TAXATION LAW SOCIETY 2012 TAXATION LAW MULTIPLE CHOICE QUESTIONS

Compiled by: Chairman: Vice-Chairman: Members: Yu, Stephen (4th Year) Tamsi, Ruby Mary Gold (3rd Year) Restauro, Ruth (4th Year) Ruiz, Sharmine (4th Year) Velayo, Lovely (4th Year) Vallecer, Virgil (3rd Year) Orofeo, Daisy (3rd Year) Jamero, Jacinto (1st Year)

GENERAL PRINCIPLES OF TAXATION

1. The following are similarities of the inherent power of taxation, eminent domain, and police power, EXCEPT one:

a. b. c. d.

Are necessary attributes of sovereignty; Interfere with private rights and property; Affect all persons or the public; Are legislative in implementation.

Suggested Answer: Letter C [The power of eminent domain affects only particular property owners, i.e. the owners whose properties are being taken by the government.]

2. Among the nature of taxation is that it is an inherent power being an attribute of sovereignty. Which among the following is NOT among its manifestation as such inherent power? a. Courts cannot issue an injunction to enjoin the collection of taxes. b. There should be no improper delegation of the power to tax. c. Taxes may be imposed even without a constitutional grant. d. The State has the right to select the subjects and objects of taxation. Suggested Answer: Letter B [Letter B is a manifestation of the nature of taxation being a legislative power.]

3. Which is NOT a characteristic of the power of Taxation?

a. b. c. d.

The power co-exists with the existence of the State. It is absolutely legislative in character. It is subject to inherent limitations. It is subject to limitations found in the 1987 Constitution.

Suggested Answer: Letter B

2. 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. Suggested Answer: Letter D

3. Tax laws, being imposition of burden, shall be strictly construed against: a. b. c. d. A person who refuses to pay the tax The taxpayer The government Either the taxpayer or the government, depending on the evidence presented

Suggested Answer: Letter C 4. The defense available to a taxpayer who is required to pay excessive taxes is: a. b. c. d. That the tax is levied for a religious purpose Due process of law Equal protection of the law Non-impairment of obligations of contract

Suggested Answer: Letter B 5. In case of conflict between tax laws and generally accepted accounting principles (GAAP): a. b. c. d. Both tax laws and GAAP shall be enforced; GAAP shall prevail over tax laws; Tax laws shall prevail over GAAP; The issue shall be resolved by the courts.

Suggested Answer: Letter C

6. Double taxation is not unconstitutional but double taxation exists when: a. Real estate tax and income tax are collected on the same real property. b. VAT is imposed on the gross receipts and income tax is also imposed on the same gross receipts. c. Income tax and capital gains tax are collected on the gain from the sale of real property. d. Corporate income is taxed and stockholders dividends are also taxed by the same corporation. Suggested Answer: Letter C 7. How is a tax distinguished from a license fee? a) Non-payment of tax does not necessarily render the business illegal. b) Tax is a regulatory measure. c) Tax is imposed in the exercise of police power. d) Tax is limited to cover cost of regulation.

Suggested Answer: Letter A

8. Which of the following statements is NOT correct?

a. Taxes may be imposed to raise revenues or to deter certain activities within the state. b. The state can have the power to tax although the Constitution does not expressly give it the power to tax. c. In the exercise of the power of taxation, the state can tax anything at any time. d. The provisions of taxation in the Constitution are grants of the power to tax.

Suggested Answer: Letter D

9. 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. Suggested Answer: Letter B

10.

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

Suggested Answer: Letter D 11. Which of the following is NOT an example of an excise tax? a. b. c. d. Transfer tax Sales tax Real property tax Income tax

Suggested Answer: Letter C

12. The Municipality of Bogo in the province of Cebu has an ordinance which requires all stores, restaurants, and other establishments selling liquor to pay a fixed annual fee of P20,000. Subsequently, the municipal council proposed an ordinance imposing a sales tax equivalent to 5% of the amount paid for the purchase or consumption of liquor in stores, restaurants, and other establishments. The municipal mayor refused to sign the ordinance on the ground that it would constitute double taxation. Is the refusal of the mayor justified? a. No. The refusal of the mayor is unjustified because double taxation is allowed in our jurisdiction. b. No. The refusal of the mayor is not justified because the impositions are of different nature and character. c. No. The refusal of the mayor is unjustified because it is not within his power. d. Yes. The refusal of the mayor is justified because the impositions constitute double taxation. Suggested Answer: Letter B 13. 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 transfer the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and finally to the consumer. Suggested Answer: Letter C

14.

The following statements are presented to you for evaluation:

Statement 1 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. Statement 2 The power of taxation is essentially a legislative function. Even in the absence of any constitutional provision, taxation falls to Congress as part of the general power of law-making. a. b. c. d. Both statements are correct Both statements are wrong. The first statement is correct; the second statement is wrong. The first statement is wrong; the second statement is correct.

Suggested Answer: Letter A 15. The City Government of Cebu, claiming that it can impose taxes under the Local Government Code, imposed a tax on banks (in addition to the percentage tax on banks imposed in the National Internal Revenue Code). The banks within the City of Cebu objected for the various reasons given below. Which would justify the objection of the banks? a. b. c. d. The power of taxation cannot be delegated. The rule of double taxation. Uniformity in taxation. None of the above

Suggested Answer: Letter D

16. An annual tax of P500.00 was imposed upon all residents of the Philippines, who are above twenty-one (21) years of age, with a gross annual income of P250,000, whether or not they send their children to public schools, for the purpose of raising funds in order to improve public school buildings. The said tax is:

a. b. c. d.

violative of the equal protection clause of the Constitution confiscatory for a public purpose a contradiction to the inherent limitations of taxation

Suggested Answer: Letter C 17. Which is NOT an essential characteristic of a tax? a. b. c. d. It is unlimited as to amount. It is a regular payment. It is proportionate in character. It is payable in money.

Suggested Answer: Letter B

18. Which of the following violates the inherent limitation of the power of taxation? a. A supplier of school supplies for the Department of Education shifted the value-added tax (VAT), making the government an indirect taxpayer of the VAT. b. A revenue regulation was issued by the Department of Finance to amend a mistake in a tax law. c. Income of the United States (US) government in the Philippines is not subjected to income taxation. d. Resident citizens abroad are taxed on their income abroad even if they have no income from the Philippines. Suggested Answer: Letter B