Chapter 1 - 3 Taxation PDF

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CHAPTER 1SELF-TEST EXERCISES Non-assignment of taxes. – C and I Territoriality of taxation. - I Taxes must be for public use. - I Exemption of the property of religious institutions from income tax. - I Exemption of the revenues and assets of non-profit, non-stock educational institutions. - I Non-d...

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CHAPTER 1 SELF-TEST EXERCISES 1. Non-assignment of taxes. – C and I 2. Territoriality of taxation. - I 3. Taxes must be for public use. - I 4. Exemption of the property of religious institutions from income tax. - I 5. Exemption of the revenues and assets of non-profit, non-stock educational institutions. - I 6. Non-delegation of the taxing power. – C and I 7. Non-appropriation for religious purpose. - I 8. The requirement of absolute majority in the passage of a tax exemption law. - I 9. Non-imprisonment for non-payment of tax or debt. N 10. Taxpayers under the same circumstance should be treated equal both in terms of privileges and obligations. - C 11. Exemption from property taxes of religious, educational, and charitable entities. - C 12. Government income and properties are not objects of taxation. - I 13. Each local government shall have the power to create its own sources of revenue. - C 14. Imprescriptibly in taxation. - N 15. Non-impairment of obligation and contracts. - C 16. Guarantee of proportional system of taxation. - C 17. International courtesy. - C 18. Non-impairment of the jurisdiction of the Supreme Court to review tax cases. - I 19. The government is not subject to estoppel. – C 20. Imprisonment for non-payment of poll tax. – N

1. There should be direct receipt of benefit before one could be compelled to taxes. - F 2. Eminent domain involves confiscation of prohibited commodities to protect the well-being of the people. - T 3. Horizontal equity requires consideration of the circumstance of the taxpayer. - T

4. Taxes are the lifeblood of the government. - T 5. Taxation is a mode of apportionment of government costs to the people. - F

6. The exercise of taxation power requires Constitutional grant. - F 7. Taxation is inherent in sovereignty. - T 8. Police power is the most superior power of the government. Its exercise needs to be sanctioned by the Constitution. - F 9. All inherent powers presuppose an equivalent form of compensation. - T 10. The reciprocal duty of support between the government and the people underscores the basis of taxation. – T

1. The scope of taxation is regarded as comprehensive, plenary, unlimited, and supreme. - F 2. The Constitutional exemption of religious, charitable, and non-profit cemeteries, churches, and mosques refers to income tax and real property tax. - F 3. Taxpayers under the same circumstance should be taxed differently. - T 4. Taxation is subject to inherent and Constitutional limitations. - T 5. International comity connotes courtesy between nations. - T 6. Collection of taxes in the absence of a law is violative of the Constitutional requirement for due process. - T 7. No one shall be imprisoned for non-payment of tax. – F 8. The lifeblood doctrine requires the government to override its obligations and contracts when necessary. – F 9. 2/3 of all members of Congress is required to pass a tax exemption law. – F 10. The government should tax itself. – F

Multiple Choice – Theory: Part 1 1. That courts cannot issue injunction against the government’s effort to collect taxes is justified by A. The lifeblood doctrine.

2. The point at which tax is levied is also called D. Assessment. 3. Which of the following inappropriately describes the nature of taxation? D. Generally for public purpose. 4. Which is correct? A. Tax condonation is a general pardon granted by the government. 5. A. The power to tax includes the power to exempt. B. The power to license includes the power to tax. D. Neither A nor B. 6. International double taxation can be mitigated by any of the following except. D. Entering into treaties to form regional trade blockage against the rest of the world. 7. Which is not an object of taxation? A. Persons. 8. The power to enforce proportional contribution from the people for the support of the government is A. Taxation. 9. This theory underscores that taxes are indispensable to the existence of the state. B. The Lifeblood Doctrine. 10. A. Taxation is the rule, exception is the exemption. B. Vague taxation are laws are interpreted liberally in favor of the government. C. Both and B 11. Statement 1: The benefit received theory presupposes that some taxpayers within the territorial jurisdiction of the Philippines will be exempted from paying tax so long as they do not receive benefits from the government. Statement 2: The ability to pay theory suggests that some taxpayers may exempted from tax provided they do not have the ability pay the same. D. Neither statement 1 nor 2. 12. Select the incorrect statement. D. Taxes should be collected only for public improvements. 13. Which is not a public purpose? C. National defense. 14. Which does not properly describe the scope of taxation. C. Discretionary. 15. All of these are secondary purposes of taxation except. B. To protect local industries. 16. What is the theory of taxation? A. Reciprocal duties of support and protection. 17. A. Taxes should not operate retrospectively. B. Tax is generally for public purpose. D. Neither A nor B. 18. Which provision of the Constitution is doable taxation believed to violate? A. Equal protection guarantee.

