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Principles MCQ and Answer

Income Taxation (University of Caloocan City)

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MULTIPLE CHOICES (ADAPTED)- WITH SUGGESTED ANSWERS

1. 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

2. One of the characteristics of internal revenue taxes is that they are (RPCPA)
A. Criminal in nature
B. Penal in nature
C. Political in nature
D. 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)

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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.
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

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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

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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 non-
stock, 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?

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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
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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 purpose. Which of the following is not a public purpose?
A. dole-out to victims of calamity
B. PantawidPamilyang Pilipino Program (4 Ps)
C. improvement of sugar industry
D. construction of a barangay chapel

52. Which of the following activities is not a public purpose?

A. Construction of bridges
B. Payment of Christmas bonuses of government officials and employees
C. Opening of road on a tract of land owned by a private individual
D. Scholarship to poor but deserving students

53. The fundamental rule in taxation is that “property of one country may not be taxed by another country”
A. international law
B. international comity
C. reciprocity
D. international inhibition

54. Question 1: Can the state tax the Armed Forces of the Philippines?
Question 2: Are the government-owned and controlled corporations subject to tax?
A. Yes, No
B. Yes, Yes
C. No, Yes
D. No, No

55. Diplomatic officials such as heads of states and ambassadors are exempt from taxes and duties because of
A. international comity
B. reciprocity provisions
C. principle of territoriality
D. exemption in the tax code

56. Deals with the provision of the law which determines the person or property to be taxed, the sum or sums to be
raised, the rate thereof, and the time and manner of levying, receiving and collecting taxes
A. Collection
B. payment
C. enforced contribution
D. levy

57. Constituted of the provisions of law which prescribe the manner of enforcing the obligation on the part of those
taxed to pay demand thus created
A. collection
B. proportionate in character
C. enforced contribution
D. levy

58. The amount required is dictated by the needs of the government in

A. license fee
B. tax
C. toll
D. tariff

59. One of the characteristics of a tax is

A. A tax is pecuniary burden and the law may not allow payment in kind
B. It is dependent upon the will or contractual assent, express or implied, of the person taxed.
C. It is levied by the state by virtue of its sovereignty

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D. It is collected for public and private purposes

60. One of the characteristics of a tax is that

A. It is generally base on a contract
B. It is generally payable in money
C. It is generally assignable
D. Optional

61. XYZ Corporation manufactures glass panels and is almost at the point of insolvency. It has no more cash and all it
has are unsold glass panels. It received an assessment from the BIR for deficiency income taxes. It wants to pay but due to
lack of cash, it seeks permission to pay in kind with glass panels. Should the BIR grant the permission?
A. It should grant the permission to make payment convenient to taxpayers
B. It should not grant permission because a tax is generally a pecuniary burden
C. It should grant permission; otherwise, XYZ Corporation would not be able to pay.
D. It should not grant permission because the government does not have the storage facilities for glass panels.

62. Which is not an essential characteristic of tax?

A. Unlimited as to amount
B. Payable in money
C. Proportionate in Character
D. Regular in Payment

63. No person shall be imposed for non-payment of

A. property tax
B. excise tax
C. poll tax
D. income tax

64. An example of a property tax is

A. additional community tax on income of real properties
B. real estate tax on real properties
C. estate tax on inherited personal as well as real properties
D. donor’s tax on donation of property

65. Which of the following is not an example of excise tax?

A. transfer tax
B. Sales tax
C. Real property tax
D. Income tax

66. Sharon, CPA has just obtained her CPA license. Before she can lawfully pursue her occupation, she should pay
A. Professional tax
B. Percentage tax
C. CPA’s income tax
D. Value-Added tax

67. A tax that is imposed upon a person who is directly bound to pay it—
A. direct tax
B. indirect tax
C. excise tax
D. poll tax

68. One is not a direct tax

A. immigration tax
B. transfer tax
C. income tax
D. contractor’s tax

69. The basic community tax of P5.00 of an individual is a (an)

A. property tax
B. direct tax
C. national tax
D. ad valorem tax

70. Which of the following statements is wrong?

A. Non-payment of additional community tax is a ground for imprisonment
B. In case of conflict between a tax law and a revenue regulation, the latter shall prevail
C. A revenue regulation can expand the provision of law by imposing a penalty even if the law that it implements does
not impose a penalty
D. Revenue bills shall originate exclusively from the Senate

