Illustration

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. Select the incorrect statement.
a. the power of eminent domain may be exercised by any private entity
b. by police power, the property taken is destroyed
c. by eminent domain, the property taken is preserved
d. eminent domain and taxation affects only property rights
3. What is the theory of taxation?
a. Necessity c. reciprocal duties of support and protection
b. Constitutionality d. public purpose
7. The point in which tax is levied is called?
a. Impact of taxation c. Incidence of taxation
b. Situs of taxation d. Assessment

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

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

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

8. I. Taxation is the rule; exception is the exemption.

II. Police power may be used to implement the taxation 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

9. Which of the following depicts taxation being used to implement police power?
a. Oplan Kandado enforced against taxpayer not issuing BIR receipts
b. Prohibition of smuggling and the seizure of smuggled goods
c. Levy of exorbitant excise taxes on sin products
d. All of the above

10. Select the incorrect statement.

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

11. Which of the following is delegated?

a. Levy or imposition of tax by the national government
b. Assessment and collection of taxes by the national government
c. Levy or imposition of ordinance by the local government
d. Assessment and collection of local taxes by the local government

12. Businesses of the State should not be taxed under the inherent limitations as it will not yield additional revenue to the
State but taxing private businesses to the exclusion of State businesses will violate the equality doctrine of the
Constitution. Considering that taxes are essential to the government, what must be done?
a. Exempt businesses owned by the State
b. Exempt both State and private businesses following the Constitutional limitations are superior to the Lifeblood
Doctrine.
c. Tax both State and private businesses. The inherent limitations may be disregarded by applying the constitutional
limitations.
d. None of these

13. 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
14. 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

15. 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. 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.

16. Ram 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 practitioners 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.

17. 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 rice.
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.

18. 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.
c. No, because government agencies are exempt. This would pose a violation of the equality clause in the constitution.
d. No, because GOCCs are constitutionally exempted from paying taxes.

19. 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.
c. No, with respect to any properties held by such educational institution.
d. No, with respect to properties not actually devoted to educational purposes.
9. Requiring non-resident aliens residing outside the country to file tax returns here in the Philippines would more likely
result in
a. violation of constitutional limitation.
b. violation of inherent limitation.
c. violation of both inherent and constitutional limitations.
d. no violation.

21. There is a proposal to levy tax upon texting. If there are 400 representatives and 260 attended the deliberation for
approval of the tax bill, how many dissenting vote is required to kill the bill?
a. 260 c. 130
b. 131 d. 101

22. The Japanese government invested P100,000,000 in a domestic 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.

23. 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. Uniformity in taxation c. The power of taxation cannot be delegated
b. The rule of double taxation d. None of these

24. 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.
25. 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
26. 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 or location
27. Which of the following tax privileges can be withdrawn?
a. Income tax exemption of non-profit educational institution
b. Real property tax exemption of religious, charitable and educational entities
c. Taxpayer’s right to due process and equal protection
d. Tax exemption granted by law

28. 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.
The prescriptive period of assessment has elapsed.
That there is no benefit that can be derived from the tax.
29. A law was passed by Congress which granted tax amnesty to those who have not paid income tax for a certain year
without at the same time providing for the refund of taxes to those 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.

30. Which is not an element of double taxation?

a. Taxing authority c. Tax type
b. Tax period d. Tax rates

31. Which is not an instance of a double taxation?

a. Taxes by the national government on business where one is based on sales and the other on the income from such
sales.
b. A tax imposed upon fishing and fishpond operations.
c. Business taxes imposed by the national government and the local government.
d. None of these

32. Who is not subject to Philippine personal tax?

a. Resident alien c. Non-resident citizen
b. Resident citizen d. None of these

33. A resident citizen had the following business sales during the month:

Sales Income
Philippine sales P 2,000,000 P 800,000
Singapore sales 1,500,000 400,000
Total sales P 3,500,000 P 1,200,000

Compute the income subject to tax.

a. P 3,500,000 c. P 2,000,000
b. P 1,200,000 d. P 800,000

34. What is the amount subject to Philippine business tax?

a. P3,500,000 c. P1,500,000
b. P2,000,000 d. P 0

35. A resident citizen had the following properties:

Philippine properties P 2,000,000

Properties in Hong Kong 1,500,000
Total sales P 3,500,000

What is the amount subject to Philippine property tax?

a. P3,500,000 c. P1,500,000
b. P2,000,000 d. P 0

36. Mr. Kang, an Indonesian national, sold to his OFW friend in Indonesia his car which they agreed to be delivered to the
Philippines within 30 days after import documentation are completed. Mr. Kang realized a P300,000 income on the
sale. Which is correct?
a. The gain is subject to Philippine income tax since the goods are delivered in the Philippines.
b. The gain is not subject to Philippine income tax since the income is earned outside the Philippines.
 c. The gain is subject to Philippine income tax since the sale is made to a Filipino.
d. The gain is not subject to income tax since the seller is an alien who is not subject to Philippine tax.

37. A seller sold a piece of land to a buyer who agreed to pay P4,000,000. The sale is subject to a capital gains tax based
on the selling price. In order of the seller to reduce his taxes, they executed a deed of sale which indicated a selling
price of P1,000,000. This is an example of
a. Tax minimization c. Tax loophole
b. Tax evasion d. Tax arbitrage

38. Aldo has a property worth P1,000,000 which he intends to transfer to his son. Considering that disposal by sale would
be subject to capital gains tax of 6%, Aldo decided to donate the property in four parts of P250,000 over four years.
This is an example of
a. Tax minimization c. Tax loophole
b. Tax evasion d. Tax arbitrage

39. Claiming input VAT on personal transactions as credit against output VAT on sales in the course of business is an
example of
a. Tax minimization c. Tax loophole
b. Tax evasion d. Tax arbitrage

40. A taxpayer had a family home worth P15M which he intends to transfer to his only son. Which of the following mode of
transfer results in optimum tax minimization?
a. Transfer mortis causa c. Sale transaction
b. Transfer inter-vivos d. Sale for insufficient consideration

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

42. Tax minimization cannot be achieved by

a. Tax planning c. Maximization of tax credits and loss carry-overs
b. Selection of transaction d. Offsetting of losses and income of subsidiaries

43. Which of the following tax saving practices could result in a BIR assessment?
a. Practicing tax avoidance c. Engaging in tax dodging schemes
b. Maximizing tax incentives d. Entering into compromise with the government