* Valid, rises ¢, ‘or ty stants of tty this is cally nment, eation of the ernment. tax? ied as the Chapter 2 - Taxes, Tax Laws and Tax Administration CHAPTER 2 TAXES, TAX LAWS, AND TAX ADMINISTRATION Chapter Overview and Objectives This Chapter discusses tax laws, taxes, and their distinction from similar items, and the administration of the tax system. After this chapter, readers are expected to comprehend and demonstrate knowledge on the following: 1. The type of taxation laws Distinction among tax laws, revenue regulations, and rulings Tax, its elements, and classifications Distinction of tax from similar items ‘Tax system and its types The principles of a sound tax system How tax is administered The powers of the Bureau of Internal Revenue (BIR) and the Commissioner of Internal Revenue (CIR) and the non-delegated powers of the CIR 9. The criteria for selection of large taxpayers PYAAPYN TAXATION LAW Taxation law refers to any law that arises from the exercise of the taxation power of the State. Types of taxation laws 1. Tax laws - These are laws that provide for the assessment and collection of taxes. as ‘Examples: a. The National Internal Revenue Code (NIRC) b. The Tariff and Customs Code c. The Local Tax Code d. The Real Property Tax Code 2. Tax exemption laws - These are laws that grant immunity from taxation. Examples: a. The Minimum Wage Law b. The Omnibus Investment Code of 1987 (E.0. 226) c. Barangay Micro-Business Enterprise (BMBE) Law d. Cooperative Development Act 35amt tao 1 Cans il Dees ne ne a ‘Be Revenue Regulations swith foreign countries 1. Revenue regulations 2. Revenue memorandum orders Revenue memorandum rulings | © Revenue memorandum crelrs 5. Revenue bulletins a cc wr toe OO aed ‘aanmedation of the Commissioner of Internal Revenue (CIR) that cem ‘provision ofthe National internal Revenue Code (NIRC) and related statutes, Revenue regulations are formal pronouncements intended to cl fevee clarify or explat leg nd ye ec pve oon by providing details oFadmnisa rocedur regulation has the force and effect of is fli sct of a law, but vende to expand ori the application ofthe law; otherwise, itis void, “ ef evenue Memorandum Or "9 sprucio presen eu A eaances that provide ce meee Mldelnes: and cule processes, ‘operations, ac — procedures necessary in the implementa vjectives, plans, and exept aun. cance oe eran the Bureau in all areas of Revenue Memory cate aes) are ay MOST ponsore he a pec rel wth exalted consequences in aT opinions and interpretatior ‘and other tax laws as applied of provemecedents, and which the IR viding taxpayers guidance on the 8s therefore, cannot contravene andum Cj and void ab initic sale eu 0. Able partons MCs) a ‘sued by he Bandon elicatins gp SUaNCES that_ publish pertine ther agencies at WE, Tiles, regul recs Ly dereg, me nc ee 9% Els, regulations, and pres cas hue i chapter 2 - Taxos, Tax Laws and Tax Administration nmmncg eine te oer ener [Hoy "veler to periodic issuances, notices, and official of fneernal Revenue that Gonsolidate the Bur Stan spece aus of lw or administration In setae, relevant tax laws, and other issuances for Revenue _Bul ements of BIR Baling’ ofthe Bureau to queries raised payers and ther stakeholders Fl se lings are merely advisory or a sort of information service to the taxpayer such that Mone of them is binding except to the addressee and may be reversed by the BIR at anytime. ‘Types of rulings 1, Value Added Tax (VAT) rulings 2, International Tax Affairs Division (ITAD) rulings 3. BIR rulings 4. Delegated Authority (DA) rulings Generally accepted accounting principles (GAAP) vs. Tax Laws Generally accepted accounting principles or GAAP are not laws, but are mere ‘conventions of financial reporting. They are benchmarks for the fair and relevant valuation and recognition of income, expense, assets, liabilities, and equity of reporting entity for general purpose financial reporting. GAAP accounting reports are intended to meet the common needs of a vast number of users in the general public. ‘Tax laws including rules, regulations, and rulings prescribe the criteria for tax reporting, a special form of financial reporting which is intended to meet specific needs of tax authorities. ‘Taxpayers normally follow GAAP in recording transactions in their books. However, in the preparation and filing of tax returns, taxpayers are mandated to follow the tax law in cases of conflict with GAAP. NATURE OF PHILIPPINE TAX LAWS Philippine tax laws are civil and not political in nature. They are effective even during periods of enemy occupation. They are laws of the occupied territory and not by the occupying enemy. Tax payments made during occupations of foreign enemies are valid. Our internal revenue laws are not penal in nature because they do not define crime, ‘Their penalty provisions are merely intended to secure taxpayers’ compliance. 