-- Book 1

I~
\

TAXATION " ~

~~
 EXERCISES

\. Statement \: A person may refuse to pay a tax on the ground

that he receives no persona\ benefit from it.
Statement 2: A taxpayer has a right to question illegal
expenditures of public funds .
A. If only the first statement is correct.
B. If only the second statement is correct.
C. If both statements are correct.
D. If both statements are incorrect.

2. Statement l: One of the essential characteristics of a tax is it

is unlimited in amount.
Stateme'nt 2: A tax is generally unlimited because it is based
on the needs of the state.
A. If only the first statement is correct.
B. If only the second statement is correct. ·
C. If both statements are correct.
D. If both statements are incorrect.

3. Statement l: A License Fee is a charge imposed under the

police power of the state.
Statement 2: Penalty is imposed by the state only.
A. If only the first statement is correct.
B. If only the second statement is correct.
C. If both statements are correct.
D. If both statements are incorrect.

4. Statement l : Imposition of taxes is a legislative act.

Statement 2: Collection of taxes is an administrative act.
A. If only the first statement is correct.
B. If only the second statement is correct.
C. If both statements are correct.
D. If both statements are incorrect.

39
 5. Statement 1: A state has the power to tax even if not granted
by the Constitution. . . 9. Statement I: The RDO is know,, as the alter ego of the BIR
Statement 2: A state canno_t _exercise police power if not Commissioner.
filallted
0
by the Constitution. . Statement 2: The BIR Commi ssioner is directl y under the
A. lf only the first statement ts correct. President's Office.
B. If only the second statement is correct. A. If only the first statement is correct.
C. If both statements are correct. B. If only the second statement is correct.
D. If both statements are incorrect. C. If both statements are correct.
D. If both statements are incorrect.
6. Statement 1: There can only be a tax if there is a law imposing
I0. Statement I: Provisions in the Philippine Constitution on
the tax.
Statement 2: The power to tax is inherent. Taxation are grants of power. tt, j
A. If only the first statement is correct. Statement 2: Due process oflaw in taxation in the Constitution
is a grant of power.
B. If only the second statement is correct.
c. If both statements are correct. A. If only the first statement is correct.
o. If both statements are incorrect. B. If only the second statement is correct.
C. If both statements are correct.
D. If both statements are incorrect.
7. Statement 1: A tax is based on law while debt is based on
contract.
Statement 2: A tax is also a custom 's duty. 11. Statement I: An excise tax is also called privilege tax.
A. If only the first statement is correct.
Statem_ent 2: A tax which is neither personal nor property. is
an excise tax.

I
B. If only the second statement is correct.
C. If both statements are correct.
A. If only the first statement is correct.
B. If only the second statement is correct.
-
·,I D. If both statements are incorrect. C. If both statements are correct.
,l D. If both statements are inconect.

8. Statement 1: A person cannot be imprisoned for non-payment

l of property_tax.
12. Statement I: Estate tax is a proportional tax.
Statement 2: A progressive tax is a tax. the rate of which is
Statement 2: A law may be passed violating uniformity of directly proportional to tax base.
taxation. A. If only the first statement is correct.
A. If only the first statement is correct. B. If only the second statement is correct.
B. If only the second statement is correct. C. If both statements are correct.
C. If both statements are correct. D. If both statements are incorrect.
D. If both statements are incorrect.

40 41
 . 'thout representation is not tyranny.
St t 1· Taxation w1 A. If only the first statement is correct.
l 3. atement 2·. In the exercise of taxation, the state can tax
Statemen • · 8 . If only the second statement is correct.
anything at anytime and at an~ amount. C. If both statements are correct.
A. If only the first statement ts c_orrect. D. If both statements are incorrect.
B. If only the second statement is correct.
c. If both statements are correct. 18. Statement l : Territoriality is one of the constitutional
o. If both statements are incorrect. limitations on the power of taxation. .
Statement 2: International comity is an inherent limitation m
Statement 1: Taxation and power of Eminent Domain may be taxation.
14.
exercised simultaneously: . A. If only the first statement is correct.
Statement 2: Taxation and Police Power may be exercised 8 . If only the second statement is correct.
simultaneously. C. If both statements are correct.
A. If only the first statement is correct. D. If both statements are incorrect.
B. If only the second statement is correct.
C. If both statements are correct. 19. Statement I: Taxes may be used for sectarian purposes if
D. If both statements are incorrect. allowed by an ordinance.
Statement 2: The President can refuse to implement a tax law
15. Statement ·1: All of our tax laws are statutory laws. if it appears to be unconstitutional.
Statement 2: The non-i~pairment clause is a statutory 1aw A. If only the first statement is correct.
on taxation. B. If only the second statement is correct.
A. If only the first statement is correct. C. If both statements are correct.
B. If only the second statement is correct. D. If both statements are incorrect.
C. If both statements are correct.
D. If both statements are incorrect. 20. Statement 1: There can be double taxation in the Philippines.
Statement 2: Double taxation is illegal if it violates the
16. Statement I: Non-payment of tax makes the business illegal. uniformity of taxation.
Statement 2: The non-payment of license fee makes the A. If only the first statement is correct.
business illegal. B, If only the second statement is correct.
A. If only the first statement is correct. C. If both statements are correct.
B. If only the second statement is correct. D, If both statements are incorrect.
C. If both statements are correct.
D. If both statements are incorrect. 21 . Statement 1: A progressive system of taxation means a tax
structure where the tax base increases as the tax rate increases.
17. Statement I: Margin fee is atax. Statement 2: Tax exemption is a grant of immunity to a
Statement 2: Custom's duty is a tax. particular taxpayer from tax where others are obliged to pay.

