COLEGIO DE DAGUPAN

Arellano Street, Dagupan City

School of Business and Accountancy

INCOME TAXATION
Summer, AY 2017-2018
Preliminary Examination

NO ERASURES ON FINAL ANSWERS.

I. True or False . Write TRUE or FALSE, not T or F.

1. The Constitutional exemption of religious, charitable and non-profit cemeteries, churches and
mosques refers to income tax and real property tax.
2. Taxpayers under the same circumstance should be taxed differently.
3. Taxation is subject to inherent and Constitutional limitations.
4. International comity connotes courtesy between nations.
5. Collection of taxes in the absence of a law is violative of the Constitutional requirement for due
process.
6. Eminent domain involves confiscation of prohibited commodities to protect the well-being of the
people.
7. Horizontal equity requires consideration of the circumstances of the taxpayer.
8. Taxes are the lifeblood of the government.
9. Taxation is a mode of apportionment of government costs to the people.
10.There should be direct receipt of benefit before one could be compelled to pay taxes.
11.The scope of taxation is regarded as comprehensive, plenary, unlimited and supreme.
12.No one shall be imprisoned for non-payment of tax.
13.The lifeblood doctrine requires the government to override its obligations and contracts when
necessary.
14.2/3 of all members of Congress is required to pass a tax exemption law.
15.The government should tax itself.
16.The exercise of taxation requires Constitutional grant.
17.Taxation is inherent in sovereignty.
18.Police power is the most superior power of the government. Its exercise needs to be sanctioned by
the Constitution.
19.All inherent powers presuppose an equivalent form of compensation.
20.The reciprocal duty of support between the government and the people underscores the basis of
taxation.

II. Multiple Choice.

1. A citizen of a foreign country is considered a non-resident alien engaged in business in the

Phils. If he stayed inside the Phils.
a. For 183 days or more
b. For less than 183 days
c. For more than 180 days
d. For less than 180 days

2. I - All individual taxpayers are subject 20 % final tax on interests from any currency bank deposit and
yield or any other monetary benefit from deposit substitutes and from trust funds and similar
arrangements.

II - All individual taxpayers are subject to 20% final on royalties, in general and 10% final tax on
books, literary works and musical composition.

III – All individual taxpayers are subject to 20% final tax on prizes and winnings, in general.

a. True; True; False

b. True ; False; True

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c. False; True; True
d. False; False; False

3. I. Tax is imposed on persons, property, and property rights.

II. Special assessment is imposed on persons, property, and property rights.
a. True; True
b. False; true
c. True; false
d. False; false

4. I. Due process of law in taxation under the constitution is a grant of power.

II. Provisions in the Philippine constitution on taxation are grants of power.
a. True; True
b. False; true
c. True; false
d. False; false

5. The tax imposed should be proportionate to the taxpayer’s ability to pay.

a. Fiscal adequacy
b. Administrative feasibility
c. Equality or theoretical justice
d. Intellectual sensitivity

6. It literally means “place of taxation”; the country that has the power and jurisdiction to levy
and collect the tax.
a. Basis of taxation
b. Scope of taxation
c. Situs of taxation
d. Theory of taxation

7. An escape from taxation where the producer or manufacturer pays the tax and endeavors to
recoup himself by improving his process of production thereby turning out his units of products at a
lower cost.
a. Shifting
b. Transformation
c. Exemption
d. Capitalization

8. In every case of doubt, tax exemptions are construed

a. Strictly against the government and the taxpayer.
b. Liberally in favor of the government and the taxpayer.
c. Strictly against the government and liberally in favor of the taxpayer.
d. Liberally in favor of the government and strictly against the taxpayer.

9. This power is superior to the non-impairment clause and is broader in application because it
is a power to make and implement laws.
a. Power of Taxation
b. Power of Eminent Domain
c. Power of Recall
d. Police Power

10. Tax as distinguished from special assessment:

a. not as a personal liability of the person assessed.
b. based wholly on benefits
c. exceptional as to time and place
d. based on necessity and is to raise revenues

11. No person shall be imprisoned for non-payment of this:

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a. Excise tax
b. Income tax
c. Value added tax
d. Poll tax

12. The Department of Finance thru its officers entered into a contract with foreign investors
granting them exemption from all forms of taxes to encourage investments in the Phils. The contract is
a. Void, unless the President ratifies
b. Void, because the power to grant tax exemption is vested in Congress.
c. Valid, if the President has authorized the officers to enter into such contract.
d. Valid, because the purpose is to promote public welfare.