372. +r having jurisdiction over the obje 1 tional and inherent limitations. _- a tax imposed for general purpose a — a tax imposed to regulate business, conduct, acts gras bin od taxevied to achieve some socal or economic objectives octal of economccnue * A r capitation ~ a tax on persons who are residents of; itax on properties-real or personal _ tax ~ a tax imposed upon the performance of an bee tof a privilege or engagement in an occupation ne + ie valor Dowie ok is occurs, taxes * where the statutory taxpayer is not a is the nam, Pe! by lay pm Bisons vie tal paysthetsg z Chapter 2 Taxes, Tax Laws and Tax Administration g, Astorate Progressive or graduated tax - This is a tax which imposes increasi F. Asto imposing authority da ( 0 -e. Ad sleen ~ a tax of a fixed proportion imposed upon the value of the tax Proportional tax ~ This is a flat or fixed rate tax. The use of proportional tax emphasizes equality as it subjects all taxpayers with the same rate without regard to their ability to pay. ag the tax base increase. The use of progressive tax rates results in able taxation because it gets more tax to those who are more capable. the gap between the rich and the poor. reverse of progressive gressive tax is tly violates the Constitutional guarantee of progressive taxation. ‘Mixed tax - This tax manifest tax rates which is a combination of any of the above types of tax. ‘National tax - tax imposed by the national government Examples: Income tax - tax on annual income, gains ot profits Estate tax - tax on gratuitous transfer of properties upon death Donor’s tax - tax on gratuitous transfer of properties by a living donor |. Value Added Tax ~ consumption tax collected _by VAT business Other percentage tax - consumption tax collected -by_non-VAT business taxpayers f.Excise tax ~ tax on sin praduets and non-essential commodities such as alcohol, cigarettes and metal ‘This should be differentiated with the privilege tax which is also Documentary stamp tax - agreements and papers evidencing the acceptance, transfer of an obligation, right or property incident thereto. by a decedent Local tax ~ rament Examples: a. Real property tax b. Professional tax c. Business taxes, fees, and charges 39 tax imposed by the muniei2 Taxes, Tax Laws and Tax ‘Administration Chapter ‘4. Community tax Faron banks and other financial institutions DISTINCTION OF TAXES WITH SIMILAR ITEMS Taxs. Revenue sntfor public purpose, ‘Tax refers to the amount it by the governmer Reve refers to all income colle Taxvs.License fee ' Tarhas a broader subject than license. Tax emanates from taxation power Tanowed upon any object such as persons, properties, OF privileges to revenue. License fee emanates from police power and is imposed to regulate the exercise, a privilege such asthe commencement of a business or a profession, 1 ‘Taxes are imposed after the commencement of a business or profession “4 license fe is imposed before engagement in those activities. In other words, ‘a post-activity imposition whereas license is a pre-activity imposition. 7 Tax vs. Toll Pat's ley of goverment; hence, a demand of sovereignty. Toll is a cha the use of other's property; hen: a] is a demand of ownershi ‘The amount of tax depends upon the needs of the government, but the amount {ollis dependent upon the value of the property leased, Both the government and private entiti i iti Beh Geom Private entities impose toll, but private entities ca ‘Tax vs. Debt 1 Whi i lea tinge ile debt arises from private contracts. Non-payment of it but non-payment of, i Debt 'yment of debt does not lead to imprisonment. sen) _ be subject ‘o set-off but tax is not. Debt can be paid ini nd (dacion ‘sgeneraly payable in money, ad Tax draws inte When itis so Bat eee the taxpayer is delinquent, Debt draws inter legal delay, contracting parties or when the debtor incurs# 40 ‘Chapter 2 - Taxes, Tax Laws and Tax Administration ‘Tax vs. Special Assessment Tax is an amount imposed upon persons, properties, or_privileges. Special assessment is levied by the government on Tands” adjacent public improvement. Its imposed on land only and is intended to compensate the government for a part of te cost ofthe improvement. ‘The basis of special assessment is the benefit in terms of the appreciation in land value caused by the public improvement. On the other hand, tax is levied without expectation of a direct proximate benefit. Unlike taxes, special assessment attaches to the land. It will not become a personal obligation of the land owner. Therefore, the non-payment of special assessment ‘will not result to imprisonment of the owner (unlike in non-payment of taxes), Taxvs. Tariff ‘Tax is broader than tariff. Tax is an amount imposed upon persons, privilege, tansactions, or properties. Tariff is the amount imposed on imported oF exported commodities. ‘Tax_vs. Penalty yr the support of the government. Penalty is an