FAR EASTERN UNIVERSITY

MAKATI

Tax I – Law on Income Taxation Francis Manabat Javier, CPA, LL.B.

Exercises
GENERAL PRINCIPLES / EXERCISES
A. Identification

Taxation______ 1. The act of laying a tax.

Legislative____ 2. The branch of the government that exercises the power of the taxation.
Law-making body_ 3. Taxation may only be exercised by a ________________.
Dual nature of taxation_4. It refers to the nature of taxation as an inherent power and legislative in character.
Inherent Lim___5. Limitations on the power of taxation not found in the Constitution.
International Comity_6. Under this specific limitation, properties of foreign government are exempted from taxation.
Lifeblood_____7. The theory that justifies the necessity of taxation.
Benefit-protection_8. The theory that emphasizes the relationship between state and its inhabitants.
Administrative feasibility_9. The theory under the canons of taxation which emphasizes on the economic aspect of taxation.
Canons of taxation_10. It also means characteristics of a sound taxation system.
Theoretical justice_11. It means taxes should be based on the taxpayer’s ability to pay and benefits received.
Uniformity___12. It means taxable items of the same class should be taxed at the same rate.
Fiscal adequacy_13. A canon of taxation which means that taxes should be sufficient to support and maintain government
expenditures.
Tax code____14. It refers to the National Internal Revenue Code.
Equitable recoupment_15. A principle which means a tax erroneously paid may be set-off from a present tax liability even if the
right to refund has already prescribed.
Non-delegation_16. A principle which prohibits the delegation of a taxing power which has already been delegated.
Shifting______17. A form of tax escape by transferring the burden of taxation to another.
Tax evasion___18. A form of tax escape through illegal means.
Tax avoidance_19. A form of tax escape through permissible or legal means.
Constitutional Lim._20. Limitations of taxation embodied in the fundamental law of the land.

B. True or False:
21. A person may refuse to pay a tax on the ground that he receives no personal benefit from it. F
22. A taxpayer has a right to question illegal expenditures of public funds. T
23. One of the essential characteristics of a tax is it is unlimited in amount.
24. A tax is generally unlimited because it is based on the needs of the state.
25. A License Fee is a charge imposed under the police power of the state. T
26. Penalty is imposed by the state only. F
27. Imposition of taxes is a legislative act. T
28. Collection of taxes is an administrative act. T
29. A state has the power to tax even if not granted by the Constitution. T
30. A state cannot exercise police power if not granted by the Constitution. F
31. There can only be a tax if there is a law imposing the tax. T
32. The power to tax is inherent. T
33. a. A tax is based on law while debt is based on contract. T
34. A tax is also a custom’s duty. F
35. A person cannot be imprisoned for non-payment of property tax. F
36. A law may be passed violating uniformity of taxation. F
37. The RDO is known as the alter ego of the BIR Commissioner. F
38. The BIR Commissioner is directly under the President’s Office. F
39. Provisions in the Philippine Constitution on Taxation are grants of power. F
40. Due process of law in taxation in the Constitution is a grant of power. F
41. An excise tax is also called privilege tax. T
42. A tax which is neither personal nor property, is an excise tax. T
43. Estate tax is a proportional tax. F
44. A progressive tax is a tax, the rate of which is directly proportional to tax base. F
45. Taxation without representation is not tyranny. F
46. In the exercise of taxation, the state can tax anything at anytime and at any amount. T
47. Taxation and power of Eminent Domain may be exercised simultaneously. T
48. Taxation and Police Power may be exercised simultaneously. T
49. Our tax laws are statutory laws. T
50. The non-impairment clause is a statutory law on taxation. F
51. Non-payment of tax makes the business illegal. F
52. The non-payment of license fee makes the business illegal. T

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 53. Margin fee is a tax. F
54. Custom’s duty is a tax. T
55. Territoriality is one of the constitutional limitations on the power of taxation. F
56. International comity is an inherent limitation in taxation. T
57. Taxes may be used for sectarian purposes also if allowed by an ordinance. F
58. The President can refuse to implement a tax law if it appears to be unconstitutional. T
59. There can be double taxation in the Philippines. T
60. Double taxation is illegal if it violates the uniformity of taxation. T
61. A progressive system of taxation means a tax structure where the tax base increases as the tax rate increases. F
62. Tax exemption is a grant of immunity to a particular taxpayer from tax where others are obliged to pay. T
63. Tax avoidance is a form of tax escape. T
64. Tax evasion is not punishable. F
65. A tax may include the power to destroy. T
66. A tax may be imposed violating uniformity of taxation. F
67. A tax may be subjected to set-off or compensation. T
68. A tax ordinarily includes interest. F
69. A tax bill may embrace more than one subject. F
70. Non-payment of a tax cannot result to criminal liability on the part of the taxpayer, only civil liability. F