42 43
 . . . • f ta<ati<>n. f.J(C£r T:
O
All arc charactensucs ot 1hc pow1.; r ·

26. A- \t is an inherent power.

B. It is legislative in character. 1 1 111
A If onlYthe first state,nent is co,rect. • I ·tituti ornl 1,1111 a ll • ·
B If only the second statement ts correct. c. It is civil in character. . . - s
o. It is subject to ,nhercnt an, co•" '
c· tfboth staternents are correct.
o: 1f!,oth state"''"" are inco,rect our tax laws are:
C. penul in natun: .
o. social in nature . ~
. Tax avoidance is a form of tax escape. 27. A. Political in nature .
22. 51a1ernent I·. Tax evasion is not pun1sha
· bl e. B. Civil in nature .
Staternen t 2 • first statement ts
. correct.
A If onlY (he Also known as tax administration
9. If only the second statement ts correct. A. Collection of taxes. C. Payment oft•'''
28 . B. Levying of ta«s. D. !ncidcnCC of tO'ation
C. If both staternents are correct.
D. If both staternents are incorrect.
J9. Ta,ation is an inherent power because:
Staten,ent I: A tax ,nay include the power to destroy. .
State"''"' , A ,ax rnaY be imposed v,olatmS untfonntty of A. It is the life blood of the government.
23 2 B. Protection and benefit theory.
C. It co-exists with the <'istence of the state.
taxation.
A. If only the first statement is correct o. It is exercised for•the general welfare of the people
. If only the second statement is correct
c.
8 If both statements are correct. JO. All are essential characteristics of a tax. £)((£PT:
D. If both statements are incorrect. A. lt is an enforced contribution.
B. lt is generally unlimited in arnount.
Statement I : A tax maY be subjected to set-off or
C. It is generally payable in 111oney.
compensation. · . . . D. It is a proportionate burden .
Statement 2: A tax ordinarily includes ,oterest.
A. If only the first statement is correct.
31 . A
A.tax is invalid,
Theory EXCEPT:
of ta.ation and its purpose are disregarded.
B. If only the second staJemeot is correct
C. If both statements are correct. B. Basis of taxation is not recognized.
C. Inherent and constitutional limitations arc not observed
D. If both statements are incorrect.
D. It results to double taxation .
25. Statement 1: A tax bill may embrace mote than one subject.
Statement 2: Non-payment of a tax cannot result to criminal 32. All are secondary purposes of ia.ation tXC£PT:
liability on the part of the taXpayer, only civil Iiability. A. SurnptuafY purpose C. CornpensatorY purpose
A. If only the first statement is correct. 13. Regulatory purpose D. Uniformity purpose
8. If only the second statement is correct.
-15
C. If both statements are correct.
D. If both statements are incorrect.
44
 33. Jn the absence of inherent and constitutionaJ. lirnitation, the
power of tax is:
A. Comprehensive C. Both a and h 39. Taxation is eq uitable in all of the following, EXCEPT:
B. Un limited D. Regulatory A. Its burden fa lls on those better to pay.
B. It is based on abili ty to pay.
34. A ll are similarities of taxation, po/ice power, and power of C. ft is based on benefits received.
eminent domain, EXCEPT D. ft is based on uniform ity rule.
A. All are necessary attributes of the Constitution 40.
B. A ll exist independently of the Constitution The only tax where non-payment of which will not result to
imprisonment:
C. All contemplate an equivalent bene fit A. Excise tax
D. All arc superior to the non-impairment clause of the C. Personal..tax
8 . Donor 's tax D . Property tax
Constitution
41. One of the following is NOT a major tax under the Tax Code:
35. Below are characteristics of a sound taxation system , A. Income tax C. Excise tax
EXCEPT: 8 . Donor 's tax D. Estate tax
A. Administrative feas ibility and compliance
B . Fiscal adeq uacy
C. Theoretical justice
42. One of the following can be BOTH be a progressive tax and
a proportional tax :
-
D. Uniformity of taxation A Donor 's tax C. Both a and b
B. Income tax on individuals D. Estate tax
36, It refers to a fraudulent act of minimizing taxes:
43. A tax which is BOTH under taxation and Police Power:
A. Tax avoidance C. Tax minimization
B. Tax evasion D. Multiple taxation A Compensatory Tax C. National Tax
B . Regulatory Tax D. General Tax
37. One of the following is NOT an inherent limitation :
44. A demand of Proprietorship:
A. Taxes must be for public purposes A. Tax C. Toll
B. Equality in Taxation. B. Special assessment D. License fee
C. Territoriality rule
D. Rule on double taxation 45. Levied only on lands:
A . Tax C. Toll
38. All of the following is territoriality doctrine except one: B . Special assessment D. License fee
A Residence of the taxpayer.
B. Source of the income. 46. A proportional tax:
C. Situs of the thing or property taxed. A. Individual income tax C. Donor's tax
D. International organizations B . Corporate income tax D . Estate tax

