acttax1 q1

Taxation is considered an inherent power of the State because:
A. It must always be expressly granted by the Constitution.
B. It exists as a necessary consequence of sovereignty.
C. It is only valid if approved by the Supreme Court.
D. It requires consent from taxpayers before imposition.

b

Which of the following best describes the legislative character of taxation?
A. It can be exercised by anyone who has the power to collect revenue.
B. It is primarily implemented through judicial interpretation.
C. It is exercised by Congress through the enactment of tax laws.
D. It is enforced directly by executive agencies without legal basis.

c

Which among the following powers of the State may also be exercised by certain public service or utility companies when properly delegated?
A. Police power
B. Eminent domain
C. Taxation
D. Judicial review

b

The purpose of police power is primarily to:
A. Acquire private property for public use with compensation.
B. Impose taxes to raise revenue.
C. Promote public welfare by regulating liberty and property.
D. Administer justice through the courts.

c

Which taxation theory emphasizes that taxes are indispensable to enable the government to exist and perform its functions?
A. Necessity theory
B. Benefits-protection theory
C. Lifeblood theory
D. Equal protection theory

a

The Benefits-protection theory is based on the principle that:
A. Taxes should be imposed only when citizens request government services.
B. The government provides protection and services, while citizens contribute taxes in return.
C. The Constitution requires equality in the imposition of taxes.
D. The right to tax exists independently of the benefits citizens receive.

b

Which theory explains why taxation is compulsory—that is, why citizens cannot refuse to pay taxes even if they do not directly benefit?
A. Necessity theory
B. Lifeblood theory
C. Benefits-protection theory
D. Symbiotic relationship theory

b

Which aspect of taxation refers to the power of the legislature to impose taxes through laws?
A. Collection
B. Assessment
C. Levying
D. Regulation

c

The process of determining the correct amount of tax to be paid by the taxpayer is called:
A. Levying
B. Assessment
C. Collection
D. Appraisal

b

Which aspect of taxation involves the actual enforcement of payment of taxes?
A. Levying
B. Collection
C. Assessment
D. Appropriation

b

Which of the following correctly matches the aspect of taxation with the government branch that performs it?
A. Levying – Executive Branch
B. Assessment – Legislative Branch
C. Collection – Executive Branch
D. Collection – Legislative Branch

c

The President may, by authority of law, adjust tariff rates, import duties, and export duties.

t

Local Government Units (LGUs) may exercise the power of taxation because:
A. The Constitution grants them authority to create their own revenue sources
B. They are independent states within the Philippines
C. They receive express delegation from Congress for every local tax
D. They are exempted from the Constitution’s taxing provisions

a

The Philippine government may impose taxes on embassies located within its territory since they are physically in the Philippines.

f

A Filipino citizen living abroad earns income from investments in the United States. Which limitation applies to his tax liability in the Philippines?
A. Public purpose
B. Non-delegation of taxing power
C. Territorial limitation
D. International comity

c

Government-owned and controlled corporations (GOCCs) are generally exempt from taxes.

f

Which of the following best explains why the government cannot tax itself?
A. It would result in unnecessary bookkeeping
B. It violates the principle of checks and balances
C. It would only shift resources from one pocket of the government to another
D. It would violate international comity

c

Which of the following violates the due process clause in taxation?
A. A tax law enacted by Congress imposing excise tax on luxury goods
B. A tax ordinance that provides prior notice and hearing before collection
C. A tax that is so excessive it amounts to confiscation of property
D. A tax classification distinguishing luxury cars from public utility vehicles

c

Taxpayers must be given both notice and an opportunity to be heard before being deprived of property through taxation.

t

Equal protection in taxation prohibits:
A. Reasonable classification of taxpayers
B. Applying different tax rates to luxury cars and public utility vehicles
C. Class legislation that discriminates without reasonable grounds
D. Tax exemptions granted to charitable institutions

c

Congress may classify taxpayers as long as the classification is based on substantial distinctions and is germane to the purpose of the law.