C. Multiple Choice: In each of the following, choose the best answer.

71. All are characteristics of the power of taxation, EXCEPT:

a. It is an inherent power. c. It is civil in character
b. It is legislative in character. d. It is subject to inherent and constitutional limitation

72. Our tax laws are:

a. Political in nature. b. Civil in nature c. Penal in nature d. Social in nature

73. Also known as tax administration

a. Collection of taxes b. Levying of taxes c. Payment of taxes. Incidence of taxation

74. Taxation is an inherent power because:

a. It is the life blood of the government. c. It co-exists with the existence of the state.
b. Protection and benefit theory. d. It is exercised for the general welfare of the people.

75. All are essential characteristics of a tax, EXCEPT:

a. It is an enforced contribution. c. It is generally payable in money
b. It is generally unlimited in amount. d. It is a proportionate burden.

76. A tax is invalid, EXCEPT:

a. Theory of taxation and its purpose are disregarded. c. Inherent and constitutional limitations are not observed
b. Basis of taxation is not recognized. d. It results to double taxation.

77. All are secondary purposes of taxation EXCEPT:

a. Sumptuary purpose b. Regulatory purpose c. Compensatory purpose d. Uniformity purpose

78. In the absence of inherent and constitutional limitation, the power of tax is:
a. Comprehensive b. Unlimited c. Both a and b. d. Regulatory

79. All are similarities of taxation, police power, and power of eminent domain, EXCEPT:
a. All are necessary attributes of the Constitution c. All contemplate an equivalent benefit
b. All exist independently of the Constitution d. All are superior to the non-impairment clause of the
Constitution

80. It refers to a fraudulent act of minimizing taxes:

a. Tax avoidance b. Tax evasion c. Tax minimization d. Multiple taxation

81. Below are characteristics of a sound taxation system, EXCEPT:

a. Administrative feasibility and compliance c. Theoretical justice
b. Fiscal adequacy d. Uniformity of taxation

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

a. Taxes must be for public purposes c. Territoriality rule
b. Equality in Taxation. d. Rule on double taxation

83. All of the following is an exception to the territoriality doctrine except one:
a. In case of taxation of resident or citizens of the Philippines. c. In case of international comity
b. If provided under a treaty obligation. d. In case of international organization

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 84. Taxation is equitable in all of the following, EXCEPT:
a. Its burden falls on those better to pay. c. It is based on benefits received
b. It is based on ability to pay. d. It is based on uniformity rule.

85. The only tax where non-payment of which will not result to imprisonment:
a. Excise tax b. Donor’s tax c. Personal tax d. Property tax

86. One of the following is NOT a major business tax under the Tax Code:
a. Income tax b. Percentage tax c. Excise tax d. VAT

87. One of the following can be BOTH a progressive tax and a proportional tax:
a. Donor’s tax b. Both a and b c. Estate tax d. Income tax on individuals

88. A tax which is BOTH under taxation and Police Power:

a. Compensatory Tax b. Regulatory tax c. National Tax d. General tax

89. A demand of Proprietorship:

a. Tax b. Special assessment c. Toll d. License fee

90. Levied only on lands:

a. Tax b. Toll c. Special assessment d. License fee

91. A proportional tax:

a. Individual income tax b. Donor’s tax c. Corporate income tax d. Estate tax

92. Imposed to regulate conduct:

a. Tax b. Toll c. Penalty d. License fee

93. An ad-valorem tax:

a. Real estate tax b. Income tax c. Excise tax on wine d. Excise tax on cinematographic films

94. One of the following is NOT a source of our tax laws:

a. Administrative rulings and opinions c. 1987 Constitution
b. Judicial decisions d. Expert Opinion on Taxation

95. The government may not do all except one:

a. Tax itself c. Impose tax arbitrarily
b. Delegate its power to tax to private agencies d. Disregard uniformity in taxation

96. A form of tax escape through which one is given tax immunity wherein others are subjected to tax:
a. Shifting b. Tax immunity c. Tax exemption d. Tax avoidance

97. A form of tax escape by a manufacturer or producer who improves his proceeds of production thereby minimizing his
unit production cost:
a. Tax avoidance b. Capitalization c. Transformation d. Shifting

98. A waiver by the government’s right to collect tax:

a. Tax exemption b. Tax amnesty c. Tax avoidance d. Tax evasion

99. A tax imposed based on the number:

a. Income Tax b. Ad-valorem Tax c. Specific Tax d. Custom’s duties

100. The theory which most justifies the necessity of taxation:

a. Protection and benefits theory c. Lifeblood theory
b. Revenue purposes theory d. Ability to pay theory

101. 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.