71. Statement 1: The value-added tax is property tax

Statement 2: The estate tax is a direct tax
A. the two statements are correct
B. the two statements are wrong
C. statement 1 is correct; statement 2 is wrong
D. statement 1 is wrong; statement 2 is correct

72. Forms part of the purchase price of the commodity or service and passed on to customers

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A. direct tax
B. indirect tax
C. excise tax
D. poll tax

73. A tax on business is

A. direct tax
B. indirect tax
C. property tax
D. none of the above

74. Fermin is a mining operator. His mineral lands are not covered by any lease contact. The tax Fermin has to pay
based on the actual value of the gross output or mineral products extracted is
A. mining tax
B. royalties
C. rental
D. ad valorem tax

75. The tax that is imposed solely to raise revenue for government expenditures
A. revenue tax
B. regulatory tax
C. specific tax
D. ad valorem tax

76. Tax levied for particular or specific purpose irrespective of whether revenue is actually raised or not
A. revenue tax
B. regulatory tax
C. specific tax
D. ad valorem tax

77. Tax imposed by the national government and is effective within the entire jurisdiction thereof
A. national tax
B. local tax
C. proportional tax
D. general tax

78. Taxes imposed by a political subdivision of the state and is effective only within the territorial boundaries thereof
A. national tax
B. local tax
C. progressive tax
D. regressive tax

79. Which of the following taxes is proportional?

A. value-added tax
B. income tax
C. estate tax
D. donor’s tax

80. The following are kinds of taxes as to graduation. Which one is

not? A, Digressive
B. Uniform
C. Regressive
D. Progressive

81. An example of a tax where the concept of progressively finds application is the
A. income tax on individuals
B. excise tax on petroleum products
C. value-added tax on certain articles
D. amusement tax on boxing exhibitions

82. The power of the state or those to whom the power has been delegated to take private property for public use upon
paying to the owner a just compensation
A. power of eminent domain
B. police power
C. power of taxation
D. people power

83. There can be classification of the subject matter being required to shoulder the burden. Which is the exception?
A. tax
B. license fee
C. toll
D’ eminent domain

84. The power of state to enact laws in relation to persons and property as may promote public health, public
morals, public safety and the general welfare of the people.
A. power of eminent domain
B. police power
C. power of taxation
D. people power

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85. The following are similarities of the inherent power of taxation, eminent domain and police power except one
A. Are necessary attributes of sovereignty
B. Interferes with private rights and property
C. Affect all persons or the public
D. Are legislative in their implementation

86. Which statement refers to police power as distinguished from taxation?

A. It can only be imposed on specific property or properties
B. The amount imposed depends on whether the activity is useful or not.
C. It involves the taking of property by the government
D. The amount imposed has no limit

87. Police power as distinguished from taxation or eminent domain

A. Just compensation is received by the owner of the property
B, Maybe exercised by private individuals
C. Superior to the non-impairment clause of the constitution
D, Property is taken by the government for public use

88. Which of statements is wrong?

A. The power of taxation may be exercised by the government, its political subdivisions, and public utilities
B. Generally, there is no limit on the amount of tax that may be imposed
C. The money contributed as tax becomes part of the public funds
D. The power of taxation is subject to certain constitutional limitations.

89. Mr., No Null is exempt from all taxes

Q1: Is he exempt from customs duties on the importation of goods?
Q2: Is he exempt from parking fees on the parking areas owned by the government?
Q3: Is he exempt from Mayor’s Permit Fees?
Which of the above questions is/are answerable by “No”?
A. Q2 only
B. Q1 &Q2
C. Q2 & Q3
D. Q1, Q2 and Q3

90. After having been informed that some massage parlors are being used as fronts for prostitution, the
SangguiniangPanlngsod of Manila passed a tax ordinance subjecting to massage parlors within its jurisdiction to such
onerous taxes that leave them no other alternative but to stop operating. The passage of the ordinance is a valid exercise of
–
A. taxation
B. eminent domain
C. police power
D. police power and power of taxation

91. Which of the following statements is correct?

A. Non-payment of tax and debt is ground for imprisonment
B. The power of taxation may include the power to destroy
C. Provisions in the Public Constitution on taxation are grants of power
D. Lands and buildings being used actually, directly and exclusively for religious and charitable purposes by churches and
charitable institutions are exempt from income and property taxes.

