POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Final Examination

TAX01 – Income Taxation

Prof. Froilan A. Magpantay

Multiple Choice

Instruction: Shade the letter of the best answer on your scantron sheet.

1. Which is an inherent limitation of the State?

a. Police Power
b. Non-taxability of the Government
c. Taxation
d. Constitutional powers
2. The purpose of Police power is to:
a. Raise revenue
b. Promote public welfare
c. Facilitate the taking of private property for public use
d. Impose unnecessary burden
3. Every person who is able must contribute his share in the burden of running the government. The
government for its part is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their material and moral values. This
theory of taxation is known as:
a. Necessity theory
b. Symbiotic Relationship theory
c. Ability to pay theory
d. Administrative feasibility
4. Which is a characteristic of a sound tax system
a. Fiscal Government
b. Ability to pay Doctrine
c. Theories of justice
d. Necessity theory
5. “The power to tax does not include the power to destroy while the court sits.” This statement is
opined by
a. Justice Homes
b. Justice Marshall
c. Justice Holmes
d. Justice Halmes
6. The following are essential characteristics of taxation except:
a. It is levied on person and property.
b. It is an enforced contribution- not dependent on the will of the person taxed, not a
contract but a positive act of government.
c. It is proportionate in character- taxes must be based on the ability to pay, in accordance
with the constitutional mandate to congress to evolve a progressive system of taxation.
d. That either the person or property taxed be within the Jurisdiction of the taxing authority.
7. Which of the following is NOT a requisite of a valid tax
a. That either the person or property taxed be within the Jurisdiction of the taxing authority.
b. It is proportionate in character- taxes must be based on the ability to pay, in accordance
with the constitutional mandate to congress to evolve a progressive system of taxation.
c. The tax must not impinge on the inherent and constitutional limitations on the power of
taxation.
d. That the assessment and collection of certain kinds of taxes guarantee against injustice
to individuals, especially by providing notice and opportunity for hearing.
8. The following are the factors to determine the Situs of taxation except:
a. Kind or classification of the tax being levied
b. Citizenship of the taxpayer
c. Profession of the taxpayer
d. Residence of the taxpayer
9. The Latin maxim that helps in determining the Situs of a land is:
a. Mobilia sequuntur personam
b. Rebus sic stantibus
c. Lex rei sitae
d. Emptio rei speratae
10. One of the tests to determine the public purpose of tax is:
a. Duty test
b. Place of incorporation test
c. Accion reinvidicatoria
d. Nationality test
11. The following are the inherent limitations of taxation except:
a. International Comity
b. Non-delegability of the taxing power
c. Exemption of the Government
 d. Non-impairment of an obligation
12. International comity refers to:
a. The respect accorded by nations to each other because they are sovereign equals.
b. The committee tasked with enforcing international law
c. The express contract between nations embodied in a treaty that determine which country
will tax a particular subject
d. The legally binding agreement between nations that focuses on the amount to be taxed
between which country
13. A delegated power cannot be further delegated. Since the power of taxation is a power that is
exercised by congress as delegates of the people then as a general rule, Congress could not re-
delegate this delegated power. This is known as:
a. Res inter alios acta rule
b. Delegata potestas non potest delegari
c. Res perit domino
d. Delagata pat non simas suma
14. Uniformity means:
a. all taxable articles or properties of the same class shall be taxed at the same rate.
b. requires that the apportionment of the tax should consider the taxpayer’s ability to
shoulder the tax burden usually measured in terms of wealth and on the basis of the
benefits he receives from the government
c. Tax must be for a public purpose
d. Imposed within territorial jurisdiction
15. Equitability means:
a. all taxable articles or properties of the same class shall be taxed at the same rate.
b. requires that the apportionment of the tax should consider the taxpayer’s ability to
shoulder the tax burden usually measured in terms of wealth and on the basis of the
benefits he receives from the government
c. Tax must be equally used for public purpose
d. Imposed equally within territorial jurisdiction
16. The following are exceptions to territoriality EXCEPT:
a. Where the tax laws operate outside the territorial jurisdiction
b. Where the tax laws do not operate within the territorial jurisdiction of the state.
c. Both a and b
d. None of the above
17. Inherent limitations
a. Proceed from the very nature of the taxing power itself.
b. Proceed from constitutionally imposed limitations
c. Proceed from limitations imposed by tax statutes
d. Proceed from limitations set by Congress
18. Which is principally limited by the requirement of due process?
a. Eminent Domain c. Taxation
b. Police power d. All of these
19. Who among the following individual taxpayers is taxable on income within & without?
a. Pakyaw, a native of General Santos City, working as overseas contract worker in Iraq
b. Jack Oldman, a naturalized Filipino citizen and married to a Filipina. He had been living in
Caloocan City since 1950.
c. Kerps Hiyas, Spanish citizen, a resident of Madrid, Spain, spent a one year vacation trip in
Boracay.
d. Da Ming Sasuh, Taiwanese singer, held a 3-day concert in Manila.