46 47
 ➔ 7. Imposed to regulate conduct:
A. Ta.x
C. Penalty
B. Toll
D. License fee 53 . A waiver by th -• 0 ~ • .
A T,. t:_ "'ovc;;mment s right to collect tax :
➔8. An advalorem tax : • ax exempti on C .
B Ta t · Tax avoidance
A. Real estate tax · x amneS y D. Tax evasion
B. Income tax 54.
C. Excise tax on wine A tax imposed based on the number·
A. Income Tax ·
D. Excise tax oa cinematographic films B. Specific Ta.... C. Advalorern Tax
D. Custom·s duties
49. One of tl1e following is NOT a source of our tax laws: 55: The theory which • .
A. Administrative rulings and opinions A p t . most Justifies the necess ity of taxation:
. ro ect1on and benefits theory
B. Judicial decisions B. Re ven ue purposes theory
C. 1987 Constitution C. Lifeblood theory
D. Expert Opinion on Taxation D. Ability to pay theory
56. One of the charact · f f·
The government may not do all except one: . . .' ens ics o mtema/ revenue laws is that they are:
A· Cnmma/ 111 nature
A. Tax itself
B. Penal in nature
B . Delegate its power to. tax to private agencies C. Political in nature
C. Impose tax arbitrarily
D. Generally prospective in application
D. Disregard uniformity in taxation
57.
Which of th e following is not example of excise tax:
A form of tax escape through which one is given tax immunity : · Transfer tax C. Real property tax
wherein others are subjected to tax: · Sales tax D. Income tax
A. Shitling C. Tax exemption
B. Tax immunity D. Tax avoidance 58. The following are si milarities of the inherent power of
taxation, eminent domain. and police power. except one:
A form of tax escape by a manufacturer or producer who A. Are necessary attributes of sovereignty
improves his proceeds of production thereby minimizing his B. lnterfore with private rights and property
C. Superior to the non-impairment clause
unit production cost
D. Are legislative in charact~r
A. Tax avoidance C. Transformation
B. Capitalization D. Shifting 59. 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 sti ll exercise ~
the power.

.~
4X 49
 Jt 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 law-making. 63 . Tax as distinguished from license fee :
A. False; False C. True; True A. Non-payment does not necessary render the business
illegal
B. False; True D. True; False
B. A regulatory measure
C. Imposed in the exercise of police power
60. Which of the following is not a scheme of shifting the
D. Limited to cover cost of regulation
incidence of taxation?
A. The manufacturer transfer the tax to the consumer by 64. Value-added tax is an example of:
adding the tax to the selling price of the goods sold; A. Graduated tax
B. The tax forms part of the purchase price; B. Progressive tax
C. Changing the terms of the sale like FOB shipping point C. Regressive tax
in the Philippines to FOB destination abroad, so that the D. Proportional tax
title passes abroad instead of in the Philippines.
D. The manufacturer transfer the sales tax to the distributor, 65. Which statement refers to police power as distinguished from
then in tum to the wholesaler, in tum to the retailer and taxation?
finally to the consumer. A. It can only be imposed on specific property or properties
B. The amount imposed depends on whether the activity is
61 . In case of conflict between the tax code and generally accepted useful or not
accounting principles (GAAP): C. It imrolves the taking of property by the government
A- Both tax codes and GAAP shall be enforced D. The amount imposed has no limit
B. GAAP shall prevail over tax code st
C. Tax code shall prevail over GAAP 66. l Statement - Tax exemptions are strictly construed against
the government. .
D . The issue shall be resolved by the courts · nd
' 2 Statement - When the tax law is not clear and there is
doubt whether he is taxable or not, the doubt shall be settled
62 . Which of the following statements is not correct? against the government.
A. Taxes may be imposed to raise revenues or to regulate
A. Only the first statement is correct
c certain activities within the state
B. Only the second statement is correct
8. The state can have the power of taxation even i( the C . Both statements are correct
Constitution does not expressly give it the power to tax D. Both statements are incorrect
C. For the exercise of the power of taxation, the state can
tax anything at any time 67. l s, Statement - The income from bank deposit ofa Tax-exempt
D. The provisions .of taxation in the Philippine Constitution
are grants of power and not limitations on taxing powers
Catholic Church is taxable.
2 nd Statement - The charitable contributions given to a church -·
are also taxable.