amount imposed to dis Penalty may be imposed by both the government and private individuals. It may arise both from law or contract whereas tax arises from law. ‘TAX SYSTEM The tax system refers to the methods or schemes of imposing, assessing, and collecting taxes. It includes all the tax laws and regulations, the means of their enforcement, and the government offices, bureaus and withholding agents which are part of the machineries of the government in tax collection. The Philippine tax system is divided into two: the national tax system and the local tax system. ‘Types of Tax Systems According to Imposition 1. Progressive - employed in the taxation of income of individuals, and transfers of properties by individuals 2. Proportional - employed in taxation of corporate income and business 3. Regressive - not employed in the Philippines ‘Types of Tax System According to Impact 1. Progressive system : A progressive tax system is one that emphasizes direct taxes. A direct tax cannot be shifted. Hence, it encourages economic efficiency as it leaves no other resort to taxpayers than to be efficient. This type of tax system impacts, more upon the rich, aLis one that etnphesizes-indicect taxes Indi i taxa B eonsumers; hence, the impact of 7 id of pases. Th effec, a regressive tax syste nat despite the Constitutional guarantee of a pro, ss has a dominantly regressive tax system due to Wr deducts the tax on the income before releasing the same to emits the same to the government. The following are ‘taxes collected under this system: withholding tax - a withholding tax prescribed on cej ‘payments and is creditable against the income tax due of "payee forthe taxable quarter or year in which the particular income earned, ‘Final withholding tax - a kind of withholding tax which is presi ‘certain income payments and is not creditable against any income tax. the payee for the taxable year ‘tax on government payments -the tax withheld by 4 government agencies and __instrumentalities ‘Bovernment-owned and controlled corporations on their payments Suppliers, or payees, ‘compliance ‘System - Under this collection system, the ta) nines his income, reports the same through income tax ret es faeces ‘This system is also referred to as the method.” A portion of the tax due Payable herein may have ‘Wibotangtor lunder the withholding system, ‘such as: ua x on compensation | by compensation earners withholding tax by taxpayer engaged in business or ex (deduction) against the tax di taxpayer shall pay any balance credit for excess tax withhel Chapter 2 - Taxes, Tax Laws and Tax Administration 3, Assessment or enforcement system - Und government identifies non-compliant taxpayer penalties, and enforces collections by coerci Proceeding or judicial proceedings when necessary. collection system, the ses their tax dues and sans such as summary PRINCIPLES OF A SOUND TAX SYSTEM According to Adam Smith, governments should adhere to certain principles or canons to evolve a sound tax system: 1. Fiscal adequacy 2. Theoretical justice 3. Administrative feasibility Fiscal adequacy Fiscal adequacy requires that the sources of government funds must be sufficient to cover government costs. The"government must not incur a deficit. A budget deficit paralyzes the government's ability to deliver the essential public services to the people. Hence, taxes should increase in response to increase in government spending. aay justice il Justice or equity suggests that taxation should consider the taxpayer's It also suggests that the exercise of taxation should not be tor confiscatory. Administrative feasibility Administrative feasibility suggests that tax laws should be capable of efficient and effective administration to encourage Compliance. Government should make i éasy for the taxpayer to comply by avoiding administrative bottlenecks and reducing compliance costs. The following are applications of the principle of administrative feasibility: 1 ig and e-payment of taxes 2. Substituted filing system for employees 3. Final withholding tax on non-resident aliens or corporations 4. Accreditation of authorized agent banks in the filing and payment of taxes ‘TAX ADMINISTRATION tration refers to the management of the tax system. Tax n of the national tax system in the Philippines is entrusted to the Bureau of Internal Revenue which is under the supervision and administration of the Department of Finance. 