92. The following statements are correct. Which is the exception?

A. The rule of taxation shall be uniform and equitable
B. Taxation may be used to implement the police power of the state
C. Police power is superior to the non-impairment clause of the constitution
D. The salary of the justices of the Supreme Court are exempt from income tax

93. Statement 1: An Executive order by the President of the Philippines directing the Commission on Higher Education
to regulate the operation of review centers is a valid exercise of power.
Statement 2: Construction of a church building is exempt from the payment of building permit fees because the constitution
provide that churches are exempt from property taxes.
Which of the above statements is true?
A. Statement 1 only
B. Statement 2 only
C. Neither statements
D. Both statements

94. Statement 1: The Congress can enact tax laws even in the absence of a constitutional provision granting said body
the power of tax.
Statement 2: A tax may be validly imposed in the exercise of police power and not the power of tax.
A. False, False
B. False, True
C. True, True
D. True, False

95. Which of the following may not raise money for the government?
A. Power of taxation
B. Police power
C. Power of eminent domain

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D. Privatization of government’s capital assets

96. In this power of the State, the person who is parting with his money or property is presumed to receive a benefit
A. Taxation
B. Police power
C. Eminent domain
D. Forfeiture power

97. Which of the following inherent powers of the government is inferior to the non-impairment clause of
the constitution?
A. Taxation
B. Police power
C. Eminent domain
D. None

98. Tax as distinguished 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

99. The distinction of a tax from permit or license fee is that a tax is
A. Imposed for regulation
B. One which involves exercise of police power
C. One in which there is generally no limit on the amount that may be imposed
D. Answer not given

100. Which of the following terms describes this statement “that the state has compensate discretion on the amount
to be imposed after distinguishing between a useful and non-useful activity”?
A. Tax
B. License fee
C. Toll
D. Customs duty

101. Which of the following is not a distinction or similarity of license fee from tax?
A. Imposed for regulation
B. Involves exercise of police power
C. Nonpayment makes the business illegal
D. Legal compensation or reward of an officer for services

102. All of the following, except one, are characteristics of a toll

A. Demand of proprietorship
B. Compensation for the use of another’s property
C. Maybe imposed by private individuals
D. Levied for the support of the government

103. This is A demand of ownership

A. License fee
B. Tax
C. Toll
D. Franchise

104. One of the following is not a characteristic of a special assessment/levy

A. It has special application only to a particular time and place.
B. It is levied only on land
C. May be levied on business
D. Based wholly on benefits

105. Which statement is wrong?

A. A tax is a demand of sovereignty
B. A toll is demand of ownership
C. A special levy is a tax
D. Customs duty is a tax

106. Which of the following is not a characteristic of debt?

A. Generally arises from contract
B. Payable only in money
C. Assignable
D. Imprisonment is not a sanction for non-payment

107. All funds or income derived by the government om any other source
A. Tax
B. Customs duty
C. Revenue
D. Ordinary revenue

108. It comprises all kinds of funds including taxes

A. License fee
B. Income

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C. Customs duty
D. Revenue

109. Which of the following constitute objectionable double taxation?

A. A license fee and a tax imposed on the same business or occupation for selling the same articles.
B. A tax imposed both on the occupation of fishing and on fishpond operation
C. Persons engaged in leasing or selling real property are subject to real estate dealers’ tax and their sales are also
subject to 10% VAT
D. A tax of 1% is imposed for bank reserve deficiency while a penalty of 1/10 of 1% is also imposed as a consequence
of such reserve.

110. Which of the following is not an element of direct duplicate taxation which is violative of the equal protection
and uniformity clauses in the constitution?
A. Same property is taxed twice
B. Same taxing authority
C. Same amount
D. Same purpose

111. Which of the following statements is correct?

A. Tax laws can never have a retroactive effect
B. The government cannot tax agencies and instruments
C. A taxpayer’s suit can be filed by any taxpayer in any instance against the government
D. In the Philippines, there may be double taxation.

