Taxation Review Quiz 01

Monday, 8 July 2024 8:05 pm

1. Congress passed a sin tax law that increased the tax rates on cigarettes by 100%.
The law was thought to be sufficient drive many cigarette companies out of the
business, and was questioned in court by a cigarette company that would go out of
business because it would not be able to pay the increased tax. The cigarette
company is:
A. Wrong because taxes are the lifeblood of the government.
B. Wrong because the law recognizes that the power to tax is the power to
destroy.
C. Correct because no government can deprive a person of his livelihood.
D. Correct because congress, in this case, exceeded its power to tax.

2. Money collected from taxation shall not be paid to any religious dignitary except
when:
A. The religious dignitary is assigned to the Philippine Army.
B. It is paid by a local government unit.
C. The payment is passed in audit by COA.
D. It is part of the lawmaker's pork barrel.

3. The power to tax is the power to destroy. Is this always so?

A. No. The Executive branch may decide not to enforce a tax law which it believes to
be confiscatory.
B. Yes. The tax collections should enforce a tax law even if it results to the
destruction of the property rights of a taxpayer.
C. Yes. Tax laws should always be enforced because without taxes the very
existence of the State is endangered.
D. No. The Supreme Court may nullify a tax law, hence, property rights are not
affected.

4. What is the rule on the taxability of income that a government educational

institution derives from its school operations? Such income is:
A. Subject to 10% tax on its net taxable income as if it is a proprietary educational
institution.
B. Exempt from income taxation if it is actually, directly, and exclusively used
for educational purposes.
C. Subject to the ordinary income tax rates with respect to incomes derived from
educational activities.
D. Exempt from income taxation in the same manner as government-owned and
controlled corporations.

5. The Secretary of Finance, upon recommendation of the Commissioner of Internal

Revenue, issued a Revenue Regulation using gross income as the tax base for
corporations doing business in the Philippines. Is the Revenue Regulation valid?
A. Yes, the Secretary of Finance has the power to issue rules and regulations.
B. Yes, gross income taxation over corporations is valid.
C. No, the Secretary of Finance has virtually amended the NIRC.
D. No, only the Commissioner of the BIR has the authority to make revenue rules and
regulations.

6. In a loan agreement between the Bangko Sentral ng Pilipinas (as borrower) and
private international banks (as lenders), it is stipulated that all payments of interest
by the Central Bank to the lenders shall be made free and clear from all Philippine
taxes which may be imposed thereon. Is the stipulation valid?
A. Yes, based on the international comity.
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A. Yes, based on the international comity.
B. Yes, based on the doctrine of non-taxability of the government.
C. No, violative of the inherent limitations.
D. No, violative of the constitutional limitations.

7. The President of the Philippines and the Prime Minister of Japan entered into an
executive agreement of a loan facility to the Philippines from Japan whereby it was
stipulated that interest on loans granted by private Japanese financial institutions
to private financial institutions in the Philippines shall not be subject to Philippine
income taxes. Is the tax exemption valid?
A. Yes, based on international comity.
B. Yes, based on an executive agreements and treaties.
C. No, it is a violation of essential characteristics of taxation.
D. No, based on the doctrine of territoriality.

8. Which of the following is not a purpose of taxation?

A. To reduce inequalities of wealth.
B. As protective tariff on imported goods to protect local producers against foreign
competitions.
C. To encourage the growth of homes industries through the proper use of tax
incentives.
D. To expropriate property for the promotion of general welfare

9. This rule is not application on the construction of tax laws.

A. If the law is repealed, taxes assessed before repeat 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 of 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 of tax shall be construed against the taxpayer.
D. Provisions intended for the security of the taxpayer or to ensure equality or
uniformity of taxpayer are mandatory.

10. Which is the correct and best statement? A tax reform at any give 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.

11. The Constitution provides, “charitable institutions, 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 institutions and religious institutions from what kind of taxes?
A. From all kinds of taxes including real property taxes.
B. From income taxes only
C. From real property
D. From value-added tax

12. ABC Corporation, an export-oriented company, was able to secure a Bureau of

Internal Revenue ruling in July 2015 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. ABC 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

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 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
C. Yes, tax exemptions should be interpreted strictly against the taxpayer
D. Yes, tax must favor the government's power to collect its revenues.

