Chapter 1 General Principles and Concepts

 Problem 1-1         True or False

Write True if the statement is correct or False if the statement is incorrect.

1. Eminent domain and police power can effectively be performed even without taxation.
2. Taxes may be imposed to encourage economic growth by granting tax exemptions.
3. Taxation is a way of apportioning the cost of government among those who are privileged to enjoy its benefits.
4. The state can enforce contributions upon its citizens in the form of taxes even without a provision in the Constitution authorizing it.
5. The police power of the government may be exercised through taxation.
6. When the power to tax is delegated to the local government, only the legislative branch of the local government can exercise the power.
7. The power of taxation can be exercised without limitation because its scope is unlimited.
8. The power of taxation is absolute because it is the strongest of all powers of the government.
9. Taxation presupposes an equivalent compensation.
10. There is no imposition of amount in police power.
11. Police power and eminent domain may defeat the constitutional rights of a person.
12. Tax exemption applies only to government entities that exercise proprietary functions.
13. All government entities regardless of their functions are exempted from taxes because it would be impractical for the government to be taxing itself.
14. The state can still exercise its taxing powers over its citizen outside its territory.

Problem 1-2         True or False

Write True if the statement is correct or False if the statement is incorrect.

1. No law granting any tax exemption shall be passed without the concurrence of two thirds of the members of the congress.
2. Churches are exempt from payment of income taxes.
3. A tax may be levied for the support of religious activities as long as all churches benefit from it.
4. A bill not signed by the President can still become law.
5. No person shall be imprisoned for nonpayment of income tax.
6. Taxation is considered as the lifeblood of the government and every government unit must exercise this power.
7. The amount of taxes may be increased to curve spending power and minimize inflation.
8. Benefits from taxation have to be experienced to justify the legitimacy of collection of taxes from the people.
9. Taxes may be used as a tool and weapon in international relations and protect trade relations.
10. The power of legislative review in taxation is limited only to the interpretation and application of tax laws.
11. The rule of “ex post facto law” is applicable for tax purposes.
12. Real estate tax and income tax collected on the same real estate property is double taxation.
13. A tax evader sidesteps the law, while the tax avoider breaks it.
14. Tax exemption is transferable and assignable.
15. Taxation is the government’s legitimate means of interfering with the private properties of its subjects.

Problem 1-3         True or False

Write True if the statement is correct or False if the statement is incorrect.

1. The doctrine of equitable recoupment is applicable to cases where the taxes involved are totally unrelated.
2. Protection is the basic consideration that justifies tax situs.
3. The tax situs for occupation is the place where occupation is pursued even if the criterion for nationality is given.
4. There is no direct double taxation by taxing corporate income and corporate stockholders’ dividends from the same corporation.
5. Tax laws are given retroactive effects.
6. In the imposition of taxes, public purpose is presumed.
7. Taxes are obligations created by law.
8. Taxes collected by the BIR are local taxes.
9. Nonpayment of license fee makes the business illegal.
10. In taxation, it is one’s civil liability to pay taxes which gives rise to criminal liability.
11. Tax laws must be construed strictly against the government, and tax exemptions must be construed strictly against the taxpayer.
12. As a rule doubts must be resolved liberally in favor of the government and strictly against the taxpayer.
13. The Philippine tax laws are not political and penal in nature.
14. When there is ambiguity of tax laws, the rules of statutory construction may be used to search for the legislative intent. However, when the meaning of the law is clear, the statute must be enforced as written.
15. Revenue regulations that are inconsistent with law have the effect and force of law if they are useful and reasonable.

Problem 1-4         Multiple Choice

Encircle the letter that contains the best answer.

1. Statement No.1: Taxation is an inherent power of the government.

Statement No.2: Taxation is a process consisting of levying, assessment and collection.

1. Both statements are correct.
2. Both statements are incorrect.
3. Only statement No.1 is correct.
4. Only statement No.2 is correct.
5. 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: It is essentially a legislative function. Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making.