19. Which limitation of taxation is the concept of “situs of taxation” based? D. Exemption of the government. 20. Which tax exemption is irrevocable? D. Both A and B 21. Which statement is incorrect? C. The government provides protection and other benefits while the people provide support. 22. Which is the most incorrect statement regarding taxes? C. There should be personal benefit enjoyed from the government before one is required to pay tax. 23. Statement 1: In the selection of the objects of taxation, the courts have no power to inquire into the wisdom, objectivity, motive, expediency, or necessity of a tax law. Statement 2: An imposition can both a tax and a regulation. Taxes may be levied to provide means for rehabilitation and stabilization of threatened industry. C. Both statements. 24. Which of the following acts in taxation is administrative by nature? C. Levy or distraint of taxpayers’ property for tax delinquency. 25. This refers to the privilege or immunity from a tax burden which others are subject to: B. Deduction. 26. Which is not a legislative act? C. Assessment of the tax? 27. Which of the following statements does not support the principle that tax is not subject to compensation or set-off? C. Taxes arise from law, not from contracts; 28. Statement 1: Taxation is the rule; exemption is the exception. Statement 2: Taxation may be used to implement the police power of the state. D. I and II are not true. 29. Which of the following powers of the Commissioner of Internal Revenue cannot be delegated? C. The power to compromise or abate any tax liability involving basic deficiency tax of 500,000 pesos and minor criminal violations. 30. When exemption from a tax imposition is silent or not clearly stated, which is true? A. Taxation applies since exemptions are construed against the government. 31. What is the basis of taxation? B. Constitutionality. 32. When the provisions of tax laws are silent as to the taxability of an item, which is true? D. Exemption applies since obligation arising from law is presumed; ignorance of the law is not an excuse.

33. Which is not legally tenable in refusing to pay tax? A. Absence of benefit from the government. 34. What is the primary purpose of taxation? B. To raise revenue.

Multiple Choice – Theory: Part 2 1. That all taxable articles or properties of the same class shall be taxed at the same rate underscores. A. Equality in taxation. 2. The Constitutional exemption of religious or charitable institutions refers only to B. Income tax. 3. An educational institution operated by a religious organization was being required by a local government to pay real property tax. Is the assessment valid? B. Yes, with respect to properties not actually devoted to educational purposes. 4. Which is not a Constitutional limitation? A. No tax law shall be passed without the concurrence of a majority of members of Congress. 5. Which of the following is not an inherent limitation of the power to tax? C. Tax laws shall be uniform and equitable. 6. The following are inherent limitations to the power of taxation except one. Choose the exception. D, Non-appropriation for religious purpose. 7. The following are limitations of taxation: C. Taxation is for public purpose. 8. The provisions in the Constitution regarding taxation are C. Grants and limitations to the power to tax. 9. The agreement among nations to lessen tax burdens of their respective subjects is called B. International comity. 10. The Constitutional exemption of non-stock, non-profit educational institutions refer to C. Property tax and income tax. 11. Which of the following violative of the principle of non-delegation? D. Allowing the Secretary of Finance and the BIR to issue regulation or rulings which go beyond the scope of a tax law. 12. Which of the following violates Constitutional provisions? C. Imposition of license for the sale of religious literature. 13. In order to phase-out a huge deficit, the President of the Philippines passed a law offering all taxpayers with previous tax delinquency to pay a minimum tax in exchange for relief from tax