43‘of Internal Revenue ar Re out ston cacho be dsignted tothe folowing RPOWDE Nerror s+ valerso | Enforcement group — Systems Group tanet c- Pawel ‘Management Group | Tax Administration sow -@ int 0. mang "BUREAU OF INTERNAL REVENUE and collection of taxes, a ___ decided in its favor by the courts _—-% Giving effect to, and administer officials of receipts and clearances 7. Submission of annual report, pertin 2 To decide tax cases, subject to the oF les and fines, and judgments in ing the supervisory and police to itby the NIRC and other laws mn ent of internal revenue officers and other employees to other ut coche and distribution of forms, receipts, certificates, stamps, at engneth formation to Congress and r ‘the Congressional: ‘Oversight Committee in a ‘matters of taxation ~ owersoF rue commssiowen ‘OF INTERNAL REVENUE | 1. To interpret the provisions o | Prange? the Provision of the NIRG, subject to review by the Secretary} | Tote cess exclusive appellate jurisdiction of the: og /-& Disputed assessments ~ Refunds of internal revenue i aera ae Tevenue taxes, fees, or other charges j x OtberNIRC and special law matters administered by the BIR “obtain information aes te Smmon, examine, and take testimony Purpose: For the CIR to ascertain —& The correctness of any 7 been made by the axpoyan “HOF In making a return when none b. The tax liability of any such lab ‘any person for a “4 Taxcomplanceof the taxpayer SWpetne %ces Tee m any inter "mal revenue tax or in corre ear I. Ya terse SHAG Connie once Chapter 2 - Taxes, Tax Laws and Tax Administration 6 & Authorized acts: a. To examine any book, paper, record or other data relevant to such inquiry b. To obtain on a regular basis any information from any person other than the person whose internal revenue tax liability is subject to audit « To summon the person liable for tax or required to file a return, his employees, or any person having possession and custody of his books of accounts and accounting records to produce such books, papers, records or other data and to give testimony 4. To take testimony of the person concerned, under oath, as may be relevant or material to the inquiry €. To cause revenue officers and employees to make canvass of any revenue district To make assessment and prescribe additional requirement for tax administration and enforcement To examine tax returns and determine tax due thereon The CIR or his duly authorized representatives may authorize the examination of any taxpayer and the assessment of the correct amount of tax. Failure to file return shall not prevent the CIR from authorizing the examination, Tax or deficiency assessments are due upon notice and demand by the CIR or his representatives, Returns, statements or declarations shall not be withdrawn but may be modified, changed and amended by the taxpayer within 3 years from the date of fling. except when a notice for audit or investigation has been actually served upon the taxpayer. When a return shall not be forthcoming within the prescribed deadline or when there is a reason to believe that the return is false, incomplete or grroneous, the CIR shall assess the proper tax on the basis of best evidence available, In case a person fails to file a required return or other documents at the time Presumed prima facie correct and sufficient forall legal purposes. To conduct inventory taking or surveillance To prescribe presumptive gross sales and receipts for a taxpayer when: The taxpayer failed to issue receipts; or 45or other records of the taxpayer do ng, inthe return, ceipt shall be derived from the performance ‘dreumstances adjusted for other relevan, gto remove, hide, or conceal his property | perform any act tending to obstruct the proceedings forthe ofthe tax orrender the same ineffective ofthe taxable period shal be communicated through ano together with a request for immediate payment. Taxes shall by le immediately. crbe real property values IR is authorized to divide the Philippines into zones and prescribe real erty values after consultation with competent appraisers. The values | preseribed a to as zonal value. ‘For purposes of internal revenue taxes, fair value of real property shall mean whichever is higher of: ‘a. Zonal value prescribed by the Commissioner 1 Assessed value per the Provincial and City Assessor's Office For purposes of local taxes, fair value of rel property pertains to the assessed value, 10, To compromise tax liabilities of taxpayers ‘I. Toinquire into bank deposits only under the following instances: & Determination ofthe ross estate of decedent " substantiate the taxpayer's claim of financial incapacity to pay tax ina application for tax compromise ae ae ‘In cases of financial incapacity, inquiry can proceed only if th , roe if the taxpayer walveshis privilege under the Bank Deposit Secrecy Act. “ 12. To accredit and register tax agents The denial by the CIR of application for accredi mn litation is appealable to the ‘appeal within 60 days is deemed an approval. 46 qotor2-T2#08, Tax LaWe and Tax Adineraton sg: to refund or credit internal revenue taxes tu: Toabate or cance te topreserbe aditonal procedures or documentary requirements lites in certain cases 46 To eles hls powers to any subordinate officer with a rank equivalent to a division chief of an office ‘The f 7, The power to recommend the promulg secretary of Finance. ated power of the CIR swing powers of the Commissioner shall not be delegated: \n of rules and regulations to the / 2, The power to issue rulings of first impression or to reverse, revoke or modify ‘any existing rulings of the Bureau. 