112. 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

113. 1st Statement: Our Constitution does not prohibit double taxation
2nd Statement: If double taxation occurs, the taxpayer may seek relief under the uniformity clause or the equal protection
guarantee
A. 1st Statement is correct, 2nd Statement is wrong
B. 1st Statement is wrong, 2nd Statement is correct
C. Both Statements are wrong
D. Both Statements are correct

114. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In
this sense, double taxation
A. Violates substantive due process
B. Does not violate substantive due process
C. Violates the right equal protection
D. Does not violate the right equal protection

115. Your client owns a row of apartments. He complains to you that he is being required to pay 4 kinds of taxes on
this line of business alone. From the list given by your client, which of the following taxes has been wrongly imposed on
him?
A. Real estate tax on the land and building
B. Value-Added tax on the gross receipts from rent
C. Community tax based on the assessed value of the apartment house
D. Income tax on income from rent

116. One of the following is a false statement about double taxation. Which is it?
A. There is no constitutional prohibition on double taxation
B. Direct duplicate taxation is a valid defense against a tax measure if it is violative of the equal protection clause.
C. Absence of any of the elements of direct double taxation makes it indirect duplicate taxation
D. A 20% final withholding tax on interest income on bank deposits and a 5% gross receipts tax on banks is a
direct duplicate taxation

117. Statement 1: An ordinance imposing a tax on the manufacture of soft drinks and another tax on the sale of the soft
drinks constitute double taxation
Statement 2: Although a deficiency assessment is not necessary, the fact that a tax is due must first be proved before one
cancan be prosecuted for tax evasion
A. Statement 1 Only
B. Statement 2 only
C. Neither statements
D. Both statements?

118. Mr. Alas shoes in Makati through a retail store. He pays the VAT on his gross sales to the BIR and the municipal
license tax based on the same gross sales to the City of Makati. He comes to you for advice because he thinks he is
subjected to double taxation.
What advice will you give him?
A. Yes, there is double taxation and it is oppressive
B. The City of Makati does not have this power.
C. Yes, there is double taxation and it is illegal in the Philippines
D. Double taxation is allowed where one tax is imposed by the national government and the other by the local government.

119. Transfer of the tax burden by one whom the tax is assessed to another

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A. Shifting

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B. Capitalization
C. Transformation
D. Tax exemption

120. Which of the following is not a scheme of shifting the incidence of tax burden?
A. The manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold
B. The purchaser asks for a discount or refuse to buy at regular price unless it is reduced by an amount equal to the tax
he will pay
C. Changing the term of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title
passes abroad instead in the Philippines
D. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, to the retailer and finally
to the consumer.

121. The reduction in the selling price of income-producing property by an amount equal to the capitalized value of the
future taxes that may be paid by the purchaser
A. Shifting
B. Capitalization
C. Transformation
D. Tax exemption

122. The method by which the manufacturer or producer upon whom the taxes imposed pays the tax and strives
to recover such expense through lower production ost without sacrificing quality of his product.
A. Shifting
B. Capitalization
C. Transformation
D. Tax exemption

123. The grant of immunity to particular persons or corporation or to persons or corporations of a particular class from
a tax which persons and corporations generally within the same taxing district are obliged to pay.
A. Tax exemption
B. Tax evasion
C. Tax avoidance
D. Tax amnesty

124. Statement 1: The grant of a tax amnesty must be construed against the taxpayer and liberally in favor of the
taxing authority
Statement 2: A tax exemption is a personal privilege which can be assigned or transferred by the grantee unless disallowed
in the law granting tax exemption.
Which of the above statements is true?
A. Statement 1 only
B. Statement 2 only
C, Neither statements
D. Both statements

125. Which of the following are not usually imposed when there is tax amnesty?
A. Civil criminal and administrative penalties
B. Civil and criminal penalties
C. Civil and administrative penalties
D. Criminal and administrative penalties

126. Statement 1: A BIR Ruling issued by a Commissioner of Internal Revenue which grants tax exemption would create
a perpetual exemption in favor of the taxpayer.
Statement 2: A tax exemption may be withdrawn anytime at the pleasure of the taxing authority.
A. Statement 1 only
B. Statements 1 & 2
C. Statement 2 only
D. Neither of them