20. A. The power to tax includes the power to exempt

B. The power to license includes the power to tax

Which is true?
a. A only c. A and B
b. B only d. Neither A nor B

21. The point in which tax is levied is called

a.Impact of taxation c. Incidence of Taxation
b.Situs of taxation d.Assessment
22. A. Taxation is the rule, exception is the exemption
B. Vague Taxation laws are interpreted liberally in favor of the government

Which is false?
a.A only c. A and B
b. B only d. Neither A nor B
23. In order to phase-out a huge deficit, the President of the Philippines passed a law offering all
taxpayers with previous tax delinquency to pay a minimum tax in exchange of relief from tax
assessment in the period of delinquency. Is this a valid exercise of taxation power?
a.Yes, because the measure adopted if of necessity
b. Yes, because the President is merely exercising its presidential discretion
c. No, because the power of taxation is non-delegated
d. No, because only the Department of Finance can issue such ruling
24. With the country under incessant shortage of sugar, the Philippine Congress enacted a law
providing tax exemptions and incentives to cane farmers without at the same time granting tax
exemptions to rice farmers which is the staple food of the Philippines. Is the new law valid?
a. Yes, since there is a valid classification of the taxpayer who would be exempted from tax
b.Yes, since sugar is more important than rice
c. No, since the grant of exemption is construed in favor of taxpayers
d. No, because there is no uniformity in the grant of tax exemption
25. Congress passed a law subjecting government owned and controlled corporations (GOCCs)
to income tax. Is this law valid?
a. Yes because all government agencies and instrumentalities are subject to tax
b. Yes, because the GOCCs are essentially commercial by operation
c. No, because the government agencies are exempt. This would pose violation of the equality
clause in the constitution
d.NO because GOCCs are constitutionally exempted from paying taxes

26. Tax exemption bills are approved by

a. Majority of all members of the Congress
b. Solely by the President of the Republic
c. 2/3 of all members of the Congress
d. Majority of representatives constituting quorum

27. The Japanese government invested P100M in a Philippine local bank and earned P10M
interest. Which is correct?
a.The income is exempt on grounds of territoriality
b. The income is exempt due to international comity
c.The income is subject to tax on the basis of sovereignty
d. The income is subject to tax because the income is earned within the Philippines
28. Which is mandatorily observed in implementing the police power?
a.Public interest c. Public use
b. Just compensation d. all of these
29. Which is considered in the exercise of eminent domain?
a.Public use c. Both a and b
b. Just Compensation d. Neither a nor b
30. Select the correct statement
a.Eminent domain refers to the power to take public property for private use after paying just
compensation
b.Police power being the most superior power of the State is not subject to any limitation
c.Taxation power shall be exercised by Congress even without an express Constitutional
grant
d.Taxes may be collected even without a law since obligation arising from law is always
presumed.
31. Select the correct statement
a.The benefit received theory explains that the government is obliged to serve the people since
it is benefiting from the tax collection from its subjects
b.the lifeblood theory underscores that taxation is the most superior power of the State
c.The police power of the State is superior to the non-impairment clause of the Constitution
d. The power of taxation is superior to the non-impairment clause

