PAMANTASAN NG LUNGSOD NG VALENZUELA

College of Accountancy
INCOME TAXATION
General Principles
Post-Examination 1
SET C
Instructions: Properly shade the box that corresponds to your answer in the special answer
sheet provided. Choose the best answer.

1. In case of conflict between the tax code and generally accepted accounting principles.
a. Both tax codes and GAAP shall be enforced
b. GAAP shall prevail over tax code
c. Tax code shall prevail over GAAP
d. The issue shall be resolved by the courts

2. Which of the following statements is not correct?

a. Taxes may be imposed to raise revenues or to regulate 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 anytime.
d. The provisions of taxation in the Philippine Constitution are grants of power and not
imitations on taxing powers.

3. Tax as distinguished from license fee;

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

4. Value-added tax is an example of:

a. Graduated tax
b. Progressive tax
c. Regressive tax
d. Proportional tax

5. 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

6. 1st statement: Tax exemptions are strictly against the government

2nd statement: When the tax law is not clear and there is a doubt whether he is taxable or not,
the doubt shall be settled against the government.
a. Only the first statement is correct
b. Only the second statement is correct
c. Both statements are correct
d. Both statements are incorrect

7. 1st statement: The income from bank deposit of a Tax-exempt Catholic church is taxable.
2nd statement: The charitable contributions given to a church are also taxable.
a. True; False c. True; True
b. False: True d. False; False
st
8. 1 statement: Tax imposed outside the situs of Taxation is void.
2nd statement: International comity is an exception to the territoriality doctrine.
a. True; False c. True; True
b. False: True d. False; False
9. Imposed based on the control & superiority of one country over another
a. Tithe c. Tribute
b. Tax d. Toll
10. Imposed based on religious obligation;
a. Tithe c. Tribute
b. Tax d. Toll
11. Taxes are;
a. Retroactive c. Generally proportional
b. Prospective d. Personal to the taxpayer
12. S1: Nonpayment of tax will only result to a civil liability.
S2: Tax liabilities of a corporation will not extend to the stockholder absolutely.
a. True, True. c. False, True
b. False, False d. True, False
13. All are objectives of taxation except;
a. Revenue purpose c. Increase of social inequity
b. Regulation d. Encourage economic growth
14. S1: Courts can review or inquire into the wisdom or advisability of a tax law.
S2: Our constitution does not contain any provision granting tax exemption to the government
a. True, True c. False, True
b. False, False d. True, False

15. S1: To be exempt from taxation under the Constitution land & building must be exclusively and
actually used for religious, educational or charitable purpose, even if not directly.
S2: Exemptions of non-profits schools are only limited to revenue and assets derived from
strictly school operations.
a. True, True c. False, True
b. False, False d. True, False

16. S1: A taxpayer's tax exempt status justifies the non-keeping of books of accounts & other
accounting records.
S2: Tax regulations of the Chief Justice & Associate Justice of the Supreme Court are tax-
exempt.
a. True, True c. False True
b. False, False d. True, False
17. S1: Our tax code prevails over the Civil Code.
S2: Tax regulations promulgated by the Secretary of Finance need not be published in a
newspaper of general circulation.
a. True, True c. False True
b. False, False d. True, False

18. Corporate income tax is classified as:

a. Direct tax as to rate
b. Progressive tax as to rate
c. Proportional tax as to rate
d. Regulatory tax

19. Motor vehicle registration fees are now considered

a. License fee
b. Margin fee
c. Regulatory tax
d. General tax

20. Our tax laws are not;

a. Progressive and prospective
b. Civil and prospective
c. Penal and regulatory
d. Personal and regulatory
21. Where does taxing power of the provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative grant
c. Presidential or Executive act
d. Local legislation

22. How will local government units be able to exercise their taxing powers?
a. By local legislation
b. By authority conferred by congress
c. By the issuance of the department of Finance
d. By the help of the Bureau of Internal Revenue

23. The National Internal Revenue Code, is also known as;

a. Republic Act 9337
b. Republic Act 8424
c. Presidential Decree 1158
d. Executive Order 464

24. The Local Government Code took effect on January 1, 1992. PLDT's legislative franchise was
granted sometime before 1992. Its franchise provides that PLDT will only pay 3% franchise tax
in lieu of all taxes. The legislative franchises of smart and Globe Telecoms were granted in
1998. Their Legislative franchise state that they will pay only 5% franchise tax in lieu of all
taxes. The Province of Zamboanga del Norte passed an ordinance in 1997 that impose a local
franchise tax on all telecommunication companies operating within the province. The tax is
50% of 1% of the gross annual receipts of the preceding calendar year based on the incoming
receipts, or receipts realized, within its territorial jurisdiction.
Is the ordinance valid?
a. No, the ordinance in effect resulted to double taxation.
b. No, the Local Government Code prevails over the ordinance.
c. Yes, the local government units are empowered by the Constitution to raise its own
revenue.
d. Yes, autonomy of Zamboanga del Norte.