50 51
 A. True; False
c. True; True
D. False; :False 74. Statement I : Courts can review or inquire into the wisdom or
B. False; True
advisability of a tax law.
. d outside the situs of Taxation is Statement 2: Our constitution does not contain any provision
68. 1s1 Statement - Tax impose
granting tax exemption to the government.
void. . . Comity is an exception to the A. True, True C. False, Tme
2"d Statement - Intemattona 1 . B. False, False D. Tme, False
territoriality doctrine. C True True
A. True, False
B. False, True
o: Fals~, False 75. Statement I : To be exempt from taxation under the
Constitution land and buildings must be exclusively and
. d superiority of one country actually used for religious, educational or charitable purpose,
69. Imposed based on the contro 1an even if not directly.
over another: C. TRIBUTE Statement 2: Exemptions of non-profit schools are only limited
A. TITHE D. TOLL to revenue and assets derived from strictly school operations.
B. TAX A. True, True C. False, True
B. False, False D. True, False
· r ·
Imposed based on re 1g10us
obligation:
C . TRIBUTE
70.
A. TITHE
C. TAX
o: TOLL
76. Statement l : A taxpayer 's tax exempt status justifies the non-
keeping of books of accounts & other accounting records.
Statement 2: The salaries of the Chief Justice & associate
justice of the Supreme Court are tax-exempt.
71. Taxes are:
C. Generally proportional A. True, True C. False, True
A. Retroactive D. Personal to the taxpayer B. False, False D. True, False
B. Prospective

f · will only result to civil 77. Statement 1: Our Tax Code prevails over the Civil Code.
72. Statement 1: Non payment o tax . Statement 2: Tax regulations promulgated by the Secretary
liability ... f corporation will not extend of Finance need not. be published in a newspaper of general
Statement 2: Tax liab1httes o a , circulation.
to the stockholders absolutely.
c. False, True A. True, True C. False, True
A. True, True B. False, False D. True, False
D. True, False
B . False, False
78. Corporate income tax is classified as :
73. All are objectives of taxation except: A. Direct tax as to rate
A. Revenue purpose B. Progressive tax as to rate
B. Regulation . C. Proportional tax as to rate
C. Increase of social inequity h D. Regulatory tax
D. Encourage economic growt
53
52
79 .
• ,
· tratJOO 1ee5
Motor vehicle reg1s
A - License fee
M'P
<LI~
now considered - franchise tax m li e u o f a ll taxc-s. The leg is la t ive franc hi s e s ':f
Smart and Gl o be Teleco m s w ere g ra nt e d in 199 8 . Th~ir r
B . Margin fee lee:islarive franchi se sstatc th a t they w ill pay l1nl y 5°/o franch ise
C. Regulatory tax ta~ in lieu of all taxes. The Prov ince o f Zamboang a del Norte
0 . General taX passed an ordina nce in 1997 tha t impose s a loca l fran c hi se
tax on a ll telecommunication companies o perating within the
Our taX Laws are both: . province. The tax is 50% o f I % o f the gross annuaJ n..-ceipts
80. . and prospective of the proceding cale ndar year based on the incoming receipts .
A. progressive _
B Civil and prospective or recei pts realized. wit h in its terntorial jurisdiction .
c · Penal and Regulatory Is the ordinance va lid?
· Personal and Regulatory A. No. the o rdinance in effec t res ulted into double taxation.
o.
B . No, the Loca l Government Code prevails over ordinances.
code is also known as:
The National Lntemal Revenue C . Yes, the loca l governme nt units a re empowered by the
81.
A. Republic Act 9337 Constitution to raise its ow n revenue s .
B. Republic Act 8424 D . Yes, autonom y of Zamboanga del Norte .
c. Presidential Decree I 158
o . Executive Order 464 85 . What kind of taxes . fees and c harges are considered as
National Internal Reve nu e Taxes under the Na ti o n a l Internal
. of the provinces, municipalities
Where does taxmg pawer Revenue Code (N IR C)?
82. I. Income taxes
and cities precede from?
A. Constitutional grant II . Estate taxes
B. Legislative enactment _ II I. Donor 's taxes
C. Presidential or Executive act rv. Value added taxes
o . Local legislation V. Other percentage taxes
VI. Excise taxes
. l emment units be able to exercise their VU . Docume ntary stamp taxes
83. How will the 1oca gov
VIII. Community taxes o r po ll taxes
.-
taxing powers?

,
A. By Local Legislation IX. Real property taxes
B . By authority conferred by Congress . , /
C. By the issuance of the Department of Fmance A. 1,11, 111 , IV, V, VI
o. By the help of the Bureau of Internal Revenue B. I, II , III, lV, V,VI. VII ,

The Local Government Code took effect on January I , 1992.

