INCOME TAXATION

Basic Principles of Taxation

Multiple Choice

1. The distinction of a tax from permit or license fee is that a tax is:
a) Imposed for regulation
b) One which involve an exercise of police power
c) One in which there is generally no limit on the amount that maybe imposed
d) Answer not given

2. One of the characteristic of a tax is that:

a) It is generally based on contract c) It is generally assignable
b) It is generally payable in money d) Answer not given

3. One of the characteristic of our internal revenue laws is that they are:
a) Political in nature c) Generally prospective in nature
b) Penal in nature d) Answer not given

4. Police power as distinguished from the power of eminent domain is:

a) Just compensation is received by the owner of property
b) Maybe exercised by private individuals
c) Superior to the non-impairment clause of obligations and contract under the constitution
d) Property is taken by the government for public purposes

5. A tax wherein both the incidence of or the liability for the payment of the tax as well as the burden of
the tax falls on the same person
a) Direct tax c) Indirect tax
b) Personal tax d) Property tax

6. 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
d) It should be exercised to promote public welfare

7. 1st statement: Our constitution does not prohibit double taxation

2nd statement: If double taxation occurs, the tax payers may seek relief under uniformity rule or
the equal protection guarantee.

a) 1st statement is correct, 2nd statement is wrong c) Both statements are wrong
b) 1st statement is wrong, 2nd statement is correct d) Both statements are correct

8. The following are constitutional limitations on the power of taxation except one:
a) Due process of law
b) No imprisonment for non-payment of a debt or a poll tax
c) Equal protection of the law
d) Prohibition of double taxation

9. Which one of the following is not the characteristic of the state power to tax?
a) It is inherent in the sovereignty
b) It is legislative in character
c) It is based on the ability to pay
d) It is subject to the constitutional and inherent limitations

10. A kind of tax system where rates increases as the tax base increases:
a) Degressive Tax c) Regressive Tax
b) Proportional Tax d) Progressive Tax

11. One of the following is not a direct tax:

a) Immigration Tax c) Income Tax
b) Transfer Tax d) Value Added Tax

12. One is not a characteristic or element of a tax:

a) It is levied by the legislation
b) It is payable in money or in kind
c) It is proportional in character
d) It is an enforced contribution

13. If there is a conflict between the tax laws (NIRC) and the Philippine Financial Reporting Standards
(PFRS):
a) Both tax laws and PFRS shall be enforced
b) The issue shall be resolved by the courts
 c) PFRS shall prevail over the tax law
d) Tax law shall prevail over the PFRS

14. Tax as distinguished from license fees:

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

15. One of the following has no power to tax:

a) Provinces c) Government Corporation
b) Cities d) Barangays

16. Which of the following is not an example of excise tax:

a) Transfer Tax c) Sales Tax
b) Real Property Tax d) Income Tax

17. The following are the similarities of the power of taxation, eminent domain and police power except:
a) Are necessary attributes of sovereignty
b) Interfere with private rights and properties
c) Affect all persons or the public
d) Are legislative in implementation

18. Tax of a fixed proportion of the value of the property with respect to which the tax is assessed and
requires the intervention of assessors or appraisers to estimate the value of such property before the
amount due from each taxpayer can be determined is known as:
a) Specific Tax c) Ad valorem tax
b) Special or regulatory tax d) Answer not given

19. The nature of taxation are the following except one, which is it:
a) It is inherent in the state/sovereignty
b) Only the government benefits from it
c) It is a mean by which the state generates revenues
d) The citizens/constituents are benefiting from it

20. Which of the following is not among the basic principles of a sound tax system?
a) Theoretical Justice c) Assessment and Collection of Taxes
b) Fiscal Adequacy d) Administrative Feasibility

21. The defense available to a taxpayer who is required to pay excessive taxes
a) That the tax is levied for religious purposes
b) Due process of law
c) Equal protection of the law
d) Non-impairment of obligations of contact

22. Without revenue raised from taxation, the government will not survive resulting in detriment to society
a) Lifeblood Theory c) Tax evasion
b) Basis of Taxation d) Symbiotic relationship

23. A taxpayer gives the following reasons in refusing to pay a tax. Which of his reasons is not
acceptable for legally refusing to pay the tax?
a) That he has been deprived of due process.
b) That there is lack of territorial jurisdiction.
c) That the prescriptive period for the tax has elapsed.
d) That he will derive no benefit from the tax