1. Both statements are false.
2. Only statement 1 is false.
3. Both statements are true.
4. Only statement 1 is true.

3. Which of the following statements is/are correct?
4. Taxation is a process.
5. Enactment of tax laws is part of the taxation process.

• The constitution expressly conferred the power of Taxation to the President of the Philippines.

1. Taxation requires voluntary contribution from the inhabitants to support the government.

Choices:

1. i, ii, iii and iv
2. i, ii and iii only
3. i and ii only
4. i only
5. Which of the following is/are natural qualities of a Taxation Power?
   1. An inherent power.
   2. Essentially an executive function.
   3. An absolute power.
   4. Territorial in operation

Choices:

1. i, ii, iii and iv
2. i, ii and iii only
3. i and ii only
4. i only
5. Taxation co-exist with the four elements of the state, which include all, except one of the following:
6. Government
7. Property
8. Sovereignty
9. Territory
10. Which of the following statements is not correct?
11. All the following National Government units exercise the inherent power of taxation.
12. Local government units could exercise the power of taxation through legislated delegation.
13. National legislation is exercised by Congress.
14. Interpretation of Tax Laws is done by the Legislative branch of the government.
15. All of the following statements are correct except one.
16. Taxation power is an absolute power.
17. Taxation power is the strongest of all the inherent powers of the government.
18. Tax laws must not violate Constitutional restrictions.
19. Exercise of taxation power is subject to restrictions.
20. Statement 1: Government units performing governmental functions are exempt from tax unless expressly taxable.

Statement 2: Government owned or controlled corporations exercising proprietary functions are taxable unless expressly exempt.

1. Only statement 1 is correct.
2. Only statement 2 is correct.
3. Both statements are correct.
4. Both statements are not correct.
5. Which of the following is incorrect description of taxation?
6. Legislative and inherent for the existence of the government.
7. Necessary and for public purposes.
8. Supreme and an absolute power of the state.
9. Restricted by constitutional and inherent limitations.

10. The power of taxation is supreme, plenary, unlimited and comprehensive. Hence, it may be exercised by the state without any Constitutional provisions granting it. Which of the following is not correct?
11. The power of taxation is based on necessity because without money, the state cannot survive.
12. The scope of the power of taxation is unlimited.
13. The power of taxation can be exercised only if there is just compensation.
14. The power of taxation is not absolutely unlimited.

Problem 1-5         Multiple Choice

Encircle the letter that contains the best answer.

1. Which of the following is not true?

2. Tax affects the area or nation as a community rather than as individuals. This is a specific explanation of
3. Public purpose
4. Common good
5. General welfare
6. Reciprocity
7. Which of the following is a correct nature of restriction to exercise taxation power?

4. Which statement refers to police power as distinguished from taxation?
5. It is restricted by constitutional provision.
6. It is superior to the impairment clause of the constitution.
7. It involves the taking of property by the government.
8. The amount imposed has no limit.
9. Police power is distinguished from taxation power because
   1. It involves taking of property
   2. The amount collected is limited to the cost of regulation
   3. It is an inherent power of the state
   4. The benefit derived is the protection given by the state
10. All of the following are inherent restrictions on the exercise of taxation power except
    1. Rule of uniformity
    2. For public purpose
    3. Territorial jurisdiction
    4. International comity
11. The US embassy donated vehicle to the Department of Foreign Affairs of the Philippines. Which of the following statement is korek J?
    1. This transaction is exempted from payment of donor’s tax only.
    2. This transaction is exempted only from payment of documentary stamp tax.
    3. This transaction is exempted from payment of both donor’s tax and documentary stamp tax.
    4. This transaction is subject to both donor’s tax and documentary stamp tax.
12. A fundamental rule in taxation is that property of one country may not be taxed by another country. This is known as:
    1. International law
    2. International comity
    3. Reciprocity
    4. International inhibition
13. Which of the following statements is not correct?
    1. The government automatically possesses the power to collect taxes from its inhabitants.
    2. The government can enforce contribution upon its citizen only when the constitution grants it.
    3. Taxation power exists inseparably with the state.
    4. The state has the supreme power to command and enforce contribution from the people within its jurisdiction.
14. Which of the following statements is not correct?
    1. Collections from taxes are public money.
    2. Appropriation of taxes for the common good of the people is valid.
    3. Construction of private road from taxes is a valid appropriation.
    4. Allocation of taxes for the benefit of a greater portion of population is considered for public purpose.
15. A taxpayer gives the following reasons in refusing to pay a tax. Which of these reasons is not acceptable for legally refusing to pay the tax?
    1. That he has been deprived of the due process.
    2. That there is lack of territorial jurisdiction.
    3. That he derives no benefit from the tax.
    4. That the prescriptive period for the tax has elapsed.
16. The following are the constitutional limitations on the power of taxation, except
    1. Only Congress can exercise the power of taxation
    2. Non-impairment of the obligation of contracts
    3. Taxes are not subject to set-off or compensation
    4. The rule of taxation must be uniform
17. Due process in taxation means that the
    1. Taxpayers must be given the opportunity to be heard
    2. Individual taxpayer must derive direct benefit from taxes
    3. Tax imposed must not be harsh, oppressive, and arbitrary
    4. Tax imposed must be subject to the rule on uniformity