C.
D.
I, II , HI , IV, V, VI , VII , VIII
I, II , m, IV, V, Vl , vn, VIII , IX
/
.....-
84.
PLDT's legislative franchise was granted sometime before
I 992. Its franchise provides that PLOT will only pay 3%

54 55

(
86. The least source of tax laws:
A. Statutes
8. P residential Decrees 89. Aspects of ta.'i.ation. except?
C. Reven ue Regulations A. Levy ing of tax
B. Administration of tax
D. Tax treaties or conventions
C. Collection of tax
D. Interpretation of tax
87. XYZ Corporation, an export oriented company, was able
secure a Bureau of Internal Revenue
. (BIR)
. . ruling in Ju ne
to 90. Statement one ·· o·irect taxes arc those tu xes whcrebv th~
. b"t•
2005 that exempts from tax the 1mportat1on of some of i Iia I ity and burden o·t· ti1e tax t::i
- II son t.he same person ·.
raw materials. The ruling is of first impression,
. . which rnea ns
ts r bT
Statement two·. lndi t t .
rec axes are those taxes whereby the
the interpretation made by the C omm1ss1oner of lnternat ,a ' ,ty and burden falls upon two different person.
Revenue is one without established ~reced~nts ._ Subsequently, A. Tme, true
however, the BIR issued another rulmg which m effect woutct B . Trne, false
subject to tax such lcind of importation. XYZ Corporation is C. False, false
concerned that said ruling may have a retroactive effect, which D. False, true
means that all their importations done before the issuance of
91. Which of the_ folio w~n?
· are exempt from real property taxes?
the second ruling could be subject to-tax. May the BIR rulings
A. Properties of religious organization
be given retroactive effect? B. Properties of charitable institution
A. No, B[R rulings are prospective in n~ture. C . Properties of education institution
B. No, BIR rulings are not retroactive if they are prejudicial D. Properties actually. directly and exclusively used for
to the taxpayer. religious purposes
C. Yes; tax exemptions should be interpreted strictly against
the taxpayer. 92. The Constitution provides. ·'charitable institutions, churches.
D. Yes, tax must favor the government's power to collect its parsonages or convents appurtenant thereto, mosques. and
non-profit cemeteries and all lands , buildings. and
revenues. -"'
improvements actually. directly and exclusively used for
What is required to make a BIR ruling of first impression a religious, charitable or educational purposes shall be exempt .....
88. from taxation." This provision exempts charitable institutions ~

~hloo~~~~ . and religious institutions from what kind of taxes?

,/
A. Must be reasonable and within the authonty conferred.
B. Must be germane to the purpose of the law.
C. Must be published.
D. Must be prospective in application.
A. From all kinds of taxes, i.e. income, vat, customs. local
taxes, and real property tax
B. From income tax only
C. From value-added-tax
I .,.,

,..,,
D. From real property tax ~
E. From capital gains tax

57 ~
56 _,,,
93 . 151 Statement: In every case of doubt. tax statutes are constru
strictly agains t the Government and liberally in favor of t~d
taxpay er. e 97. Which is the correct and b t st
given time u d eS atement? A tax refom, at any
2"" S1a1ement: Where the intent to tax is clear and the taxpay A J; . ~ erscores the fact that:
claims that he is exempt from the tax obligat_ion, the tax sha~~ B . Tax.at'
axatton is an inh
. . erent power of the state
be construed against the taxpayer and m favor of th c · 'T ~on ~s essentially a legislative power
Government because the 1power of taxation is necessary / D. Thiaxatton is a power that is
. very broad
. 0 . e estate can and sh ou Id adopt progressive tax ation
th e eXIstence of such Government.
A. True; False C. False, True
8. True; True D. False, False
98 . Which of the follow in
A Maybe recomm J .
~tatements is wrong? A revenue bill
B. May have a H en e ~y the President to Congress
ouse vers10n and a S t .
94. The following are the powers of the BIR, except: separately and th . . ena e version approved
en consolidated 'th b h
A. The assessment and collection of all national internal approving the consol 1'd t d . Wt · ot houses
C M • . a e version
revenue taxes. . ay ongmate from the S .
the House of Re . enate and on which same bill
B. The execution of all judgments in all cases decided in its presentattves ma
favor by the CTA and the ordinary courts. D • Must originate fro th H Y propose amendments.
• m e ouse of Re ·
C. The enforcement of all forfeitures, penalties and fines
connected with national internal revenue taxes.
D. The assessment and collection of some customs duties. 99.
which same bill th S

Which statement refers to I'

taxation?
presentattves and on
e enate may propose amendments.

