.
c. payment.
d. collection.

30.Transfer of the tax burden by one whom the tax is assessed to another
a. Shifting
b. Capitalization
c. Tax exemption
d. Transformation

31.The method by which the manufacturer or producer upon whom the tax is
imposed pays the tax and strives to recover such expense through lower
production cost without sacrificing the quality of his product
a. Shifting
b. Capitalization
c. Tax exemption
d. Transformation

32.The reduction in the selling price of income producing property by an

amount equal to the capitalized value of future taxes that may be paid
by the purchaser
a. Shifting
b. Capitalization
c. Tax exemption
d. Transformation

33. Tax as distinguished from license fee:

a. Non-payment does not necessarily render the business illegal;
b. A regulatory measure;
c. Imposed in the exercise of police power;
d. Limited to cover cost of regulation.

34. Ito ang tawag sa ahensiya ng pamahalaan ng Republika ng Pilipinas na

naglilikom ng mga iba't ibang uri ng buwis sa bansa.
A. Kawanihan ng Rentas Internas
B. Kawanihan ng Panloob na Kita
C. Kawanihan ng Internus Reditus
D. Kawanihan ng Pananalapi

35. For purposes of determining income tax liability: In case of

conflict between the tax code and generally accepted accounting
principles (GAAP):
a. Both tax codes and GAAP shall be enforced;
b. GAAP shall prevail over tax code;
c. Tax code shall prevail over GAAP;
d. The issue shall be resolved by the courts.

36. The President of the Philippines and the Prime Minister of Japan
entered into an executive agreement on a loan facility to the
Philippines from Japan whereby it was stipulated that interest on loans
granted by private Japanese financial institutions in the Philippines
shall not be subject to Philippine income tax laws. What basic
characteristics of taxation has been violated by this agreement?
A. Constitutional limitation C. Legislative in character
B. Inherent limitation D. Theoretical justice

37. Which of the following statement is/are CORRECT?

I. The power to license includes the power to tax
II. The power to tax may not include the power to destroy.
III. The power to tax includes the power to exempt
A. I only C. I and II B. III only D. II and III

38. First Statement – the power of taxation is complete, plenary,

supreme and without any limit.
Second Statement – income of a non-stock non-profit educational
institution is exempt
a. False; True
b. True; True
c. False; False
d. False, True

39. A new bill was passed by the congress, however it was vetoed by the
president. How many votes are necessary to overturn the president’s
veto?
a. Majority of all members of Congress
b. 2/3 vote of all members of Congress
c. ¾ vote of all members of Congress
d. Unanimous vote of all members of Congress

40. On September 6, 2022, a new tax bill was passed by the congress. It
was duly presented to the president on October 1, 2022. The president
communicated his veto on December 1, 2022. Was the tax bill passed into
law?
a. Yes, because the 60 day period to veto has lapsed.
b. No, because the president vetoed the bill.
c. No, because the 30 day period to veto has lapsed.
d. Yes, because the 30 day period to veto has lapsed.