43, The power to compromise or abate any tax liability Exceptionally, the Regional Evaluation Boards may compromise tax liabilities under the following: a. assessments are issued by the regional offices involving basic deficiency tax of P500,000 or less, and minor criminal violations discovered by regional and district officials, Composition of the Regional Evaluation Board a. Regional Dir b. Assistant Regior Heads of the Legal, Assessment and Collection Division d._ Revenue District Officer having jurisdiction over the taxpayer 4. The power to assign and reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept. Rules in assignments of revenue officers to other duties 1. Revenue officers assigned to an establishment where excisable articles are kept shall in no case stay there for more than 2 years. 2. Revenue officers assigned to perform assessment and collection function sh: ‘not remain in the same assignment for more than 3 years. 3. Assignment of internal revenue officers and employees of the Bureau to special duties shall not exceed 1 year. a7collection of internal revenue taxes, subordinates with respect to collec ported goods. ‘ nent offices and his subordinates with res the Commissioner with respect to receipts ie taxes authorized to be made thru banks, d government depositary banks (AGDB). D WITH TAX COLLECTIONS OR TAX INCENTIVES Zone Authority t Tax Collecting Unit (BoC) ulatory functions, the bureau of Customs is tasked to administer fn imported articles and collection of the Value Added Tax on with the BIR, the BOC is under the supervision of the nce. ‘The Bureau of Customs is headed by the Customs Commissioner and is assisted five Deputy Commissioners and 14 District Collectors. " Board of Investments (BOI) ‘The BOI is tasked to lead the promotion of investments in the assisting Filipinos and foreign investors to venture and el ilipin and prosper in desirable areas epee etiites. It supervises the rant of tax incentives under the Omnibus wvestment Code. is an attached agency of the Dey j * partment of Trade and Bs seas capnered ot a un time govemors excluding the DTI secretary asits ines shall appoi ' bboard who shall actas the BOI's managinghead. © '°® Chairman of the Prlippine Economic Zone Authority (PEZA) PEZA is created to promote investments in export-ori industries in the Philippines and, among other myriads of eis ee ‘Brant of both fiscal and non-fiscal incentives, aati 48 1 2.- Taxes, Tax Laws and Tax Administration cchapte jstered enterprises enjoy tax holidays f pezA register ys for certain years, exemption from port and export taxes including local taxes. The PEZA is also an attached agency ofthe DTH ‘the PEZA is headed by a director general and is assisted by three deputy directors. Local Government Tax Collecting Units Provinces, municipalities, cities and barangays also imposed and collect various {gees to rationalize their fiscal autonomy. These will be discussed under Business Gnd Transfer Taxation by the same author. “TAXPAYER CLASSIFICATION FOR PURPOSES OF TAX ADMINISTRATION For purposes of effective and efficient tax administration, taxpayers are classified jnto large and non-large. Large taxpayers are under the supervision of the Large ‘Taxpayer Service (LTS) ofthe BIR. Non-large taxpayers are under the supervision of the respective Revenue District Offices (RDOs) where the business, trade or profession of the taxpayer is situated. “The following are the criteria for determining large taxpayers: A. Asto payment 1. Value Added Tax - At least P200,000 per quarter for the preceding year 2. Excise Tax - Atleast P1,000,000 tax paid forthe preceding year 3. Income Tax - At least P1,000,000 annual income tax paid for the preceding 4. Withholding Tax - Atleast 1,000,000 annual withholding tax payments or remittances from all types of withholding taxes 5. Percentage tax - At least P200,000 percentage tax pald or payable per quarter for the preceding year 6. Documentary stamp tax - Atleast P1,000,000 aggregate amount per year B. Asto financial conditions and results of operations 1. Gross receipts or sales - P1,000,000,000 total annual gross sales or receipts 2. Net worth - P300,000,000 total net worth at the close of each calendar or fiscal year 3. Gross purchases - P80O, year 4. Top corporate taxpayer listed an Commission (000,000 total annual purchases for the preceding id published by the Securities and Exchange 491d Tax Administration ‘Chapter 2 - Taxes, Tax Laws an payers as large taxpayers aseitl tax Ae ee atically clasified as large taxpayers yp src ate sir torn Multinational enterprises with an authorized capitalization or