13. 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 Leyte
passed an ordinance in 1997 that imposes 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 into double taxation.
B. No, the Local Government Code prevails over ordinance.
C. Yes, the local government units are empowered by the Constitution to raise
its own revenues.
D. Yes, autonomy of Province of Leyte.

14. What does the Constitution mean when it used the term "evolve" progressive tax
system?
A. Mandatory
B. Restrictive
C. Permissive
D. None of the above

15. The rule on strict interpretation does not apply in the case of?
A. Non-stock, non-profit institutions
B. Charitable institutions
C. Religious institutions
D. Government political subdivisions

16. St. Mary’s College is a non-stock, nonprofit educational institution run by the
Archdiocese of Cebu. It collected and received the following.
I. Tuition fees
II. Dormitory fees
III. Rentals from canteen concessionaries
IV. Interest from the money-market placements of the tuition fees; and
V. Donation of a lot and building by school alumni.

Which of these above cited income and donation would not be exempt from
taxation?
A. I and II only
B. III, IV and V only
C. All are taxable
D. All are exempt

17. Suppose that St. Mary’s College is a proprietary educational institution, owned by
the archbishop’s family, rather than the archdiocese, which of the above cited
income and donation would be exempt?
A. I and II only
B. III, IV and V only
C. All are taxable
D. All are exempt

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18. Central Luzon Drug (CLD) operated 6 drugstores under the name and style
"Mercury Drug". CLD granted 20% sales discount to senior citizens in pursuant to
RA 7432 and its implementing rules. CLD filed with petitioner a claim for tax
refund/credit in the amount allegedly arising from the 20% sales discount. CIR was
ordered to issue a tax credit certificate in favor of CLD. This is an exercise of the
power of?
A. Taxation
B. Police Power
C. Eminent Domain
D. None of the above

19. Frank, as taxpayer, and Realty Owners Association of the Philippines, Inc.
(ROAP), alleged that E.O. 73 providing for the collection of real property taxes as
provided for under Section 21 of PD 464 (Real Property Tax Code) is
unconstitutional because it accelerated the application of the general revision of
assessments to January 1, 1987 thereby increasing real property taxes by 100% to
400% on improvements, and up to 100% on land which would necessarily lead to
confiscation of property. The contention of Frank is wrong on the basis of?
A. Fiscal adequacy
B. Ability to pay
C. Theoretical justice
D. Administrative feasibility

20. In order to raise revenue for the repair and maintenance of the newly constructed
City Hall of Cebu, the City Mayor ordered the collection of P1.00, called "elevator
tax", every time a person rides any of the high-tech elevators in the City Hall during
the hours of 8am to 10am and 4pm to 6pm. Is the elevator tax a valid imposition?
A. Yes, local government has the power to create its own source of income.
B. No, LGUs are not allowed to exercise power to tax
C. No, mayors do not have the power to tax.
D. Yes, nothing prohibits the imposition of the tax.

21. The City Council of Ormoc enacted Ordinance No. 4, series of 1964 taxing the
production-and exportation of only centrifugal sugar. At the time of the enactment,
plaintiff Ormoc Sugar Co., was the only sugar central in Ormoc. The Supreme
Court declared the ordinance unconstitutional on the basis of?
A. Due process clause
B. Equal protection clause
C. Double taxation
D. Non-impairment clause

22. Rosanna, a lessor of a property, pays real estate tax on the premises, a real estate
dealer's tax based on rental receipts and income tax on the rentals. He claims that
this is double taxation. Decide.
A. There is double taxation. The real estate tax is a national tax
B. There is double taxation. Both taxes are imposed by the same authority
C. There is no double taxation. The taxes are not founded on the same basis.
D. None of the above

23. All are similarities of taxation, police power and power of eminent domain, except
A. All are necessary attributes of the Constitution.
B. All exist independently of the Constitution.
C. All contemplate an equivalent benefit.
D. All are superior to the non-impairment clause of the Constitution.

24. Which of the following statements is not correct?

A. Taxes may be imposed to raise revenues or to regulate certain activities within the

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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 any time.
D. The provisions of taxation in the Philippine Constitution are grants of power
and not limitations on taxing powers.

25. 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.

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