127. It is also known as tax dodging

A. Tax exemption
B. Tax evasion
C. Tax avoidance
D. Transformation

128. It is otherwise known as tax minimization

A. Tax exemption
B. Tax evasion
C. Tax avoidance
D. Transformation

129. Which of the following statements constitute tax avoidance?

A. Deliberate failure of a taxpayer to pay the taxes due to the government
B. Connotes fraud through the use of pretenses and forbidden devices to lessen or defeat taxes
C. Punishable by law
D. Maybe contrary to the intent of the legislature but nevertheless do not violate the law.

130. Which of the following fats pertain/s to tax avoidance?

I. After studying his tax problems, Alicante decided to withdraw his bank deposits and to buy tax exempt securities

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II. B who wishes to avoid the payment of taxes assessable on the transaction made it appear on the deed of dale that
the selling price was only P200,000 although it was actually P300,000
III. Refraining from engaging in activities subject to tax
IV. Clavillas Corp. sold its vacant lot to Royal Match, Inc. when the real intention was to donate it to the latter.
A. I only
B. I and II
C. I and IV
D. I, III and IV

131. In case of ambiguity, tax laws shall be interpreted

A. Strictly against the taxpayer
B. Strictly against the government
C. Liberally in favor of the taxpayer
D. Liberally against the government

132. The following, except one, are exceptions to the rule that the tax exemptions must be strictly construed against the
taxpayer
A. Where the statute granting the exemption provides for liberal interpretation thereof.
B. If the taxpayer does not fall within the purview of the exception by clear legislative intent.
C. In case of special taxes relating to special cases and affecting only special classes of persons
D. If exemptions refer to public property

134. A franchise can be amended by

A. An amendment of special laws which granted the franchise
B. An amendment of a law of general application
C. An amendment of a revenue regulation
D. An amendment of tax laws

135. Some franchise holders who are paying the franchise tax are being required by an amendatory law to pay the
value-added tax, while others remain subject to franchise tax. Which of the following constitutional provisions makes the
law unconstitutional?
A. No law shall be passed impairing the obligation of contract.
B. The rule of taxation shall be uniform
C. No person shall be deprived of property without due process of law
D. None of the above

136. S1: The point on which a tax is originally imposed is impact of taxation
S2: As a rule, taxes are subject to set-off or compensation
1st Statement 2nd Statement
A. True True
B. False True
C. False False
D. True False

137. Which of the following is not considered as a step in making a revenue regulation effective?
A. Recommendation by the Commissioner of Internal Revenue to the Secretary of Finance
B. Approval by the Secretary of Finance
C. Legislation by Congress
D. Publication in a newspaper of general circulation

138. Statement 1: In case of conflict between a revenue regulation and the provisions of National Internal Revenue
Code the latter shall prevail.
Statement 2: The revocation of a revenue regulation cannot be made retroactive even if the reason for its
revocation is that it erroneous or contrary to the law.
A. Statement 1 is correct; Statement 2 is wrong
B. Both statements are correct
C. Statement 1 is wrong; Statement 2 is correct
D. Both statements are wrong

139. All of the following, except one, are sources of tax laws
A. Legislations, tax treaties and tax ordinances
B. Judicial decisions
C. Opinions of authors
D. Administrative rules and regulations

140. The best source of our tax laws is—

A. Statutes
B. Court decisions
C. Constitution
D. BIR Rulings

141. When the refund of a tax supposedly due to the taxpayer has already been barred by prescription, and the said
taxpayer is assessed with a tax at present, the two taxes may be set-off with each other. This doctrine is called
A. Set-off doctrine
B. Doctrine of reciprocity
C. Tax sparing doctrine
D. Equitable recoupment

142. Statement 1: The doctrine of equitable recoupment is applicable in the Philippines

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Statement 2: Where taxes and the claim of the taxpayer are fully liquidated, due and demandable, set-off or legal
compensation may take place by operation of law.
A. First statement is correct; second statement is wrong
B. Both statements are correct
C. First statement is wrong; second statement is correct
D. Both statements are wrong