assigned capital y merger or consolidation of a large taxpayer he operation or business in case of spin-off of ay 1thorized capitalization of atleast P300,000,000 registers, them as large taxpayer) 9. Corporate taxpayers with at least P100,000,000 authorized capital in banking insurance, telecommunication, utilities, petroleum, tobacco, and alcohol industri, 10, Corporate taxpayers engaged in the production of metallic minerals 50 re chapter 2 T@X88, Tax Laws and Tax Adminstration ApTER 2: SELF-TEST EXERCISES ue _/orscussion Questions is stnguish tax law from tax exemption law, } enumerate the sources of tax laws J iscuss the nature of Philippine tax law. 3. Distinguish tax laws, revenue regulations, and rulings £ Define tax and identify its elements. 2 What are the classifications of taxes? Enumerate and provide examples for each classification. 7. Compare tax with revenue, license, toll, debt, special assessment, tariff, and alty. og. Wihtis atacaystem? What areits pes? 9, Enumerate the principles of a sound tax system. Explain each. 410, Enumerate the powers ofthe BIR. 41, Enumerate the non-delegated powers of the CIR. Exercise Drill No. 1 Identify the type of tax that is described by the following: ‘T._A consumption tax collected by non-VAT businesses 2._ Tax on gratuitous transfer of property by aliving donor 3, Tax that decreases in rates as the amount or value of the tax object increases 4 Tax collected upon persons who are not the statutory taxpayers ‘Tax that is imposed based on the value of the tax object ‘Tax for general purpose ‘Tax imposed by the national government ‘Atax on sin products or non-essential commodities Imposed on the gratuitous transfer of property upon death ‘Tax on residents of a country “Tax that remains at flat rate regardless of the value of the tax object 12. Tax which is collected on a per unit basis, 13, Taxis collected upon the statutoi er 14, Tax imposed to regulate businesses or professions 1S. Tax upon performance of an act or enjoyment of a L_ privilege 51Criteria When taxis collected upon someone who is effectively reimbursed by another, the as Ss ee 4 6. personal indirect. 4 illegal. 2 Allaread valorem taxes, except one. Select the exception. a Polltax © Real b. Estate tax lag tax 4. Capital gains tax on real property capital asset 3. Taxation power can be used to destroy @ asarevenue measure. —c.as animplement of | police power. b evenifthetaxisinvalid. d.when the Sate isin dire need of funds. 4. Which is nota characteristic of tax? n enforced contribution, : generally payable in money, “ | chapter 2 - Taxes, Tax Laws and Tax Administration subject to assignment. id by the law-making body of the State having jurisdiction. a 5. Which ofthe following is alocal tax? "4. Value added tax Documentary stamp tax bb. Real property tax Other percentage taxes 6. Which is nota source of tax law? a, CHED regulations ——_c. Judicial decisions b. BIR Rulings 4. Constitution ified as .National or local tax 4. Specific or ad valorem tax a regul b. Direct or indirect tax ¢ National or local tax 4. Specific or ad valorem tax ‘National or local tax d. Specific or ad valorem tax b. Enforced within the territorial jurisdiction of the taxing authority ._Levied by the lawmaking body 4d. Generally payable in kind business taxes, d. personal taxes. ¢. Documentary stamp tax 4. Excise tax 13, Asto subject matter, taxes do a. Property tax b. Regulatory tax 14. A tax that is imposed upon the performance of an ac, the enjoyment ofa privilege ‘or the engagement ina profession is known as a. income tax. excise tax. bi ticense, transfer tax. 5328 ax taws and Tax hem 5 caper 2 Taxes T tax? 9, which sa national” 15: i peal property @ tb. Community ing Income tax Professional tax jstinguishes license from tax? 16. Which of dine Does not renders business il E vse ¢ preactivity napplication bt iscorec? 17. Whichis cores to compensation. ‘Taxes may be subject 5 2 Tateinga demand of ownership is exercised only by private ny > aton en pago and cesionin payment are applicable to taxation d._ Special assessment app! only when public improvement is made 18, Tarasto determination of amount is classified as a Fiscalorregulatory _¢.National or local tax bh Director indirect tax d. Specific or ad valorem tax ification as to object do not include Regulatory tax 4. Excise tax A. Taxmust not violate constitutional and inherent limitation. B. Taxmust be uniform and equitable. Taxmstbe for public purpose. ax must be levied by the lawmaking bod! & Taxmustbe proportionate in character, Taxis generally payable in money. Which ofthe above . a Allothe aaa not an essential characteristic of a valid tax? Mama None, except F : d.None of the above 'e produc lawaujeet of 28 environmentally harmful commodty oot die nt i sales of an environment ly come correct? imposed on sales exces 100,000. taxis com ination ofan ad valorem tax and specific a% regulatory tax, ©. Bstate tax 4 Occupation tax Chapter 2 - Taxes, Tax Laws and Tax Administration 23. 