. .
po tee power as distinguished from
-
A. It is an inherent power of the state
95 . Which among the following powers of the Commissioner of
B. The benefit derived is the .. .·
the Bureau of Internal Revenue may be delegated? C. It involves the taki f protection given by the state.
A. Enforcement of all forfeitures, penalties and fines in connection D Th ng o property
. e amount collected is limited t~ the cost of regulation.
with t,he collection of national internal revenue taxes.
B. The power to recommend the promulgation of rules and 100. Which of the followin . · .
regulations by the Secretary of Finance. characteristics of . lg ts not considered as one of the
specia assessments?
C. The power to issue rulings of first impression or to reverse, It is land.
A. the based solely on th e benefit derived
· by the owners of
revoke or modify any existing ruling of the bureau.
D. The power to assign or reassign internal revenue .officers 8. It is levied only on land.
.-
to establishments where the articles subject to excise tax C. It
. is based
. . on the go vernment ,s need of money to· support
are produced or kept. its 1eg1t1mate objectives.
D: It is not personal liability of the person assessed.
96. Which of the following has no power of taxation?
A. Provinces
B. Cities
C. Barangays
D. Barrios
IO 1. l ~tatement: Because the power of taxation is inherent in state
§!

the inherent limitation on the power of taxation always applies'.

.,.,
58 59
 Statement: Inherent limitations on the power of taxation
2_1111
must give way to constitutional limitations. 105. Taxation, just like other fields ot: human learning is dynamic.
A. The ftrst statement is true while the second statement is not static, keeps on changi ng: so we must ull study. otherwise
false. we might be facing the battles of today with the antiquated
B. Tbe first statement is false while the second ·statement is weapons of yesterday.
true. Regardless of economic and busi ness conditions. u sound lax
C. Both statements are true. system should provide fo r the collection of sutlicient revenue
D. Both statements are false. to run the government.
A. True, true C. False, false
l 02. Which of the following is not a purpose of taxation? B. Tme, false D. False. true
A. To reduce inequalities of wealth
B. As protective tariff on imported goods to protect local I06. A progressive system of taxation means a tax structure
producers against foreign competitions A. Where the tax rate increases as the tax base increases
C. To encourage the growth of home industries through the B. Where persons who desire to avail of government services
proper use of tax incentives or benefits are required to pay for their cost in the form of
taxes
D. .To expropriate property for •the promotion of general
C. Where persons who possess more in wealth or· income
welfare
are required to bear the cost of government corresponding
to such capacity
103. This is not an example of excise tax D. Where the tax rate increases as the tax base decreases
A. Transfer tax C. Income tax -
B. Sales tax D. Real property tax 107. Which statement is wrong?
A. A tax is a demand of sovereignty
104. This rule is not ~pplicable on the construction of tax laws 8. A toll is a demand of ownership
A. If the law is repealed, taxes assessed before repeal of the C. A special assessment is a tax
law may no longer be collected D. Customs duty is a tax
B. lf the intent of the tax is not clear as to whether the
taxpayer is covered by the tax obligation, the law shall be l 08. Which of the following is not an element of double taxation?
construed against the government. A. Two taxes C. Sarne year
C. Where the intent to tax is clear and the taxpayer clai ms 8 . Sarne subject matter D. Same amount
he is exempt from the tax obligation, the tax shall be
construed against -the taxpayer 109. One of the following is the least prin~iple of sound tax system.
D. Provisions intended for the security of the taxpayer or to A. Fiscal adequacy C. Theoretical justice
insure equality or uniformity of taxation are mandatory. 8 . Administrati ve feasibility D. Economic consistency

t,I
60
 I 14. An internal revenue officer (IRO). having been reliably
11 o. Basis ,)f Taxation? C. Benefit-protection theory
..\. Lifrblood thc-ory informed from unimpeachable source that articles subject to
D. Reciprocal theory excise taxes were kept in the house of Y entered said house to
B. 1\e1.·essity theory
look for and to sei ze the aforementioned arti c les over the
The tollowing reasons maybe given by a taxpayer i~1 refusing objection of Y. Since said otlicer was not an11ed with a search
111.
to pay his tax liability. Which is not acceptable tor legally warrant. Y invoked the sandity of hi s home . Is the internal
rdusing to pay the tux revenue oflicer·s actuation described above sanctioned by law
.-\ . Th;t he has been deprived of due process of law or not?
B. That there is lack territorial jurisdiction A. Yes. because of primary jurisdit..:tion of the BIR over
C. That the prescription period for the collection of tax has cxcisnblc goods pursuant to the lifeblood doctrine .
lapsed B. Yes. the IRO is exempted from obtaining a search and
D. That he will derived no benefit from the tax scizurt· warrant.
C . No . violative of sean:h and sei z ure clause of the
11.2. The President of the Philippines and the Prime Minister or Constitution .
hpan 1.'ntcr1.·d into nn executive agreement of a loan facility D. No. violative of the right to privacy and abode .
10 the Philippines from .lnpan whereby it was stipulated that
interest on lonns granted by private Japanese finan c inl 115 . A store in the Cartimnr market in Pnsay C ity was discl)vercd
institutions to privntc financinl institutions in the Philippines by the BIR agents sdling luxury items worth P500 ,000 .00
shall 111.)t be subject to Philippine income taxes . Is the tnx suspct·tcd to hnve been smuggled into the c~)t1t1try by the
1.·xemptilln valid? storcowncr. May the Commissioner of lntt:rnal Rt·v1.·nuc rut
A. 'frs. hnsed on inh:mntinnnl comity. under ·'preventive embargn" snid luxury items?
B. 'frs. bused on nn ex1.·rutivc ngrccmcnts and treaties. A. Yes, it is like constructive distruint.
C . No. it is n violation of cs:-1.•nti:11 chnrnl'lcristfos nrtnx11ti1u1. B. Y1.·s. because uf anti -smuggling law.
n. No, has1.·d llll th1.• dnl'trinc or ll'tTiltlrilllity. C. No . violative of st:arch and sei z urt: (lausc lll. lhll
CnnstitutiLlll .
11 J. In a ll,;tn agr1.·cme11t hetwe1.•n the Bangkn S1.·11trnl ng Pilipinns D. No. violul'ive nftlit: due procllss clause ,.lflht· Constitution .
{as b{l1Tnw1.·r) :ind privnt1.• inh:rnutional hanks (as lenders). it
is stipulated that all paym1.·nts or interest hy the Central IJ:111k 116. Thi;) Sel:rdary nf Fina11c1.· . upo11 rL·t:nmmc1Hiatiu11 t)f the
!\) th'-' kndas shall he made free and ckar from all Philippi11i:
CtHlltll i ss inner n f III krna I R1.· vt:11 ut: . i ss ut:d a Re ven till
taxl.'s.wh1i:h may be imposed thereon . ls the stipulation val id'! Regulation usi11g gross i11l'omc as tht: lax basll for l'orporntillns
A. r_cs. based on internatim1:.1I comity. doing business in the l'hilippinlls. Is the Revenue RL'!-!. Ulati\)n
valid ? ~
B. 'Yes . based on the doctrine of 11011-taxnbility of tll ,·
gllvcmmcnt .
C. N0 · v!olativc of th!.'. inherent limitations.
D. No, violative of th!.'. constitutional limitations.

