Principles of Taxation PDF

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LEAD TAX 2101 Principles of Taxation Page 1 of 17MULTIPLE CHOICES (ADAPTED)- WITH SUGGESTED ANSWERS The process by which the sovereign raises income to defray the expenses of the government is called (RPCPA) A. subsidy B. tariff C. taxation D. tribute One of the characteristics of internal revenue t...

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MULTIPLE CHOICES (ADAPTED)- WITH SUGGESTED ANSWERS 1. A. B. C. D.

The process by which the sovereign raises income to defray the expenses of the government is called (RPCPA) subsidy tariff taxation tribute

2. A. B. C. D.

One of the characteristics of internal revenue taxes is that they are (RPCPA) Criminal in nature Penal in nature Political in nature Generally prospective in application

3. In case of conflict between tax laws and generally accepted accounting principles (GAAP) (RPCPA) A. Both tax laws and GAAP shall be enforced B. GAAP shall prevail over tax laws C. Tax laws shall prevail over GAAP D. The issue shall be resolved by the court 4. Which of the following has no power of taxation? (RPCPA) A. provinces B. cities C. barangays D. Barrios 5. “Schedular system of income taxation” means (RPCPA) A. All types of income are added together to arrive at gross income. B. Separate graduated rates are imposed on different types of income C. Capital gains are excluded in determining gross income D. Compensation income and business/professional income are added together in arriving at gross income. 6. Which of the following statements is true? A. Opinions of legal luminaries are sources of tax laws. B. The Constitution grants exemption from all kinds of taxes to religious and charitable organizations. C. Because the power to tax is unlimited, comprehensive, plenary and supreme, the power to tax can reach over into any jurisdiction to seize upon person or property. D. The “benefits-protection theory” is the source of the “doctrine of symbiotic relationship”. 7. One of the following is a primary purpose of taxation A. Protection of local industries against foreign competition through imposition of high customs duties on imported goods B. Reduction of inequalities in wealth and income by imposing progressively higher tax rates C. To secure revenue for the support of the government D. Strengthening of anemic enterprises by giving tax exemptions. 8. Which of the following is not a secondary purpose of tax? A. To serve as key instrument of social control B. To effect more equitable distribution of wealth among people C. To achieve social and economic stability D. To raise revenue to defray the necessary expenses of the government. 9. Which is the best answer? A tax reform at any given time underscores the fact that (RPCPA) A. Taxation is an inherent power of the state. B. Taxation is essentially a legislative power C. Taxation is a power that is very broad D. The state can and should adopt progressive taxation 10. The legislative body can impose a tax at any amount underscores the legal truism that taxation is A. An inherent power of the tax B. A very broad power of the state C. Essentially a legislative power D. For public purpose 11. All of the following, except one, are canons of a. sound tax system A. Fiscal adequacy B. theoretical justice C. Administrative feasibility D. inherent sovereignty 12. Under the basic principle of sound tax system, the government should not incur a deficit. (RPCPA) A. Theoretical justice B. Administrative feasibility C. Fiscal Adequacy D. None of the above 13. The following, except one, are basic principles of a sound tax system A. It should be capable of being effectively enforced. B. It must be progressive C. Sources of revenue must be sufficient to meet government expenditures and other public needs.

LEAD TAX 2101 Principles of Taxation

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D. It should be exercised to promote public welfare. 14. Real property taxes should not disregard increases in the value of real property occurring over a long period of time. To do otherwise would violate the canon of a sound tax system referred to as (BEQ) A. theoretical justice B. fiscal adequacy C. administrative feasibility D. symbiotic relationship 15. Which of the following is not one of the canons of a sound tax system? A. Quantifiability B. Equality C. Certainty D. Convenience 16. Which theory in taxation states that without taxes, a government would be paralyzed for lack of power to activate and operate it, resulting in the destruction? (BEQ) A. Power to destroy theory B. Lifeblood Theory C. Sumptuary theory D. Symbiotic doctrine 17. Congress passed a sin tax law that increased tax rates on cigarettes by 1,000%. The law was thought to be sufficient to drive many cigarette companies out of business, and was questioned in court by a cigarette company that would go online out of business because it would not be able to pay the increased tax. The cigarette company is ______________ (BEQ) A. wring because taxes are the lifeblood of the government B. wrong because the recognizes that the power to tax is the power to destroy C. correct because no government can deprive a person of his livelihood D. correct because Congress, in this case, exceeded the power to tax 18. Which statement below expresses the lifeblood theory? A. The assessed taxes must be enforced by the government B. The underlying basis of taxation is government necessity, for without taxation, a government can neither exist nor endure. C. The power of Taxation is an arbitrary method of exaction by those who are in seat of power D. The power of taxation is inherent power of the sovereign to impose burdens upon subjects and objects within its jurisdiction of the purpose of raising revenues. 19. 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 it results to the destruction of the property rights of 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. 20. The requirement of equality or theoretical justice is complied with if the tax is A. progressive B. regressive C. ad valorem D. specific 21. The power of taxation can only be exercised by the lawmaking body A. subject to constitutional and inherent limitations B. equality or theoretical justice C. legislative in character D. inherent in sovereignty 22. The President of the Philippines and the Prime Minster of Japan entered into an executive agreement in respect of 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 the Philippine income taxes. What basic characteristic of taxation has been violated by this agreement? A. inherent limitation B. theoretical justice C. legislative in character D. administrative feasibility 23. Although the power of taxation is basically legislative in character, it is not the function of the Congress to (BEQ) 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 statement gives the correct answer? That a feasibility study needs or need to look into taxes of different political subdivisions of government which may be alternative sites of the business because (RPCPA) A. Provinces, cities and municipalities must have uniform taxes between and among themselves B. The local taxes of a political subdivision need not be uniform with the local taxes of another political subdivision. C. Businesses that are subject to national taxes are exempted from local business taxes. D. Local businesses taxes may be credited against national business taxes.