24. 25. Which is an indirect tax? a, Value added tax b. Donor's tax Income tax Real property tax ‘Which is not an ad valorem tax? a. Real property tax b. Excise tax on cigar «, Income tax 4. Donor's tax ‘Atax that is imposed based on per unit or per head basis is known as a, Proportional tax c-Ad valorem tax b, Specific tax. 4. Progressive tax ‘Tax as to rates excludes a. Specific tax b. Progressive tax. Mixed tax 4. Proportional tax Mr. A has a tax obligation to the government amounting to P80,000. Since he is Jeaving the country, he entered into a contract with Mr. B wherein Mr. B shall pay tthe P80,000 tax in his behalf. On due date, Mr. B failed to pay the tax. The Bl letter of demand to Mr. A which he refused to pay. Which of the following statements is correct? ‘a. The government cannot enforce collection charges against Mr. A since he has validly transferred his obligations to B under the contract. ‘The government can no longer run after Mr. A because he is already outside the Philippine territory. ‘The government should wait until Mr. B becomes solvent again. ‘The government should force Mr. Ato pay because taxes are non-assignable. lippine tax laws are, by nature, Jes tax Is an example of «Income tax d. Indirect tax Which ofthe following statements is correct? a. The Marshall Doctrine is not used in practice since it b. An ex post facto tax law violates the constitution. b An exon personally drafted by the president shall become & law after approval by congress. 4. It is in the public interest that errors of Pu government to limit government abuse. is unconstitutional. lic officials should bind the 55Tax Administration ; rt ued court of Tax Appeals a) Secretary of Finance smissioner of Internal ow 2 someon ace nal Revenue istimted in application? sa_ wae owing HI Totes 2 tenets 4 BIR Ruling eis ota source oftaxlaw? Swe jeiors Onions of tax experts = aimvereitions dTaxtreaties and ordinances 4A, Whichisues revenue regulations? \ ve eparmentofFinance c Commissioner of Internal Revenue é Congress 4.Commissioner of Customs 35, Whichis ot an clement of tax? a Itmustbe for public purpose. 4 tmustnot volte Constitutional or inherent limitation, Iemustbe progressive by nature, 4. Itmustbeuniform and equitable, 36 Taxastoprpose does ot inde 2 Revenue Sumpruary 37. When the impact and i a Tapa bec and nonce of taxation are merged into te ‘% 2 Personal b Diettar clndirect tax 4 National tax 38 Texas z pital 5 Propery tax © Excise tax 3. Mich 4 Allof these rhesnoten nde 4 Impose Excise tax 0 Atacta 4 Personal tax ta 1 became Pate Spec tx tment erSonal tax Statement 725 te volun 2 Tax tar ; *aemandstory “ontributions to the government. ‘“Ontributions to the government 56 eee eS ae Chapter 2 - Taxes, Tax Laws and Tax Administration Which is correct? ly statement 1 is correct. b. Only statement 2s correct. Both statements are correct. d._ Neither statement is correct. 42, Which is an indirect tax? a, Other percentage tax b. Income tax Donor’s tax d. Estate tax 43. Income tax is not a/an a. Ad valorem tax «. Revenue tax b. Direct tax d. Property tax 44, Atransfer tax is not a/an a, Regressive tax «¢ National tax b. Ad valorem tax 4. Excise tax 45, Which ofthe fol a. Taxlaw geared to phase out a deficit balance of the government. . Tax law intended to prohibit gambling in the Philippines. Tax law intended to protect local industries. dd. Tax law supporting the development of a particular industry. ng levy is fiscal or revenue by nature? Multiple Choice - Theory: Part 2 1. Which is not an excise tax? a. Income tax b. Business tax «Personal tax . Transfer tax 2. Which of the following do not relate to tax? ‘a. Does not render business illegal when not paid 'b. Arises from law rather than from contracts ‘c. Intended to cover cost of regulations 4. Intended for public purpose 3. A levy from a property which derives some special benefit from public improvement is a. Special assessment b. Eminent domain Taxation Toll 4, A. Government revenue may come from tax license, toll and penalties. B. Penalty may arise either from law or contracts. Which is false? cAandB Neither A nor B 7x hdmiisraton Se Laws end Taxes, 4 ) text ies chapter 2- Taxes, Tax Laws and Tax Administration nego) 2nd of ovnetsn 43, Taxasto subject matter does not include sien on rac epropersytax Baise tax ry impost ’. Personal tax 4. Regulatory tax ving isinglshes tense OM 27 114. What distingulshes debt from tax? der taxation power: What Ges trom contract ¢.Non-payment will lad tomprisonment & Never drawsinterest_ d. Generally payable in money ise efoather’s propery b nis da cow edet businesses eta ‘ a ein money. Multiple Chotce - Theory: Part 3 generally maya a a ommissoner of Internal Revenue isnot authorized a smpasetis tase onene value