(i2
 A . Yes. the Secretary of Finance bas the power to issue rules
and regulations.
B. Yes. gross income taxation over corporations is valid 120. l " Statement - The BIR is authorized to collect estate tax
1
C. No. Secretary ofFinance has virtually amended the Nf R_c_ deficiency through the summary remedy of levying upon and
D . No. only the Commissioner of the BIR has the authority sale of real properties of a decedent, without the cognition
and authority of the court.
to make revenue rules and regulations. nd
2 Statement - The CIR may examine the bank records of
the deceased in order to determine the latter ·s taxable oet
117. A suit questioning the validity of a tax statute or law is: estate.
A Taxpayer 's suit A. True; False C. False: True
B . Derivative suit B . True; True D. False: False
C. Class suit
D. Representative suit 121 . The power to decide ctisputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in
118. / st Slatement: Internal revenue laws are civil in nature. They relation thereto, or other matters arisinl! under the Tax Code
· are not political and as such were continued in force during or other laws is vested with -
rhe period of enemy occupation and in effect were actually A. The Commissioner of Internal Revenue. subject to the
enforced by the occupation government, such tax Jaws being exclusive appellate jurisdiction of the Court of Tax
deemed to be laws of tbe occupied territory and not of the Appeals;
occupying enemies. B. The Secretary of Finance. subject to the review of Office
2 -d Statemenl: lntemaJ revenue laws are not penal in nature: of the President;
d:Jus the principle of ex post facto does not apply to them:
hou·ever, for violations of the internal revenue Jaws penalries
· may be provided
C. The Court of Tax Appeals, subject to the exclusiv e
appellate jurisctiction of the Supreme Court
D. The Regular Courts. subject to exclusive appellate
-
jurisdiction of the Court of Ta'< Appeals.
A True; False C. False; True
B. True; True D . False; False
122. The power to interpret the provisions of National Internal
Revenue Code and other ta.JC la\\-s shalJ be under the exclusive
119. 1 .r1 State111e1u: Re.al property is subject to taxation in the place and original jurisdiction of the
in \\>'-J»ch it is situared regardless of whether the ov.,ner is a A The Commissioner of InternaJ Revenue, subject to the
Iesi.dent or a Don-residem therein. review by the Secretary of Finance
?d Stmement: As fur as pecsona1 property is concerned The B. The Collllllb---siooer of Internal Re,·enue. subject to the
ancient ruJe ofmobilia sequotur personam applies. This m e<>...:::- exclusive appeilar,e juri sdiction of the Coun of Ta-.;:
z:bar rbe thing foUows the law of the owner tbereo[ Appeals:
A True: False
B. True.; True
C. False; True
D. False~ False
C. The Coun of Tax Appeals, subject to the exclusi v,e
appellate jurisdiction of the Coun of Appeals
-
D . Toe Regular C-0uns. subject ro the review by the Coun of
Tax A.ppeals.
6.5