25. What kind of taxes, fees and charges are considered as National Internal Revenue Taxes
under the National Internal Revenue Code (NIRC)?
I. Income taxes
II. Estate taxes
III. Donor's taxes
IV. Value added taxes
V. Other percentage taxes
VI. Excise taxes
VII. Documentary stamp taxes
VIII. Community taxes or poll taxes
IX. Real property taxes
a. I, II, III, IV, V, VI
b. I, II, III, IV, V, VI, VII
c. I, II, II, V, VI, VII, VIII
d. II, III, IV, V, VI, VII, VIII, IX

26. The least source of tax laws;

a. Statutes
b. Presidential decrees
c. Revenue regulations
d. Tax treaties or conventions
27. XYZ Corporation, an export and oriented company, was able to secure a Bureau of Internal
Revenue (BIR) ruling in June 2005 that exempts from tax the importation of some of its raw
materials. The ruling is of first impression, which means the interpretation made by the
Commissioner of Internal Revenue is one without established precedents. Subsequently,
however, the BIR issued another ruling which in effect would subject to tax such kind of
importation. XYZ Corporation is concerned that said ruling may have a retroactive effect, which
means that all their importations done before the issuance of the second ruling could be
subject to tax. May the BIR Rulings be given retroactive effect?
a. No, BIR rulings are prospective in nature.
b. No, BIR rulings are not retroactive if they are prejudicial to the taxpayer.
c. Yes, tax exemptions should be interpreted strictly against the taxpayer.
d. Yes, tax must favor the government's power to collect its revenues.

28. What is required to make BIR ruling of first impression a valid one, EXCEPT?
a. Must be reasonable and within the authority conferred.
b. Must be germane to the purpose of the law.
c. Must be published.
d. Must be prospective in application.

29. Aspects of taxation, EXCEPT?

a. Levying of tax
b. Administration of tax
c. Collection of tax
d. Interpretation of tax
30. S1: Direct taxes are those taxes whereby the liability and burden of the tax falls on the same
person.
S2: Indirect taxes are those taxes whereby the liability and burden falls upon two different
persons.
a. True, True c. False, False
b. True, False d. False, True

31. Which of the following are exempt from real property taxes?
a. Properties of religious organization.
b. Properties of charitable institution.
c. Properties of education institution
d. Properties actually, directly and exclusively used for religious purposes.

32. The Constitution provides, "charitable institution, churches, parsonages or convents

appurtenant thereto, mosques and non-profit cemeteries and all lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational
purposes shall be exempt from taxation." This provision exempts charitable institution and
religious institution from what kind of taxes?
a. From all kinds of taxes, i.e., income, vat, customs, local taxes and real property taxes.
b. From income tax only
c. From real property tax
d. Erom capital gain tax

33. S1: in every case of doubt, tax statutes are construed strictly against the Government and
liberally in favor of the taxpayer.
S2: Where the intent to tax is clear and the taxpayer claims that he is exempt from the tax
obligation, the tax shall be construed against the taxpayer and in favor of the Government
because the power of taxation is necessary to the existence of such Government.
a. True, False c. False, True
b. True, True d. False, False
34. The following are the powers of the BIR, except;
a. The assessment and collection of all national internal revenue taxes.
b. The execution of all judgments in all cases decided in its favor by the CTA and the ordinary
courts.
c. The enforcement of all forfeitures, penalties and fines connected with national internal
revenue taxes.
d. The assessment and collection of some custom duties.

35. Which among the following powers of the Commissioner of the BIR may be delegated?
a. Enforcement of all forfeitures, penalties and fines in connection with the collection of
national internal revenue taxes.
b. The power to recommend the promulgation of rules and regulations by the Secretary of
Finance.
c. The power to issue rulings of first impression or to reverse, revoke or modify any existing
ruling of the bureau.
d. The power to assign or reassign internal revenue officers to establishments where the
articles subject to excise tax are produced or kept.

36. Which of the following has no power of taxation?

a. Provinces
b. Cities
c. Barangays
d. Barrios

37. Which is the correct and best statement? A Tax reform at any given time underscores the fact
that;
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 estate can and should adopt progressive taxation.

38. Which of the following statements is wrong? A revenue bill

a. Maybe recommended by the President to Congress
b. May have a House version and a Senate version approved separately and then
consolidated with both houses approving the consolidated version.
c. May originate from the senate and on which same bill the House of Representatives may
propose amendments.
d. Must originate from the House of Representatives and on which same bill the Senate may
propose amendments.