Problem 1-6         Multiple Choice

Encircle the letter that contains the best answer.

1. Which of the following can be an object of taxation?
2. Person
3. Property

• Intangible rights

1. Rights

Choices:

1. i and ii
2. i, ii and iii
3. i and iv
4. i, ii, iii and iv
5. Which of the following is incorrect?
   1. Taxation exists inseparably with the state.
   2. Taxation could be exercised without specific provisions in the constitution granting it.
   3. Taxation is inherently legislative in nature.
   4. Any constitutional provisions could not restrict taxation.
6. Which of the following correctly describes the primary purpose of taxation?

4. Which of the following could not be considered as the purpose of taxation?
   1. To raise revenue to support the government
   2. To distribute the wealth of the nation
   3. To check inflation
   4. To impose monetary burden to the people
5. Which of the following is/are purposes of taxation?
   1. To raise revenue for government support
   2. To distribute wealth of nation
   3. To check inflation
   4. All of the above
6. Which of the following statements is not correct?
   1. A tax bill must only be applicable and operative after becoming a law.
   2. The effectivity of the tax law commences upon its approval.
   3. The applicability of the tax law covers the present and future transactions.
   4. Tax law is ex post facto in application.
7. Which of the following is not correct?
   1. In the absence of specific tax provision, taxes in general are not cancellable.
   2. Prescriptive period for assessment and collection is applicable to returnable taxes.
   3. The law on prescription being a remedial measure should be interpreted liberally in order to protect the taxpayer.
   4. The prescriptive period should be the shorter between the required filing date and the actual date of filing.
8. Which of the following remedies against double taxation is directly reducing the amount of tax?
   1. Reciprocity
   2. Tax exemption
   3. Tax credit
   4. Allowance for deduction
9. Which of the following tax escape is permissible under the tax code?
   1. Tax minimization
   2. Tax evasion
   3. Tax dodging
   4. Overstatement of expenses
10. One of the following is incorrect regarding tax exemption.

11. One of the following situs of taxation is not true.

12. All of the following statements are true, except
    1. Double taxation is taxing twice the same taxpayer for the same purpose covering the same period and taxed by the same authority.
    2. Direct double taxation is prohibited by law.
    3. Indirect double taxation is allowed as long as this does not violate the equal protection and uniformity principles.
    4. Indirect double taxation is not enforceable.

Problem 1-7         Multiple Choice

Encircle the letter that contains the best answer.

1. Statement 1: The City of Baguio claims that it can impose additional taxes on banks under the Local Government Code (in addition to the percentage tax on banks imposed in the NIRC).

Statement 2: Such imposition is a direct double taxation.

1. Both statements are correct.
2. Only statement 1 is correct.
3. Only statement 2 is correct.
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