25. 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. 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 lawmaking A. False, False B. False, True C. True, True D. True, False 26. Those restrictions on the exercise of the power of taxation that are found in the constitution or implied from its provisions A. theoretical justice B. legislative in character C. inherent limitations d. constitutional limitations 27. Which of the following statements is not correct? A. Taxes may be 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. For 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 powers. 28. One of the following is not an inherent limitation on the exercise of the power of taxation— A. international comity B. double taxation C. non-delegation of the legislative power to tax D. territoriality 29. The City Council passed an ordinance imposing an occupation ta on an air conditioning technician. Conde is the only person with such in the city. He challenged the validity of the ordinance as being discriminatory since he is the only one adversely affected. A. The contention of Conde is tenable B. The ordinance is unconstitutional because Conde is denied of his right to equal protection of the law. C. The contention of Conde is not justified because the rule on uniformity is not violated considering that the ordinance would also be imposed on all air conditioning technicians who may come within the jurisdiction of the city. D. The issue on validity or invalidity of the ordinance should be set aside. 30. Those who have more income should pay more income tax, while minimum wage earners should be exempt A. Uniformity of taxation B. Equality of taxation C. Due process of law D, Non-delegation of legislative power 31. All subject or objects that are similarly situated are treated alike as to the burden that may be imposed and the benefits that may result A. equitable B. proportional C. uniformity D. progressive 32. A tax law is not violative of the due process clause when it is A. arbitrary B. discriminatory C. excessive D. proportionate 33. Which of the following is violative of the uniformity rule in taxation? A. Different tax rates on boarding stables for racehorses and boarding horses are not for racing; B. Wholesale dealers in oil are subject to occupation tax while wholesale dealers in other articles such as sugar, bacon, coal, iron and other things are not so subject; C. A road users’ tax imposed on all motor vehicles registered and operating in the City of Manila but does not subject vehicles not registered therein but also operating temporarily in the said city. D. A tax of P2 per square meter or fraction thereof is imposed on every billboard or sign anywhere in the country. 34. The Lung Center of the Philippines, a charitable institution, is erected in the middle of twelve hectare lot: I. A big at its ground floor is being leased to private parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as their private clinics for their patients whom they charge for their professional services. II. The rest of the proportions of the building are used for its patients, whether paying or non-paying. III. Almost one-half of the entire area of the lot on the left side of the building is vacant IV. A big portion on the right side is being leased for commercial purposes to a private enterprise known as the Elliptical Orchids & Garden Center. Which portion is subject to real property tax? A. I only B. I and II C. III. and IV D. I, III, and IV

