TAXATION - Module 1-Principles WA PDF

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Module 1General PrinciplesDefinition: EDT original The following statements correctly described the power of the State to tax, except a. As a Power: It refers to the inherent power of an Independent State, co-extensive with sovereignty to demand contributions for public purposes to support the gover...

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Module 1 *General Principles* Choose the letter of the correct answer:

Definition: 1. EDT original The following statements correctly described the power of the State to tax, except a. As a Power: It refers to the inherent power of an Independent State, co-extensive with sovereignty to demand contributions for public purposes to support the government. b. As a Process: It passes a legislative undertaking through the enactment of laws by the Congress which will be implemented by the Executive Branch of the government through its Bureau of Internal Revenue to raise revenue for the inhabitants in order to pay the necessary expenses of the government. c. As a Means: It is a way of collecting and apportioning the cost of government among those who are privileged to enjoy its benefits. d. None of the above 2.

Taxation as defined: Statement 1: It is a power inherent in every sovereign state to imposed a charge or burden upon persons, properties or rights to raise revenues for the use and support of the government and to enable it to discharge its inappropriate functions. Statement 2: A power that is very broad and exercised both by the legislative and executive branch of the government. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true

3.

Which of the following is incorrect? a. Taxation is a process or means by which the Sovereign, through its law making body, raises income to defray the necessary expenses of the government b. Tax laws are civil and not penal in nature, although there are penalties provided for their violations c. Internal revenue laws are not political in nature d. The State can exercised the power of taxation only if it is expressly mentioned in the Constitution *** The power to tax is an inherent power. It need not be expressly mentioned in the Constitution for the State to exercise the same. Provisions in the constitution and other laws will serve as limitations, but not as a GRANT to the state the power to tax.

4.

EDT original The State, having sovereignty can enforce contributions (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 limitations upon the supremacy of tax power. c. Both “a” and “b”

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d.

Neither “a” nor “b”

Purpose of Taxation 5. 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. Examples of this are as follows, except: a. Taxation can strengthen anemic enterprises or provide incentive to greater production through grant of tax exemptions or creation of conditions conducive to their growth. b. Taxes on imports may be decrease to protect local industries against foreign competition or increased to encourage foreign trade. c. Taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in periods of slump to expand business and ward off depression. d. Taxes may be levied to reduce inequalities in wealth and income. *** The power to tax should be used to protect local industries. 6.

Which of the following statement relate to regulation purpose / objective of taxation. a. To provide funds or property with w/c the state promotes the general welfare & protection of its citizens. b. In the case of taxes levied on tobacco & alcoholic products or amusement places like night clubs, cabarets cockpits etc. c. The progressive system of taxation where the objective is to prevent the undue concentration in the hands of a few individuals. d. It does not only raise public revenue, but in the realm of tax exemption to tax relief.

7.

Statement 1: Regulatory tax is intended to achieve some social and economic end. Statement 2: Toll is a demand of ownership. It is paid for the use of another’s property and may be imposed only by the government. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true

8.

Which of the following could not be considered as a purpose of taxation? a. To raise revenue to support the government. b. To check inflation. c. To distribute the wealth of the nation. d. To impose monetary burden to the people.

9.

Statement 1: The purpose of taxation may also be “compensatory”, meaning, it may be used to make up for the benefit received (i.e., excise tax on gasoline consumed by vehicle owners using roads) Statement 2: Taxes may be imposed for the equitable distribution of wealth and income in society. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true

10. This is not a purpose of taxation a. To expropriate property for the promotion of the general welfare b. To reduce inequalities of wealth c. As protective tariff on imported goods to protect local producers against foreign competition d. To encourage the growth of home industries through the proper use of tax incentives

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“A” – exercise of police power Theory and Basis 11. On theoretical basis of taxation, which of the following statements 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 the means to carry them out. c. State needs taxation to exist, while people must support taxation because they need the presence of the state. d. “b” and “c” *** “a” is wrong because the power to tax is territorial. State can only exercise the power to tax within its territorial jurisdiction and it cannot be used to expand its territory 12. The existence of the government is a necessity and that the state has the right to compel all individuals and property within its limits to contribute a. Basis of taxation c. Scope of taxation b. Situs of taxation d. Theory of taxation *** Lifeblood or Necessity Theory 13. The reciprocal duties of support and protection between the people and the government a. Basis of taxation c. Scope of taxation b. Situs of taxation d. Theory of taxation Scope and Aspect of Taxation 14. Subject to inherent and constitutional limitations the power of taxation is regarded as supreme, plenary, unlimited and comprehensive a. Basis of taxation c. Scope of taxation b. Situs of taxation d. Theory of taxation 15. As to scope of legislative power to tax, which of the following is correct? a. The power to tax is supreme, plenary, comprehensive and without any limit because the existence of the government is a necessity. b. The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if the constitution provides otherwise. c. Congress has the right to levy a tax of any kind at any amount as it sees fit, even in the absence of any constitutional provision. d. The sole arbiter of the purpose for which taxes shall be levied is Congress, provided the purpose is public and the courts may not review the levy of the tax to determine whether or not the purpose is public. 16. That the legislative body can impose a tax at any amount underscores the legal truism that: a. Taxation is an inherent power of the state. b. Taxation is essentially a legislative power. c. Taxation is a very broad power of the state. d. Answer not given. 17. How broad is the power of the legislature to impose taxes? Answer 1: The legislature has limited discretion as to the persons, property or occupations to be taxed, where there are no constitutional restrictions, provided the property is within the territorial jurisdiction of the state. Answer 2:

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The legislature has the right to finally determine the amount or rate of tax, in the absence of any constitutional prohibitions and it may levy a tax of any amount as it sees fit. a. Answers 1 & 2 are false b. Answer 1 is true but answer 2 is false c. Answer 1 is false but answer 2 is true d. Answers 1 and 2 are true 18. Which of the following is incorrect description of taxation? a. Legislative and inherent for the existence of the government. b. Necessary and for public purpose c. Supreme and absolute power of the State d. The strongest of all inherent powers of the State. 19. The levying and imposition of tax and the collection of tax are processes which constitute the taxation system a. Basis of taxation c. Nature of taxation b. Aspect of taxation d. Theory of taxation 20. The following are the aspect of taxation I – Levy or imposition of the tax on persons, property or excises II – Collection of taxes already levied III- Sufficiency of governments 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 21. The official action of an officer authorized by law in ascertaining the amount of tax due under the law from a taxpayer is a. Assessment c. Deficiency b. Delinquency d. Distraint 22. Fixing the tax rate to be imposed is best described as a (an): a. Tax administration aspect. b. Tax legislative function. c. Aspect of taxation which could be delegated. d. Function that could be exercised by the executive branch. 23. All of the following are legislative aspect of taxation except: a. Selection of the object or subject of tax b. Valuation of property for taxation c. Fixing of tax rates d. Prescribing the general rules of taxation. 24. All of the following are administrative functions of taxation except: a. Selection of object of tax b. Equalization of assessment c. Valuation of property for taxation d. Collection of taxes. 25. Which of the following is correct? a. Fixing of tax rates b. Valuation of object of tax c. Collection of tax d. Assessment of tax liability

Legislative Yes Yes Yes No

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Administrative Yes No No Yes

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Inherent Powers of the State 26. They exist independent of the constitution being fundamental power of the state except a. Power of taxation c. Power of eminent domain b. Police power d. Power of recall 27. The power to acquire private property upon payment of just compensation for public purpose a. Power of taxation c. Power of eminent domain b. Police power d. Power of recall 28. The power to regulate liberty and property to promote the general welfare a. Power of taxation c. Power of eminent domain b. Police power d. Power of recall 29. The power to demand proportionate contribution from persons and property to defray the necessary expenses of the government a. Power of taxation c. Power of eminent domain b. Police power d. Power of recall 30. Which of the following may not raise money for the government a. Power of taxation c. Eminent domain b. Police power d. License Fees 31. The strongest of all inherent powers of the government is a. Power of taxation c. Power of eminent domain b. Police power d. Power of recall ←

Without money, the government can neither survive nor dispense any of its other powers and functions, effectively.

32. Which of the following has no power of taxation a. Provinces b. Cities

c. Barangay d. Barrios

33. Which of the following statement is wrong? A revenue bill a. Maybe recommended by the President to Congress b. May have a House version and a Senate version approved separately and then consolidated with both houses approving the consolidated version. c. May originate from the Senate and on which same bill the House of Representative may propose amendments. d. Must originate from the House of Representative and on which same bill the Senate may propose amendments. 34. Statement 1: The constitution is the source of the State’s taxing power. Statement 2: The police power of the government may be exercised through taxation. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 35. The least source of tax laws: a. Statutes b. Presidential decrees

c. Revenue regulations d. Tax treaties or conventions

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36. Statement 1: A revenue regulation must not be contrary to the provision of the law that it implement Statement 2: A revenue regulation cannot expand the provision of the law that it implements by imposing a penalty when the law that authorizes the revenue regulation does not impose a penalty. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 37. Our national internal revenue laws are a. Political in nature b. Penal and nature