24. This is a prerogative of escaping or diminishing a tax liability through availment of ways allowable by
law or not contrary to law to mitigate tax liability
a) Tax exemption c) Tax assessment
b) Tax avoidance d) Tax evasion

25. A rule in taxation which states that all taxable persons and property of the same class are taxed at the
same rate is:
a) Uniformity in taxation c) Scope of taxation
b) Theory of taxation d) Situs of taxation

26. The country that has the jurisdiction or right to levy and collect the tax is:
a) Scope of taxation c) Situs of taxation
b) Theory of taxation d) Equality in taxation

27. A tax must be imposed for public purpose. Which of the following is not a public purpose?
a) National defense c) Public education
b) Improvement of the sugar industry d) None of the above
28. The amount required is dictated by the needs of the government in
a) License fee c) Toll
b) Tax d) Debts

29. No person shall be imprisoned for non-payment of

a) Property tax c) Poll tax
b) Excise tax d) Answer not given

30. Taxation is legislative in nature, except

a) The tax power is primarily vested in the Congress
b) The tax power can be exercised by local legislative body
c) The exercise of tax power may be subject to guidelines and limitations as the congress may
provide, consistent with the basic policy of local autonomy
d) The tax law may be enacted by the local chief executive

31. A non-payment of tax has a civil liability (payment of tax) and a criminal liability (fine and/or
imprisonment).

Statement 1: A civil case has to be filed in court apart of a criminal case to be filed in court.

Statement 2: A case filed with the Court of Tax Appeals covers both the civil and criminal
aspects of the case.

a) True, true b) False, false c) True, False d) False, true

32. Statement 1: A tax that is allowed by law to be passed on by a taxpayer to another is called
Indirect tax

Statement 2: Business taxes which are not allowed by law to be passed on by the sellers of
goods and services to buyers are nonetheless imperceptibly passed on because
they are factored in on the selling price.

a) True, true b) False, false c) True, false d) False, true

33. Which statement is false?

a) A law that imposes a tax on sugar mills and centrals where the revenue collected will be used to
improve the sugar industry is a tax for a public purpose, and the law is constitutional
b) A law that imposes a tax on movie goers in a city, where the revenues will be used to improve
flood control infrastructures in the low areas in the city is constitutional
c) A law that gives tax privileges to manufacturers in defined industrial areas, which are not enjoyed
by other manufacturers elsewhere, is not discriminatory and is constitutional.
d) None of the above

34. One of the following is false:

a) Police power and license fee are for purposes of regulation
b) Any license fee should only raise an amount necessary to carry out regulation
c) The power to impose a license fee does not carry with it the power to impose a tax
d) A business or activity subject to a license fee does not become illegal because no license fee was
paid for it

35. As a basic principle of taxation, that “Taxes must be based on the taxpayer’s ability to pay” is called
a) Equality in taxation
b) Ability to pay theory
c) Theoretical justice
d) Equality in taxation

36. Which of the following may not raise money for the government?
a) Power of taxation
b) Police power
c) Eminent domain
d) None of the above

37. Which is not an essential characteristic of tax?

a) It is unlimited as to amount
b) It is payable in money
c) It is proportionate in character
d) It is a regular payment

38. Which is correct? The Bureau of Internal Revenue have the following:
a) Commissioner and one Deputy Commissioner
b) Commissioner and two Deputy Commissioners
c) Commissioner and three Deputy Commissioners
d) Commissioner and four Deputy Commissioners
39. 1st statement: The power to decide disputed assessments and refunds of internal revenue
taxes is vested in the Commissioner of Internal Revenue subject to the exclusive
appellate jurisdiction of the court of tax appeals

2nd statement: The power to interpret provisions of the national internal revenue code and
other tax laws shall be under the exclusive and original jurisdiction of the BIR
Commissioner, subject to review by the Secretary of Finance.

a) 1st statement is true, 2nd statement is false

b) 1st statement is false, 2nd statement is true
c) Both statements are true
d) Both statements are false

40. 1st statement All taxes imposed and collected by the BIR are internal revenue taxes

2nd statement The real estate tax is a local tax

a) True, False c) True, true

b) False, true d) False, false

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