assessment in the period of delinquency. Is this a valid exercise of taxation power? C. No, because the power of taxation is non-delegated. 14. 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 to Congress for approval. D. No. Tax bills shall originate from the House of Representatives. 15. 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 who are not subjected to tax. Is his contention valid? C. No, because the ordinance would cover all transplant specialist who would practice in Baguio. The uniformity rule would not be violated. 16. With the country under incessant shortage of sugar, the Philippine Congress enacted a law providing tax exemptions and incentives to can farmers without at the same time granting tax exemptions to rice farmers who produce the food the Philippines. Is the new law valid? A. Yes, since there is a valid classification of the taxpayers who would be exempted from tax. 17. Congress passed a law subjecting government-owned and controlled corporations (GOCCs) to income tax. Is the law valid? B. Yes, because GOCCs are not government agencies and are essentially commercial in nature. 18. The Philippine Congress enacted a law requiring foreign banks to withhold taxes earned by Filipino residents in their country to remit the same to the Philippine government. D. No, this is prohibited by the Constitution. 19. Which of the following normally pays real property tax? C. University of Pangasinan, a private proprietary educational institution. 20. Tax exemption bills are approved by D. Majority of the representatives constituting a quorum. 21. Which of the following is not a constitutional limitation to the power of tax? A. Nonimpairment of obligation or contracts. 22. The Japanese government invested 100,000,000 in a Philippine local bank and earned 10,000,000 interest. Which is correct? B. The income is exempt due to international comity.

Multiple Choice – Theory: Part 2 1. Select the correct statement. B. The lifeblood theory underscores that taxation is the most superior power of the State.

2. When a legislative body taxes persons and property, rights and privilege under the same taxable category at the same rate, this is referred to as compliance with the constitutional limitation of: A. Equity. 3. Which is not a legislative act? C. Determination of the subject of the tax. 4. The inherent powers of the State are similar in the following respect, except: A. They are inherent to the existence of the State. 5. Which is mandatorily observed in implementing police power? C. Public use. 6. Which is considered in the exercise of eminent domain? A. Public use. 7. The general power to enact laws to protect the well-being of the people is called? D. All of these. 8. Which of the following entities will least likely exercise the power of eminent domain? B. Water cooperatives. 9. In exercising taxation, the government need not consider A. Inherent limitations 10. Licensing of business or profession is an exercise of C. Eminent domain 11. Select the correct statement. B. Police power being the most superior power of the State is not subject to any limitation. 12. Which is principally limited by the requirement of due process? C. Taxation. 13. Statement 1: Congress exercise the power of taxation even without Constitutional delegation of the power to tax. Statement 2: Only the legislature can exercise the power of taxation, eminent domain, and police power. Which is correct? B. Statement 2. 14. Which of the following powers is inherent or co-existent with the creation of the government? C. Taxation. 15. Which power of the State affects the least number of people? C. Taxation. 16. Which of the following is not exercised by the government? A. Taxation. 17. Select the incorrect statement. B. Once a government is established, taxation is exercisable. 18. The following statements reflect the differences among the inherent powers except: D. Taxation, police power, and eminent domain are ways in which the government interferes with private right and property. 19. Statement 1: The Taxation power can be used to destroy if the law is valid.

Statement 2: A tax law which destroys things, business, or enterprises for the purpose of raising revenue is an invalid tax law. B. Statement 2. 20. Select the correct statement. D. The sumptuary purpose of taxation is to raise funds for the government. 21. Which of the following is not an inherent limitation of the power to tax? C. Tax laws shall be uniform and equitable. 22. Select the incorrect statement. D. Taxes should be collected only for public improvement. 23. Which of the following is not a constitutional limitation of the power to tax? D. Nondelegation of the taxing power. 24. Which of the powers of the State is the most superior? Which is regarded as the most important? B. Police power; Taxation.

CHAPTER 2 Exercise Drill No. 1 1. A consumption tax collected by non-VAT Businesses – Percentage Tax 2. Tax on gratuitous transfer of property by a living donor – Donor’s Tax 3. Tax that decreases in rates as the amount or value of the tax object increases – Regressive Tax 4. Tax collected upon persons who are not the statutory taxpayers – Indirect 5. Tax that is imposed based on the value of the tax object – Ad valorem 6. Tax for general purpose – General 7. Tax imposed by the national government – National 8. A tax on sin products non-essential commodities – Sin 9. Imposed on the gratuitous transfer of property upon death – Estate 10. Tax on residents of a country – Residency 11. Tax that remains at a flat regardless of the value of the tax object – Proportional 12. Tax which is collected on a per unit basis - Specific 13. Tax is collected upon the statutory taxpayer – Direct 14. Tax is imposed to regulate businesses or professions – Regulatory