c. Criminal in nature d. Civil in nature

38. Where does taxing power of the provinces, municipalities and cities precede from? a. Constitutional grant b. Legislative enactment c. Presidential decree or Executive act d. Local legislation 39. How will the local government units be able to exercise their taxing powers? a. By local legislation b. By authority conferred by Congress c. By the issuance of the Department of Finance d. By the help of the Bureau of Internal Revenue 40. When the power to tax is delegated to the local government a. Only the local executive can exercise the power. b. Only the legislative branch of the local government can exercise the power. c. The local executive and the legislative branch of the local government can exercise the power. d. Neither the local executive not the legislative branch of the local government can exercise the power. 41. Which statement is false? a. A tax is a demand of sovereignty while a toll is a demand of property ownership. b. Non-payment of a tax does not make the activity taxed unlawful. c. A grant of police power to a unit of local government carries with it a grant of the power to tax. d. Customs duty is a tax.  The power to tax is not an inherent power of the LGUs 42. Which statement gives the correct answer? That a feasibility study needs or need to look into the taxes of different political subdivisions of government which may be alternative sites of the business because a. Provinces, cities and municipalities must have uniform taxes between and among themselves b. The local taxes of political subdivisions need not be uniform with local taxes of another political subdivisions c. Business that are subject to national taxes are exempted from local business taxes d. Local business taxes may be credited against national business taxes 43. Which of the following statements is not correct? a. Only the national government exercises the inherent power of taxation. b. Local government units could exercise the power of taxation through legislated delegation.

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c. National legislation is exercised by Congress. d. Interpretation of Tax Laws is done by the Legislative branch of government. Construction of Tax Laws 44. In every case of doubt, tax statutes are construed a. Strictly against the government and the taxpayer b. Liberally in favor of the government and the taxpayer c. Strictly against the government and liberally in favor of the taxpayer d. Liberally in favor of the government and strictly against the tax payer ** Construed = Interpreted. 45. In every case of doubt tax exemption are construed a. Strictly against the government and the taxpayer b. Liberally in favor of the government and the taxpayer c. Strictly against the government and liberally in favor of the taxpayer d. Liberally in favor of the government and strictly against the taxpayer *** To be entitled to exemption, the law should be clear that the taxpayer is exempt, otherwise, the exemption claimed should be disallowed. 46. This rule is not applicable on the construction of tax laws a. If the law is repealed, taxes assessed before repeal of the law may no longer be collected. b. If the intent of the tax is not clear as to whether the taxpayer is covered by the tax obligation, the law shall be construed against the government. c. Where the intent to tax is clear and the taxpayer claims he is exempt from the tax obligation, the tax shall be construed against the taxpayer. d. Provisions intended for the security of the taxpayer or to insure equality or uniformity of taxation are mandatory. *** Application of tax laws should be prospective. implementation of a new law are still collectible.

Hence, taxes assessed before the

47. In the case of conflict between between the tax code and the generally accepted accounting principles(GAAP) a. GAAP shall prevail over the tax code b. Tax code shall prevail over GAAP c. GAAP and Tax code shall be both disregarded d. The taxpayer may choose between the GAAP or the Tax Code 48. Which of the following statements is not correct? a. A tax bill must only be applicable and operative after becoming a law. b. The effectivity of the tax law commences upon its approval. c. The applicability of the tax law covers the present and future transactions. d. Tax law is ex post facto in application.  Ex post facto means retroactive 49. Statement 1: A tax cannot be imposed without clear and express words for that purpose. Statement 2: The provisions of a taxing act are not to be extended by implication. a. Statements 1 & 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true

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50. Which of the following is not correct? a. In the absence of specific tax provision, taxes in general are not cancelable. b. Prescriptive period for assessment and collection is applicable to returnable taxes. c. The law on prescription being a remedial measure should be interpreted liberally in order to protect the taxpayer. d. The prescriptive period should be the shorter between the required filing date and the actual date of filing. Nature, Characteristics and Types 51. The following are the nature of taxation, except a. Inherent and sovereignty b. Essentially a legislative function c. Subject to inherent and constitutional limitation d. Subject to the approval of the people 52. Which of the following statements is true? a. Power to tax involves power to destroy b. In taxpayer’s suit, the government can sue taxpayers not demanding receipts from business for their transactions c. Double taxation is resorted to by taxing authority to increase tax collection d. Power of taxation is absolute or without limitations *** If the source is illegal, the State has the power to destroy the source. 53. EDT ORIGINAL “The power to tax involves power to destroy” means: a. The power to tax is viewed as the power to destroy in the sense that a lawful tax cannot be defeated just because its exercise would be destructive or would bring about insolvency to a taxpayer. b. The principle implies that an imposition of lawful regulatory taxes would be destructive to the taxpayers and business establishments because the government can compel payment of tax and forfeiture of property through the exercise of police power. c. Both “a” and “b” d. Neither “a” nor “b” 54. There can be no tax unless there is a law imposing the tax is consistent with the doctrine of a. Uniformity in taxation b. Due process of law c. Non-delegation of the power of tax d. The power of taxation is very broad and the only limitation is the sense of responsibility of the members of the legislature to their constituents 55. “The tax should be based on taxpayer’s ability to pay”. In relation to t...