Exercise 1 Fundamental Principles of taxation PDF

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ExercisesTRUE OR FALSE The three fundamental powers of the state may be exercise only by the government. Taxation is a process or means by which the sovereign, through its law making body raises income to defray the expenses of the government. Eminent domain may be exercise even by the public servic...

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Exercises TRUE OR FALSE 1. The three fundamental powers of the state may be exercise only by the government. 2. Taxation is a process or means by which the sovereign, through its law making body raises income to defray the expenses of the government. 3. Eminent domain may be exercise even by the public service corporation and public entities. 4. Police power regulates both liberty and property 5. Taxes are raised to cover the cost of governance. 6. Toll is one of the taxes collected by the government. 7. License fee is imposed in the exercise of police power. 8. License fee is imposed to raise revenue. 9. Tax is generally unlimited because it is based on the needs of the State 10. The amount imposed in the exercise of police power depends on whether the activity is useful or not. 11. The distinction of the tax from permit or license fee is that a tax is one in which there is generally no limit on the amount that may be imposed. 12. Debt, as distinguished from tax, may be paid in kind. 13. Under the equal protection clause of the constitution, all person subject to legislation shall be treated alike under dissimilar circumstances and conditions, both in the privileges conferred and liabilities imposed. 14. Tax laws are civil and penal in the nature because there is penalty provided in case of violation. 15. Special assessment is a tax 16. Special assessment is imposed on persons, property and property rights. 17. The Philippine government may subject the land where embassies of foreign governments are located to real property taxes. 18. A revenue bill may originate from the Senate and on which same bill the House of Representative may propose amendments. 19. A person may refuse to pay on the ground that he will not receive a benefit from the tax. 20. In the exercise of the power of taxation, the State can tax anything at any time. 21. In cases of deductions and exemptions, doubts shall be resolved liberally in favor of the government 22. Levying of local government taxes should be exercise only by the legislative branch of the local government. 23. The taxing power of provinces, municipalities and cities precede from a constitutional grant. 24. Taxation is regressive when their rate goes up depending on the resources of the person affected. 25. No law granting any tax exemption shall be passed without the concurrence of 2/3 of all members of the Congress. 26. There is no constitutional prohibition against double taxation in the Philippines. It is something not favored, but nevertheless permissible. 27. “Global system of income taxation” means separate graduated rates are imposed on the different types of income.

28. One of the schemes of shifting the incidence of the tax burden is by transferring the sales tax of a manufacturer to the distributor, then in turn to the wholesaler, to the retailer and finally to the consumer. 29. Transformation is 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. 30. In case of ambiguity, tax laws shall be interpreted liberally in favor of the government.

MULTIPLE CHOICE Definition, Purpose, Theory and Basis 1. Which of the following statement is incorrect? a. Taxes are the revenues raised in the exercise of the police power of the State. b. One of the special characteristics of the tax is it is unlimited in amount. c. The three fundamental powers of the State are inherent in the state and may be exercised without the need of any constitutional grant. d. All of the above

2. The State having sovereignty can enforce contribution (tax) upon its citizens even without a specific provision in the Constitution authorizing it. Which of the following will justify the foregoing statement? a. It is so because the State has the supreme power to command and enforce obedience to its will from the people within its jurisdiction b. Any provision in the constitution regarding taxation does not create rights for the sovereignty to have the power to tax but it merely constitutes limitation upon supremacy of tax power. c. Both “a” and “b” d. Neither “a” nor “b” 3. Statement 1: The distinction of tax from permit or license fee is that a tax is imposed for regulation Statement 2: Non-payment of tax does not necessarily render a business illegal. a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d. Both statements are incorrect

4. The primary purpose of taxation is to raise revenue for the support of the government. However, taxation is often employed as a devise for regulation by means of which, certain effects or conditions envisioned by the government may be achieved such as:

a. Taxation may be used to provide incentive to greater production through grant of tax exemptions. b. Taxation can strengthen weak enterprises by creating condition conducive to their growth through grant of tax exemptions. c. Taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in period of slump to expand business and ward off depression. d. All of the above 5. Which of the following statements is correct? a. The purpose of taxation may also be “compensatory” meaning, it may be used to make up for the benefit received. b. Taxes may be imposed for the equitable distribution of wealth and income in society. c. Both “a” and “b” d. Neither “a” and “b” 6. Which theory in taxation states that without taxes, a government would be a 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 7. On theoretical basis of taxation, which of the following statement is true? a. People pay taxes which their government uses to expand its powers and territorial domination. b. People demand from their government certain responsibilities and then provide this government with means to carry them out. c. State needs taxation to exist, while its people must support taxation because they need the presence of the state. d. “b” and “c” 8. Incidence of taxation means a. Shifting of tax b. Refunds of tax

c. Payment of tax d. Imposition of tax

9. 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 10. Statement 1: Symbiotic relationship relation is the reason why the government would impose taxes on the income of the resident citizens derived from sources outsides the Philippines.

a. b. c. d.

Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect

11. A law was passed by the congress which granted tax amnesty to those who have not paid income taxes for a certain year and 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 that 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 be grant amnesty 12. Congress passed a new law imposing taxes on income earned out of particular activity that was not previously taxed. The law, however taxed incomes already earned within the fiscal year when the law took effect. Is the law valid? a. No, because the laws are intended to be prospective, not retroactive b. No, the law is arbitrary in that it takes income that has already been spent c. Yes, since the tax laws are the lifeblood of the government d. Yes, tax laws are an exception; they can be given retroactive effect. 13. Due to an uncertainty whether or not a new tax law is applicable to printing companies, ABC Printers submitted a legal query to the BIR on that issue. The BIR issued a ruling that printing companies are not covered by new law. Relying on the ruling, ABC Printers did not pay the said tax. Subsequently however, the BIR reversed the ruling and issued a new one stating that the tax covers printing companies. Could the BIR assess ABC Printers for back taxes corresponding to the years before the new ruling? a. Yes, because taxation is the rule and exemption is the exception b. Yes, because taxes are the lifeblood of the government c. No, the BIR is not allowed to reverse its ruling d. No, reversal of a ruling shall not be given a retroactive application if it will be prejudicial to the taxpayer 14. Statement 1: The aspects of taxation are shared by the legislative and executive branches of the government. Statement 2: Taxes should be prospective and should not be given retroactive effect because they are burdens. a. b. c. d.

Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect

15. The power of taxation is legislative in character. Which of the following is a legislative function? A B C D  Fix with certainty the amount of tax YES NO YES YES  Identify who should collect the tax YES YES NO YES  Determine who should be subject to tax YES YES NO NO 16. The following are aspects of taxation I – Levy or imposition of the tax on persons, property or exercises II – Collection of taxes already levied III – Sufficiency of the government sources to satisfy its expenditure a. I, II and III c. I and III only b. I and II only d. II and III only 17. Statement 1: Inherent powers of the state exist independent of the constitution Statement 2: The taxing power of the local government units precede from a constitutional grant a. b. c. d.

Statement 1&2 are false Statement 1 is true but statement 2 is false Statement 1 is false but statement 1 is true Statement 1 and 2 are true

18. Statement 1: Taxation and Police Power may be exercised simultaneously Statement 2: In the exercise of taxation, the State can tax anything at anytime and any amount a. b. c. d.

Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect

19. Statement 1: The power of taxation must first be expressly granted, either by law or by the Constitution, before the State may validly exercise it. Statement 2: The Philippine government may subject the land where embassies of foreign governments are located to real property taxes. a. b. c. d.

Only statement 1 is correct Only statement 2 is correct Both statements are correct Both statements are incorrect

20. Which of the following may not raise money for the government? a. Power of taxation b. Police Power c. Power of Eminent Domain d. Privatization of the government’s capital assets 21. All of the following are legislative aspect of taxation except

a. b. c. d.

Selection of object of tax Equalization of assessment Valuation of property for taxation Collection of taxes

22. One of the Following is not a characteristic or an element of tax a. It is levied by the legislature b. It is payable in money or in kind c. It is proportionate in character d. It is enforced contribution 23. The following constitute double taxation, except one a. Both taxes are imposed in the same amount b. Both taxes are levied for the same purpose c. Both taxes are imposed by the same taxing authority d. Both taxes are imposed upon the same person 24. The least source of tax laws a. Statutes b. Presidential decree

c. Revenue regulations d. Tax treaties or convention

25. Tax which is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another a. Direct c. Excise b. Indirect d. Income 26. Tax which is demanded from the person whom the law intends or desire to pay it a. Direct b. Indirect

c. Excise d. Income

27. Tax levied for a particular or specific purpose irrespective of whether revenue is actually raised or not a. Revenue tax c. Specific tax b. Regulatory tax d. Ad valorem tax 28. Tax based on a fix percentage of the amount of property, income or other basis to be taxed a. Progressive c. Regressive b. Proportional d. Indirect 29. Tax where the rate decreases as the tax base increases a. Progressive c. Regressive b. Proportional d. Indirect 30. Tax where the rate increases as the tax base increases a. Progressive c. Regressive b. Proportional d. Indirect 31. The use of illegal or fraudulent means to avoid or defeat the payment of tax

a. Exemption b. Shifting

c. Avoidance d. Evasion

32. The exploitation by the taxpayer of illegally permissible alternative tax rates or methods of assessing taxable property or income, in order to reduce tax liability. It is otherwise known as tax minimization a. Tax exemption c. Tax avoidance b. Tax evasion d. Transformation 33. Transfer of the tax burden by one whom tax is assessed to another a. Shifting c. Transformation b. Capitalization d. Tax Exemption 34. Which of the following statements is correct? I. Shifting will result in increase prices II. Tax evasion is also known as tax dodging a. I only b. II only

c. I and II d. Neither I nor II

35. _____________ is finding out means of improvement in production so as savings would compensate for taxes paid by manufacturers or producers. a. Shifting c. Transformation b. Capitalization d. Tax dodging 36. Which statement is wrong? a. A tax is demand of sovereignty b. A toll is demand of ownership c. A special assessment is a tax d. Customs Duty 37. Which of the following is not a characteristics of debt? a. Generally arises from contract b. Payable only in money c. Assignable d. Custom duty is tax 38. Debt as distinguish from tax a. Based on law b. May be paid in kind c. Does not draw interest except when delinquent d. Generally not subject to set off or compensation

39. The distinction of a tax from the permit or license fee is that a tax is

a. b. c. d.

Imposed for regulation One which involves exercise of police power One in which there is generally no limit on the amount that may be imposed Answer not given

40. Tax as distinguish 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

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