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

a. It is an inherent power of the state.
b. The benefit derived is the protection given by the state.
c. It involves the taking of property.
d. The amount collected is limited to the cost of regulation.

40. Which of the following is not considered as one of the characteristics of special assessments?
a. It is based solely on the benefit derived by the owners of the land.
b. It is levied on land.
c. It is based on the government's need of money to support legitimate objectives.
d. It is not personal liability of the person assessed.

41. S1: Because the power of taxation is inherent in state, the inherent limitations on the power of
the taxation always apply.
S2: Inherent Limitations on the power of taxation must give way to constitutional limitations.
a. True, False c. True, True
b. False, True d. False, False
42. Which of the following is not a purpohttps://www.studocu.com/en-us/document/the-university-of-st-
thomas-minnesota/business-taxation/tax-chap-2-3-question-and-answer/9281117se of taxation?
a. To reduce inequalities of wealth
b. As protective tariff on imported goods to protect local producers against foreign
corporations.
c. To encourage the growth of home industries through the proper use of tax incentives.
d. To expropriate property of home industries for the promotion of general welfare.

43. This is not an example of excise tax

a. Transfer tax
b. Sales tax
c. Income tax
d. Real property tax

44. This rule is not applicable on the construction of tax laws

a. If the law is repealed, taxes assessed before repeal of the law may no longer be collected.
b. If the intent of the tax is not clear as to whether the taxpayer is covered by the tax obligation,
the law shall be construed against the government.
c. Where the intent to tax is clear and the taxpayer claims he is exempt from the tax obligation,
the tax shall be construed against the taxpayer.
d. Provisions intended for the security of the taxpayer or to insure equality or uniformity of
taxation are mandatory.

45. Taxation, just like other fields of human being is dynamic, not static, keeps on changing; so we
must all study, otherwise we might be facing the battles of today with the antiquated weapons
of yesterday.

Regardless of economic and business conditions, a sound tax system should provide for the
collection of sufficient revenue to run the government.
a. True, True c. False, True
b. True, False d. False, True

46. All of the following, except one, are basic principles of the sound tax system
a. Fiscal adequacy
b. Theoretical justice
c. Administrative feasibility
d. Inherent in sovereignty

47. Under this principle of sound tax system, the government should not incur a deficit
a. Theoretical justice
b. Administrative feasibility
c. Fiscal adequacy
d. None of the choices

48. The following, except one, are basic principle of a sound tax system
a. It should be capable of being effectively enforce
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
49. Which of the following is not one of the canons of sound tax system
a. Quantifiability
b. Equality
c. Certainty
d. Convenience

50. The requirements of equality or theoretical justice is complied with if the tax is
a. Progressive
 b. Regressive
c. Ad valorem
d. Specific

51. The power of taxation can only be exercised by the law making body
a. Subject to constitutional and inherent limitations
b. Theoretical justice
c. Legislative in character
d. Inherent in sovereignty

52. The President of the Philippines and the Prime Minister of Japan entered into an executive
agreement in respect of a loan facility to the Philippines from Japan whereby it was stipulated
that the interest on loans granted by private Japanese Financial Institutions in the Philippines
shall not be subject to the Philippine Income Taxes. What is the basic characteristics of
taxation has been violated by the agreement?
a. Inherent limitation
b. Theoretical justice
c. Legislative in character
d. Administrative feasibility

53. Which statement gives the correct answer? That a feasibility study needs or need to look into
the taxes of different political subdivisions of the government which may be alternative sites of
business because
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 business taxes may be credited against national business taxes

54. Those restrictions on the exercise of the power of taxation that are found in the constitution
a. Theoretical justice
b. Legislative in character
c. Inherent limitation
d. Constitutional limitation
55. Those restrictions on the exercise of the power of taxation that are implied from provisions of
the constitution
a. Theoretical justice
b. Legislative in character
c. Inherent limitation
d. Constitutional limitation

56. Which of the following statement 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 rather than
limitations

57. 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 legislative power to tax
d. Territoriality
58. The City Council pass an ordinance imposing occupation tax on an air conditioning technician.
Conde is the only person with such occupation 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 of equal protection
of law
c. The contention of Conde is not justified because the rule of uniformity is not violated
considering that the ordinance would also be imposed on all air conditioning technician who
come in the jurisdiction of the city
d. The issue on validity or invalidity of the ordinance should be set aside

59. Treating persons who are similarly situated in the same manner
a. Uniformity of taxation
b. Equality of taxation
c. Due process of law
d. Non-delegation of legislative power

60. 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

-End of Examination-
-God bless.
-Count your blessings-