143. The place of authority that has the right to impose and collect taxes—
A. Territoriality
B. International comity
C. Situs of taxation
D. Transformation

144. Domicile or residence of the owner is not the situs of taxation in

A. Income tax
B. Community tax
C. Estate tax
D. Business tax

145. Which among of the following concepts of taxation is the basis of the situs of income taxation?
A. Lifeblood doctrine of taxation
B. Symbiotic relation in taxation
C. Compensatory purpose of taxation
D. Sumptuary purpose of taxation

146. Which of the following is not correct with respect to a taxpayer’s suit?
A. It must pertain to illegal disbursement of public funds
B. It pertains to the passage of a seemingly unconstitutional measure
C. The funds sought to be disbursed must have been raised through
D. It must not refer to an enactment of a tax law

147. Anne Lapada, a student activist, wants to impugn the validity of a tax on text messages. Aside from claiming that
the law adversely affects her since she sends messages by text, what may she allege that would strengthen her claim to
the right to file a taxpayer’s suit?
A. That she is entitled to the return of the taxes collected from her on case the court nullifies the tax measure
B. That the tax money is being extracted and spent in violation of the constitutionally guaranteed right to freedom of
communication
C. That she is filing the case in behalf of a substantial number of taxpayers
D. That text messages are an important part of the lives of the people she represents.

148. A real property tax is payable

A. In the city or municipality where the owner is domiciled
B. in the place where the property is located
C. Anywhere in the Philippines
D. In the revenue office where the property is located

149. Income tax on compensation income may accrue

A. In the country of residence of the income earner
B. In the country where the service has been rendered
C. Neither in the residence of the income earner nor in the country where the service has been rendered
D. Both in the country where the income earner is a resident and in the country where the service has been earned.

150. Which of the following is not a remedy against indirect double taxation?
A. Reciprocity provisions
B. Tax credit
C. Tax exemptions
D. Vanishing deduction

ANSWERS TO MULTIPLE CHOICE QUESTIONS

1. C
2. D
Revenue laws are prospective in operation, unless the legislative intent that the statute
operate retrospectively is distinctly expressed or necessarily implied.
Our tax laws are civil in nature and not criminal. It was also held that our tax laws are not
penal laws although there are penalties provided for their violation.

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Political law is that branch or public law which deals with the organization of operations
of the governmental organs of the State and defines the relations of the State with the
inhabitants of its territory. Thus, our tax laws are not political.
3. C
Tax laws are passed by the legislative body while generally accepted accounting
principles are formulated by the Financial Reporting Standards Council. The accounting
principles should always be in accordance with law. Otherwise they are not enforceable.
4. D
5. B
6. D
7. C
8. D
9. C
10.B
11.D
12.C
13.D
14.B
15.A
16.B
17.A
18.B
19.D
20.A
21.C
22.C
23.B
24.B
25.C
26.D
27.D
28.B
29.C
30.B
31.C
32.D
33.C
34.D
35.D
36.B
37.A
38.B
39.C

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40.D
41.C
42.D
43.B
44.B
45.C
46.A
47.D
48.A
49.C
50.A
51.D
52.C
53.B
54.B
55.A
56.D
57.A
58.B
59.C
60.B
61.B
62.D
63.C
64.B
65.C
66.A
67.A
68.D
69.B
70.A
71.D
72.B
73.B
74.D
75.A
76.B
77.A
78.B
79.A
80.B
81.A
82.A
83.D
28. Principles of taxation Page 30 of 32

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84.B
85.C
86.B
87.C
88.A
89.C
90.D
91.B
92.D
93.C
94.C
95.C
96.A
97.A
98.A
99.C
100. B
101. D
102. D
103. C
104. C
105. C
106. B
107. C
108. D
109. D
110. C
111. D
112. A
113. D
114. C
115. C
116. D
117. A
118. D
119. A
120. C
121. B
122. C
123. A
124. C
125. A
126. C
127. B

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128. C
129. D
130. B
131. C
132. A
133. B
134. B
135. D
136. D
137. C
138. A
139. C
140. D
141. D
142. C
143. C
144. D
145. B
146. B
147. B
148. B
149. D
150. C

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