102. Which of the following is not example of excise tax:

a. Transfer tax; b. Sales tax c. Real property tax; d. Income tax.

103. The following are similarities of the inherent power of taxation, eminent domain, and police power, except one:
a. Are necessary attributes of sovereignty; c. Superior to the non-impairment clause
b. Interfere with private rights and property; d. Are legislative in character.

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 104. 1st Statement: The power of taxation is inherent in sovereignty being essential to the existence of every government.
Hence, even if not mentioned in the Constitution the state can still exercise the power.
2nd Statement: It is essentially a legislative function. Even in the absence of any constitutional provision, taxation
power falls to Congress as part of the general power of law-making.
a. False; False b. False; True c. True; True b. True; False

105. Which of the following is not a scheme of shifting the incidence of taxation?
a. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold;
b. The tax forms part of the purchase price;
c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the
title passes abroad instead of in the Philippines.
d. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and
finally to the consumer.

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

107. Which of the following statements is not correct?

a. Taxes may be imposed to raise revenues or to regulate 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 and not limitations on taxing powers.

108. Tax as distinguished from license fee:

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

109. Value-added tax is an example of:

a. Graduated tax; b. Progressive tax; c. Regressive tax; d. Proportional tax.

110. Which statement refers to police power as distinguished from taxation?

a. It can only be imposed on specific property or properties;
b. The amount imposed depends on whether the activity is useful or not;
c. It involves the taking of property by the government;
d. The amount imposed has no limit.

111. 1st Statement – The income from bank deposit of a Tax-exempt Catholic Church is taxable.
2 nd Statement – The charitable contributions given to a church are also taxable.
a. True; False b. False; True c. True; True d. False; false

112. 1st Statement - Tax exemptions are strictly construed against the government.
2 nd Statement – When the tax law is not clear and there is doubt whether he is taxable or not, the doubt shall be settled
against the government.
a. Only the first statement is correct. c. Both statements are correct
b. Only the second statement is correct. d. Both statements are incorrect.

113. 1st Statement - Tax imposed outside the situs of Taxation is void.
2 nd Statement – International Comity is an exception to the territoriality doctrine.
a. True; False b. False; True c. True; True d. False; False

114. Imposed based on the control & superiority of one country over another:
a. Tithe b. Tax c. Tribute d. Toll

115. Imposed based on religious obligation:

a. Tithe b. Tax c. Tribute d. Toll

116. Taxes are:

a. Retroactive b. Prospective c. Generally proportional d. Personal to the taxpayer

117. Statement 1- Non-payment of tax will only result to civil liability

Statement 2- Tax liabilities of a corporation will not extend to the stockholders absolutely.
a. True, True b. False, False c. False, True d. True, False

118. All are objectives of taxation except:

a. Revenue purpose b. Increase of social inequity c. Regulation d. Encourage economic growth

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 119. Statement 1- Courts can review or inquire into the wisdom or advisability of a tax law and Power of Judicial Review in
Taxation.
Statement 2- Our constitution does not contain any provision granting tax exemption to the government.
a. True, True b. False, False c. False, True d. True, False

120. Statement 1- To be exempt from taxation under the Constitution land & buildings must be exclusively and actually
used for religious, educational or charitable purpose, even if not directly.
Statement 2- Exemptions of non-profit schools are only limited to revenue and assets derived from strictly school
operations.
a. True, True b. False, False c. False, True d. True, False

121. Statement 1- A taxpayer’s tax-exempt status justifies the non-keeping of books of accounts & other accounting records.
Statement 2- The salaries of the Chief Justice & associate justice of the Supreme Court are tax-exempt.
a. True, True b. False, False c. False, True d. True, False

122. Statement 1- Our Tax Code prevails over the Civil Code.
Statement 2- Tax regulations promulgated by the Secretary of finance need not be published in a newspaper of general
circulation.
a. True, True b. False; False c. False, True d. True, False

123. Corporate income tax is classified as:

a. Direct tax as to rate b. Progressive tax as to rate c. Proportional tax as to rate d. Regulatory tax

124. Motor vehicle registration fees are now considered

a. License fee b. Margin fee c. Regulatory tax d. General tax

125. Our tax laws are both:

a. Penal and regulatory b. Personal and Regulatory c. Civil and prospective d. Progressive and prospective

~End~

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