32. Select the incorrect statement

a.the power to tax includes the power to exempt
b.exemptions are construed against the taxpayer and in favor of the government
c.tax statutes are construed against the government in case of doubt
d.taxes should be collected only for public improvement

33. Which is not a legislative act?

a. Assessment of the tax
b. Determination of the subject of the tax
c. Setting the amount of the tax
d. Determining the purpose of the tax

34. When a legislative body taxes persons and property, rights and privileges under the same
taxable category at the same rate, this is referred to as compliance with the constitutional
limitation of
a.Equity c. due process
b.Uniformity d. equal protection clause
35. Taxation power can be used to destroy
a. as an implement of police power
b.as a revenue measure
c. even if the tax is invalid
d. When the State is in dire need of funds

36. Which is not a nature of tax?

a.enforced proportional contribution
b. enforced within the territorial jurisdiction of the taxing authority
c.levied by the lawmaking body
 d.generally payable in kind

37. Which is not a characteristic of tax?

a.it is an enforced contribution
b.it is generally payable in money
c.it is subject to assignment
d.it is levied by the lawmaking body

38. Which is not a source of tax law?

a. judicial decisions
b. tax treaties and ordinances
c. revenue regulations
d. opinion of tax experts

39. The tax imposed upon the performance of an act, the enjoyment of a privilege or the
engagement in a profession is known as
a.Income tax c. Excise tax
b. License d. Transfer tax

40. License as distinguished from tax

a.unlimited in imposition
b.imposed for revenue
c.does not necessarily renders business illegal in case of non-payment
d. a pre-activity in operation
41. Which is correct?
a.Taxes may be subject to compensation
b. Toll, being a demand of ownership, is exercised only by private entities
c. dacion and cession are applicable to taxation
d. Special assessment applies only when public improvement is made

42. Philippine tax law are, by nature

a.political c. political and civil
b. civil d. penal and civil

43. Mr. A has tax obligation to the government amounting to P80,000. Since he is leaving the
country, he entered into a contract with Mr. B, wherein the latter shall pay the P80,000 tax in
his behalf. On due date, Mr. B failed to pay the tax. The BIR send a letter of demand to Mr. A
which he refused to pay.
Which of the following statement is correct?
a.The government cannot enforce collection charges against Mr. A since he has validly
transferred his obligations to B under the contract
b.The government can no longer run after Mr. A because he is already outside the Philippine
territory.
c.The government should wait until Mr. B becomes solvent again
d.The government should force Mr. A to pay because taxes are non-assignable

44. 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 for cover cost of regulations
d. intended for public purpose

45. Debt as compared to tax

a.a demand of ownership
b.not assignable
c.will not cause imprisonment when not paid
d.generally payable in money

46. Select the incorrect statement

a.Tax may be unlimited in amount
b. License make the business illegal when not paid
c. Special assessment are not a liability of the person owning the property
d.Special assessment can be imposed on building and other real right attaching or pertaining
to land.

47. Violation of this principle will make a tax law invalid

a. Fiscal adequacy c. Administrative feasibility
b.Theoretical justice d. Economic consistency

48. Taxes that cannot be shifted by the statutory taxpayer are referred to as
a. Direct taxes c. business taxes
b. Indirect taxes d. personal taxes

49. Which is an indirect tax?

a.Value added tax c. Estate tax
 b. Donor’s tax d. Real Property tax

50. Agreement among nation to lessen tax burden of their respective subject is called
a.Reciprocity c. territoriality
b.international comity d. tax minimization