13.Which of the following individuals shall not be subject to the income tax under Section 24 (A)?
a.Individual citizen of the Philippines residing therein;
b.Individual citizen of the Philippines who residing outside the Philippines including overseas contract
workers;
c.Individual alien who is a resident of the Philippines;
d.Individual alien who is not a resident of the Philippines.

14. A non-resident citizen is taxable on all income derived from sources

a. Within the Philippines only
b. Without the Philippines only
c. Partly within and partly without
d. Within and without the Philippines

15.A citizen of the Phils. who works and derives income from abroad is a resident if he stayed outside
the Phils.
a. For less than 180 days
b. For more than 180 days
c. For 183 days or more
d. For less 183 days

16. A tax must be imposed for public purpose. Which of the following is not a public purpose?
a. National defense
b. Public education
c. Improvement of the sugar and coconut industries.
d. Improvement of a subdivision road.

17. It is the privilege of not being imposed a financial obligation to which others are subject.
a. Tax incentive
b. Tax exemption
c. Tax amnesty
d. Tax credit

18. This is a constitutional limitation on the power of taxation.

a. Tax laws must be applied within the territorial jurisdiction of the state.
b. Exemption of government agencies and instrumentalities from taxation.
c. No appropriation of public money for religious purposes.
d. Power to tax cannot be delegated to private persons or entities.

19. The power to regulate liberty and property to promote the general welfare.
a. Power of taxation
b. Power of imminent domain
c. Police power
d. Power of recall

20. The tax laws must be capable of convenient, just and effective administration.
a. Fiscal adequacy

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b. Administrative feasibility
c. Equality or theoretical justice
d. Intellectual sensitivity

21. In case of conflict between the Tax Code and the Philippine Accounting Standards (PAS).
a. PAS shall prevail over the Tax Code.
b. Tax Code shall prevail over PAS.
c. PAS and Tax Code shall be both disregarded.
d. The taxpayer may choose between the PAS or the Tax Code.

22. The power of taxation is exercised by

a. The President
b. Bureau of Internal Revenue
c. The Supreme Court
d. Congress

23. One of the characteristics of internal revenue laws is that they are:
a. Criminal in nature
b. Political in nature
c. Penal in nature
d. Generally prospective in application.

24. Which of the following is not a scheme of shifting the incidence of taxation?
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 prices unless it is reduced by the
amount equal to the tax he will pay;
c. Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination
abroad, so that the title passes abroad instead of in the Philippines;
d. The manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in turn to
the retailer and finally to the consumer.

25. Which of the following statements is not correct?

a. Taxes may be imposed to raise revenues 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 provisions of taxation in the Philippine Constitution are grants of power and not limitations on
taxing powers.

26. License fee as distinguished from tax:

a. Non-payment does not necessary render the business illegal.
b. A revenue raising measure
c. Imposed in the exercise of taxing power.
d. Limited to cover cost of regulation.

27. Which of the following is not acceptable for legally refusing to pay the tax?
a. That the right of the state to collect the tax has prescribed.
b. That there is no jurisdiction to collect the tax.
c. That the tax law was declared as unconstitutional.
d. That there is no benefit derived from the tax.

28. It is important to know the source of income for income tax purposes, i.e. from within or
without the Philippines because
a. The Philippines imposes income tax on income from sources within and without of a non-resident
citizen.
b. Some individual taxpayers are citizens while others are aliens.

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c. Separate graduated rates are imposed on different types of income.
d. Some taxpayers are taxed on their worldwide income while others are taxable only upon income
from sources within the Phils.

29. Which of the following is not within the scope of authority of the BIR Commissioner?
a. To exercise the levying function of taxation
b. To interpret tax laws
c. To assess and collect BIR taxes
d. To decide cases involving National Internal Revenue taxes

30.Which of the following is not among the administrative powers of the Bureau of Internal Revenue?
a. Compromise tax assessments
b. Distraint of personal property of delinquent tax payer
c. Render court decision concerning tax dispute
d. Levy of real property of delinquent taxpayer

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