\
-
123. It is the official action of an administrative officer in
determining the amount of tax due from a taxpayer, or it rnay 127. A corporation may change its taxable year to calendar or fi scal
be a notice to the effect that the amount stated therein is due year in filing its annual income tax return , provided
from the taxpayer with a demand for payment of the tax 'Jr A It seeks prior Bl R approval of its proposed change in the
deficiency stated therein accounting period.
A. Tax investigation C. Tax assessment B. It simultaneously seeks Bl R approval of its new account
B. Tax audit D. Tax mapping period.
C. It should change its accounting period two years prior to
changing its taxable year.
124. What are the means employed in the assessment of taxes,
D. Its constitution and by-laws authorizes the change.
EXCEPT?
/\. Exam ination of' tax returns
128. What is the rule on the taxability of income that a government
13. Inventory taking surveillance and use of presumptions
educational institution derives from its sc hool operations?
gross sales or receipts Such income is
C. Pn:scriptiun ul' real pruper1y values
A. Subject lo IO'¼, tax on its net taxable income as if it is a
IJ. Fxarni11ation of bank deposits propriety educational institution .
B. Exempt from income taxation if it is actually, directly and
125. 1,1 Slaternent: The Cnmrnissio11er, 1he Deputy Co111111issio11ers, ' exclusively used for educational purposes.
the Revenue Rc'-1,io11:1l l)ircdors, the Revenue Distrid Olfo.:crs C. Subject to the ordinary income ta.\ rates with respect to
and other inter~al revenue oflicers shall have authority to incomes derived from educational activities.
make arrest :.111d seizures for 1he violation ol' any penal law, D. Exe1npt from income taxati on in the sa me manner as
rnlc nr l\'!),11l:1tin11 ud111i11istered by the Bureau of 1111\.·rnal government -owned and controlled corporations.
Rcwm1e 1;urs11a11t to the Tax ( 'ode.
21"' St:11cit1c111 : /\11 i111.crn:1I revenue nffil'.cr assignl'd tn 129. The power to tax is the power It) dL·stroy. Is thi s always so?
es1:1hlisl1111l'llts ~vhac :1rticks subjcd to cxciSl' tax :m· A. No. The l':Xecutivc Branch may decide not to enforce a
pnidul:cd lll' kept sh:1II in 110 casl.! stay in his assignment lt11· ' tax law which ii bclievcs lo be confiscatory.
t lllH·e th:111 tWl, (1) yen rs. B. Yes. Thc tax collecll)rs should enfi.)rCl' a tax law even if it
A. True. F:tlsl' C. LtlSl\ Trt1l'. results tt, lhc destruction of the pn,pcrty rights of a
B. Trnc. Trt1l' D. F';1lsc, False taxpayer.
C. Yl'S. Tax laws shnuld always be' enforl·ed bcc:rnsc without
l ~c,. Altlwu~h the pl,\\\:r l,I' 1:1x:Hillll is basil-;1ll y kgisl:11i, ,' in la\l'S thl' wry c'\istenCl' l,f the State is endangered.
l'h:1r.1l'll'r. it is NLH 1hc t'unl·lil,11 l)f thl' (\1ng1\'SS tt'1 : D. Nt1. The Suprc·me Ctllirt may nullify a tax law, hence,
A. Fix wi1h l'l'rl:-iint~' ihe :tmt',1mi l,f i:t\l'S prnpc-rty rights arc 11t1r atkctt'd.
R. C\1lh·1 Ilk' 1:1.x k\'icd tmlkr ihl' l:rn
(Some quc-~tions were :1tioptc'd fr-_,rn 8.-\R e\aminarion)
C'. kkmit\ \\ lh, slh,11ld ct,lb·1 thl' tL\
D. Dct-·nnint "l1t, slwuld he' suhjet'I to the r:1x

('('I
 ANSWER KEY
1. B 33. C 65. B 97. C
2. B 34, D 66. B 98. C
3. A 35. D 67. B 99. D
4. C 36. B 68. C 100. C
5. A 37. B 69. C 101. B
6. C 38. D 70. A 102. D
7. A 39. C 71. D 103. D
8. D ,40.
l 9.
C 72 .. B 104. A
I, · 10.
D
D
. 41. C 73. C 105. A
42. B 74. C : 106. A
11. C 43.
I B 75. C 107. C
I
12. B 44. C 76. B 108. D
13. B 45. B 77. D 109. D
14. B 46. B 78. C 110. C
15. D 47. D 79. C
16. 111. D
B 48. A 80. B
17. 112. A
B 49. D 81. B
18. B 113. D
50. A 82. A
19. D 114. A
51. C 83. A
20. C 115. A
52. C 84. C
21. B 53. 116. C
B 85. B ,
22. A 54. 117. A
B 86. C
23. A 55. 118. B
C 87. B
24. D 56. 119. B
D 88. D
25. D 57. 120. B
C 89. D
~ · 26. C 58. C
121. A
27. B
90. A 122. A
59. C 91.
28. A D 123. C
~ 29. C
60. C 92. D 124. D
61. C
30. B 93. B 125. B
1/
62. D
31. D 94. D 126. B
I
63. A·
1, 32. D 95. A 127. A
64. D
II' I 96. D 128. B

.lJ
129 . D
I
68
.,__
•
j;lf f