ofthe PrOPETLY The pret the provisions ofthe National Internal Revenue Code 1 eee Tl a Imerigpte Reve Reulatons a 4 Special assessment terminate an accounting period é ._ preserbe presumptive gross receipts. is ut? 2 2 pe poner a. wich isnota power ofthe Commisloer oftteral Revere? sal ePet evo change tax periods of taxpayers cent f. Torefund internal revenue taxes } : Te preseribe assessed value of real properties natal earns mare nom gs To presse gan opty onunder eran st al 4 Denandof ownership 44 ‘The principles ofa sound tax system exclude 4 Compensation or the use of another's property w*eonomicefficiency Theoretical justice & Nae ratind \. Fiscal adequacy 44 Administrative feasibility the “9 support ofthe government “i Which ofthe folowing best describes the effect of ax condonation? ‘the unpaid balance of a tax 10, Whichef the folowing is incorrect? ty fn Ne weal xpayer paving some portion ofthe unpaldt% &% 4 Thecoleced urisrefered to as revenue, 3 Tost se sure of goverment revenue {ie sinpased before commencement of a business oF profession subject to compensation or set-off. Which is not an application ofa principle ofa sound (2 system? Wrixes should adjust based on government needs: 'b. Taxation should be progressive: Taxation should encourage convenient compliance, 4, None of these wl not cause im ‘ © epee sonmen when not pal fasound tax sytem s the atc nt rater justi? 12, Selec the money. tice c-Administrative feasibillty corre b. Fiscal adequacy All of these a 7. Violation of this principle will make a tax aw invalis enders the ve eee Administrative Feasbilsy ‘snot business illegal. & Theoreticaljustice 4. Beonomie consistench ‘ofthe person owning the Pr?F ir ig the PI imposed on building and other real ane 39 /_ 58istration d TAX Adminis! chapter 2 TOROS ax Laws an lowing select the object oftaxat thas the right | oct wee gen tear ete oe these ofthe ol 1, whichofthe isthe BIR not empowered to do? a taxes snl sad rant es collect ca 2xeS Se tes penalties and fines sledenand that ax should be just, reasonable, and fay a Tetedequcy «Economic consistency 11, wher among he folowing powers ofthe Commlssfoner of Internal, bedelegated? othe powerto conduct inventory surveillance The power to recommend promulgation of revenue regulations. ©. Thepower to issue rulings of frst impressi 4 Thepewer to reverse a ruling amend or modify an existing ruling, ‘The Commissioner of Internal Revenue is not empowered to Mar nenda tart for and nba ofthe taxpayer. in information an i Okan infratin and to summon, examine, and take testimony Compromise tx bilities of tax payers. Grantamnest for erring taxpayers, 13, Which s true with tax amnesty? 2 isuncndtna oe 4 plies for pasta the taxpayer. @ Alefthee, P*ta%dfture non-compliance. 14, Which of the fol } Pie nnemay ax exemption come from? constitu Law 18, ee 4. All of these 2 Contract MPO MICh ofthe fol > Constitution egg. ones tepealabla? 4.None ofthese sccssaiset Haast tt seroranappication af he Hfblood doce, ’ \ Chapter 2- Taxes, Tax Laws and Tax Administration 46, Select the incorrect statement regarding tax amnesty and condonation ein tax amnesty, violators are required to pay a portion of the tax assessed, tL When the remaining unpaid portion of the tax is condoned, the taxpayer ‘cannot ask for refund for the balance already paid. ‘c. Tax amnesty operates as a general pardon and is rarely available. §._ Tax condonation operates on the whole balance ofthe assessed tax: hence, the taxpayer can ask for refund forthe paid portion ofthe tax {17, Which ofthe following is a power ofthe Commissioner of Internal Revenue? fa Assessment and collection of taxes b. Enforcement ofall forfeitures, penalties, and fines Interpretation of the provisions of the NIRC S. Giving effect to and administering the supervisory and police powers ‘conferred by the NIRC and other laws 46, The Commissioner of Internal Revenue can delegate the power to ‘a. refund or credit internal revenue tax. EL recommend rules and regulations to the Secretary of Finance, oe gn and re-assign revenue officer to establishments of exisabe articles compromise or abate tax liability. 19, ‘The BIR is under the supervision of a. the Bureau of Customs. c.the Department of Finance, the President. Congress. 20. Who is nota large taxpayer? ining companies sted companies Banks with P120M authorized capital <.None of these b 21. interms of fnancal measures, which ofthe following threshold for qualifeation as large taxpayers is incorrect? a. Gross receipts exceeding P1B b. Networth exceeding P300M Gross purchases exceeding PB00M d._ Gross sales exceeding P1.5B 22. Asto tax payments measures, which ofthe following threshold forthe ‘qualification as large taxpayer is incorrect? ‘ome tax payments of PIM b. jue added tax payments of PAM ¢._ Quarterly percentage tax payments of P200,000 4. Annual documentary stamp tax of P1M 61