35. Statement I: The constitutional exemption on income taxes, property taxes, and customs duties is allowed on nonstock, non-profit educational institutions only. Statement II: A building being leased by its owner to a private educational institution for used as classrooms is exempt from property tax. Statement III. Income of a non-stock, non-profit educational institution run by the Archdiocese is exempt from tax provided that the incomes are actually, directly and exclusively used for educational purposes Which of the statements are correct? A. Statement 1 only B. Statements 1&2 C. Statement 2 only D. All of them 36. Which of the following statements is not correct? A, An inherent limitation of taxation may be disregarded by the application of a constitutional limitation. B. The property of an educational institution operated by a religious order is exempt from property tax, but its income is subject to income tax. C. The prohibition of delegation by the state of power of taxation will still allow the Bureau of Internal Revenue to modify the rules on time for filing of returns and payment of taxes. D. The power of taxation is shared by the legislative and executive departments of government. 37. Business College is a non-stock, non-profit educational institution. It owns a 5-hectare lot one-half of which is being used as its school campus while the other half is vacant. To cope with the increasing operating costs and to upgrade its facilities, BC plans to do the following effective January 1, 2016: (1) rent out to a marketing firm the vacant portion of the lot; (2) increase tuition fees by 10% in accordance with government regulations; and (3) import 20 sets of computers for use in its computer courses. Which of the following questions is answerable by “Yes”? A. Is BC subject to real estate tax on the one-half portion to be rented out to a business establishment? B. Will it be exempt from income tax on its rental to the marketing firm? C. Will the increase in tuition fees be subject to income tax if it results to a net income from school operations? D. Will it be subject to customs duties on the importation of the computers? 38. The Bicol School of Business and Arts, a proprietary educational institution which is offering primary, secondary and tertiary education, is registered with and accredited by the Department of Education and the Commission on Higher Education Which of the following is exempt from tax? What kind of tax? A. The importation of laboratory equipment – from customs duties B. The school building being rented by the school – from real property tax C. A portion of the school building being leased to a fast-food chain – from real property tax D. The income from operation – from income tax 39. Assuming that the school in the preceding number is a non-stock non-profit educational institution. Which of the following is subject to tax? What kind of tax? A. The school building owned by the school – from real estate tax B. The school building being rented by the school – from real property tax C. A portion of the school building being leased to fast food chain – from real property tax D. The income from operation – from income tax 40. The head priest of the religious sect Tres Personas Solo Dios, as the corporation sole, rented a 5,000 sq. m. lot registered its name for use as school site of a school organized for profit. The sect used the rentals for the support and upkeep of its priests. The rented lot is (BEQ) A. not exempt from real property taxes because the user is organized for profit B. exempt from real property taxes since it is actually, directly and exclusively used for religious purposes C. not exempt from real property taxes since it is the rent, not the land, that is used for religious purposes D. exempt from real property taxes since it is actually, directly and exclusively used for educational purposes 41. The Municipality of Monte Cristo has a ten hectare cemetery consisting of four different cemeteries which are owned by different entities. Which of the following is subject to real estate tax? A. Cemetenterio Municipal del Monte Cristo – a government cemetery owned by the municipality which was established for the purpose of using it as a burial ground of the paupers in Monte Cristo. B. Monte Cristo Catholic Cemetery – owned by the catholic church; payments are remitted to the catholic church and for the improvement of the cemetery. C. Last Trip Memorial Park – owned by a corporation where dividends are distributed to the shareholders at the end of the year. D. Quita-Quita Memorial Park – owned by an association consisting one hundred different families; each family owns several square meters of lot; not a single portion is held for sale to either member or non-member of the association. 42. Lualhati Educational Inc., a stock educational institution organized for profit, decided to lease for a commercial use a 1,500 sq. m. portion of its school. The school actually, directly and exclusively use the rents for the maintenance of its school’s building, including payment of janitorial services. Is the leased portion subject to real property tax? A. Yes, since Lualhati is a stock and for profit educational institution B. No, since the school actually, directly and exclusively use the rents for educational purposes C. No, but it may be subject to income taxation on the rents it receives D. Yes, since the leased portion is not actually, directly and exclusively used for educational purposes 43. All appropriation, revenue or tariff bills, bills authorizing increase of a public debt, bills of local application, and private bills shall originate exclusively in the A. office of the president B. House of the representatives C. Senate D. Supreme Court

44. Which statement is wrong? A. Must originate from the House of Representatives and on which same bill the Senate may propose amendments. B. May originate from the senate and on which same bill the House of Representatives may propose amendments. C. May have a house version and senate version approved separately D. May be recommended by the president to Congress 45. Congressman Luis R. Villafuerte of the 3rd District of Camarines Sur and Senator Juan Ponce Enrile sponsored a bill in the House of Representatives and the Senate, respectively, increasing the personal exemptions of individual taxpayers as well as granting tax exemptions to minimum wage earners. Which of the following is correct? A. The Senate bill should be discussed ahead of the House bill B. The Senate and House bill may be discussed at the same time in both houses C. The house bill should be discussed ahead of the senate bill D. No priority each bill can be discussed ahead of the other. 46. No law granting any tax exemption shall be passed without the concurrence of A. majority of all members of the Congress B. 2/3 vote of all members of the congress C. ¾ vote of all members of the Congress D. Unanimous vote of all members of the Congress 47. Which of the following statement is incorrect with respect to the power of the President? A. Congress may authorize the president to fix within specified limits tariff rates, import and export quotas, tonnage and wharfage dues, and other duties and imposts within the framework of the National Development Program of the government B. The president can veto any particular item in a revenue or tariff bill, but the veto shall not affect the items or items which he does not object C. The power of taxation can be delegated to the President of the Philippines D. The President of the Philippines is empowered to grant tax exemption on certain class of taxpayers. 48. Which of the following statements is incorrect? A. No person shall be imprisoned for non-payment of debt or non-payment of taxes B. The passage of laws granting tax exemptions requires the concurrence by a majority of all the members of Congress. C. The Supreme Court’s jurisdiction over tax cases cannot be impaired. D. The revenues and assets of non-stock, non-profit educational institutions and donations for educational purposes are exempted from taxes and duties. 49. They restrict the exercise of the power of taxation although they are not embodied in the Constitution A. theoretical justice B. legislative in character C. inherent limitation D. constitutional limitations 50. 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. the payment is passed in audit by the COA D. it is part of the lawmaker’s pork barrel. 51. A tax must be appropriated and spent for public pu...