15. Tax upon performance of an act or enjoyment of a privilege – Privilege

Exercise Drill No. 2 1. Refers to all income collections of the government – Revenue 2. It is an imposition for the support of the government – Tax 3. It is imposed upon land adjacent to public improvements – Special assessments 4. It is imposed on imported and exported commodities – Custom Duties 5. It is a charge imposed prior to the commencement of business or exercise of a profession – License 6. It is a post-activity rather than a pre-activity imposition – Tax 7. It is subject to compensation or set-off – Debt 8. It is a charge for the use of others’ property – Toll 9. It is an imposition intended to discourage an act – Penalty 10. It arises from contracts rather than from law – Excise Tax

Exercise Drill No. 3 Indicate the criteria for the selection of large taxpayer for each of the following: As to payment 1. Value Added Tax – More or less 200,000/quarter 2. Excise Tax – 1,000,000/year 3. Income Tax – 1,000,000/year 4. Withholding Tax 1,000,000/year 5. Percentage Tax – 200,000/year 6. Documentary Stamp Tax – 1,000,000/year

As to conditions and operations 1. Gross receipts or sales – 1,000,000,000 in a year

2. Net worth – 300,000,000 at year end 3. Gross purchases – 800,000,000 in the preceding year

Multiple Choice – Theory: Part 1 1. Which is not a source of tax law? B. BIR Rulings. 2. When tax is collected upon someone who is effectively reimbursed by another. The tax is regarded as A. Direct. 3. All are ad valorem taxes, except one. Select the exception. C. Real property tax. 4. Taxation power can be used to destroy. C. As an implement of police power. 5. Which is not a characteristic of tax? B. Its is generally payable in money. 6. Tax as to source is classified as A. Fiscal or regulatory. 7. Which of the following is a local tax? A. Value added tax. 8. Tax as to purpose is classified as B. Direct or indirect tax. 9. Tax as to incidence is classified as C. National or local tax. 10. Which is not a nature of tax? D. Generally payable in kind. 11. Taxes that cannot be shifted by the statutory taxpayer are referred to as A. Direct taxes. 12. Tax classifications as to object do not include B. Property tax. 13. Which is a local tax? B. Professional tax. 14. As to subject matter, taxes do not include C. Poll tax. 15. A tax that is imposed upon the performance of an act, the enjoyment of a privilege or the engagement in a profession is known as C. Excise tax. 16. Which is a national tax? D. Professional Tax. 17. Which of the following distinguishes license from tax? D. Pre-activity in application. 18. Which is correct? D. Special Assessment applies only when public improvement is made. 19. Tax as to determination of amount is classified as A. Fiscal or regulatory. 20. A. Tax must not violate Constitutional and inherent limitation. B. Tax must be uniform and equitable. C. Tax must be for public purpose.

D. Tax must be levied by the lawmaking body. E. Tax must be proportionate in character. F. Tax is generally payable in money. Which of the above is/are not an essential characteristic of a valid tax? D. None of the above. 21. Tax as to rates excludes D. Proportional Tax 22. To limit the production of an environmentally harmful commodity, Congress passed a law subjecting the sales of an environmentally unfriendly commodity to 10 pesos/kilo but a tax 5% is imposed on sales exceeding 100,00. Which is correct? B. This is an example of a regulatory tax. 23. Which is not an excise tax? A. Income Tax. 24. Which is an indirect tax? B. Donor’s Tax. 25. Which is not an ad valorem tax? B. Excise tax on cigar. 26. A tax that is imposed based on per unit or per head basis is known as A. Proportional tax. 27. Mr. Dela Cruz has a tax obligation to the government amounting to 80,000. Since he is leaving the country, he entered into a contract with Mr. Garcia wherein Mr. B shall pay the 80,000 tax in his behalf. On due date, Mr. Garcia failed to pay the tax. The BIR sent a letter of demand to Mr. Dela Cruz which he refused to pay. Which of the following statements is correct? D. The government should enforce Mr. A to pay because taxes are non-assignable. 28. The Philippine tax laws are, by nature, B. Civil. 29. Motor vehicles tax is an example of B. Privilege tax. 30. Which of the following statements is correct? C. A tax bill personally drafted by the president shall become a law after approval by congress. 31. Who issues revenue regulations? D. Commissioner of Customs. 32. Tax rulings are issued by the D. Commissioner of Internal Revenue. 33. Which of the following is limited in application? C. Tax treaties. 34. Which is not a source of ta...