t

Which of the following satisfies the rule of uniformity and equity in taxation?
A. A tax law applied only to businessmen in Quezon City
B. A sin tax on cigarettes earmarked for public health programs
C. A one-time tax applied to only one specific corporation
D. A tax that exempts commercial buildings in Makati only

b

Uniformity requires that all taxpayers, regardless of circumstances, pay the exact same amount of tax.

f

Which statement is TRUE regarding poll tax?
A. Non-payment of poll tax may result in imprisonment.
B. Poll tax is based on income level and ability to pay.
C. Only a surcharge may be imposed for non-payment of poll tax.
D. Non-payment of any tax, including income tax, cannot result in imprisonment.

c

A tax exemption in a franchise contract may be revoked because the Constitution allows franchises to be subject to amendment, alteration, or repeal.

t

Congress passes a new tax law revoking a previously granted exemption to a private company based on a valid contract for valuable consideration. This, however, does not impair the contract as the law should take precedence.

f

Which of the following is a valid exercise of taxation?
A. Imposing license fees for the distribution of religious pamphlets
B. Appropriating public tax proceeds to repair a church building
C. Exempting properties exclusively used by churches for worship
D. Denying a citizen’s right to vote because of religious belief

c

Which property is tax-exempt under the constitutional limitation?
A. A church-owned commercial mall
B. A school canteen run for profit by a private contractor
C. Land used by a non-stock, non-profit school exclusively for classrooms
D. A government-owned GOCC engaged in mining

c

A non-stock, non-profit educational institution’s bookstore selling books for profit is exempt from income tax.

f

Which of the following is NOT an inherent limitation of taxation?
a) Taxes must serve a public purpose
b) Territorial limitation
c) International comity
d) Due process of law

d

Who may be granted the power to levy tariffs and duties under the prohibition against delegation of taxing power?
a) Congress only
b) President
c) Supreme Court
d) Barangay Captain

b

The state may impose income tax on a Filipino citizen even if income is earned abroad.

t

Which constitutional guarantee ensures that taxpayers are given notice and the chance to contest a tax assessment?
a) Equal protection
b) Due process
c) Rule of uniformity
d) Religious freedom

b

A “sin tax” imposed on cigarettes and alcohol is valid under the rule of uniformity and equity because:
a) It is applied absolutely equally to everyone
b) It is based on substantial distinction and is germane to public health purposes
c) It exempts small retailers for equity reasons
d) It benefits only private manufacturers

b

Poll tax is a fixed amount imposed on residents regardless of income, business, or profession.

t

A tax law that exempts a certain religion from paying property taxes on commercial buildings is valid.

f

A university operates a canteen that sells to the public and earns profit. The canteen’s income is exempt from tax under the constitutional exemption for non-stock, non-profit educational institutions.

f

Congress passes a law revoking tax exemptions previously granted to a power company under its franchise. This is constitutional.

t

The BIR imposes a license fee for selling bibles. A church refuses to pay, claiming infringement of religious freedom, but the imposition of fees is constitutional.

f

A Filipino citizen living in Quezon City earns freelance income from a US company. Which statement is correct?
a) The income is not taxable because it was earned abroad.
b) The income is taxable in the Philippines because resident citizens are taxed on worldwide income.
c) The income is taxable only if the company remits payment through a Philippine bank.
d) The income is exempt because it is foreign-sourced.

b

Which of the following is NOT taxable in the Philippines?
a) Salary earned in Canada by a Filipino resident citizen
b) Rental income from Cebu property earned by a US citizen living in New York
c) Dividend income from a US company received by a Filipino resident citizen
d) Salary earned in Saudi Arabia by a Filipino non-resident citizen (OFW)

d

A non-resident Filipino citizen is still taxed on his salary abroad because of his Philippine citizenship.

f

Territorial limitation means the Philippine government can only tax people physically present in the country.

f

Juan, a Filipino citizen residing in Cebu, owns an apartment building in Singapore. The rental income from Singapore is taxable in the Philippines.

t

Maria, a Filipino OFW in Qatar, sends money home to her family. The Qatar salary is taxable in the Philippines.

f

Which of the following is an exception to the prohibition against using tax proceeds for the support of a church or religious official?

A. Funding the construction of a new church building
B. Paying salaries of ministers assigned to private schools
C. Supporting a religious official assigned to the armed forces or penal institutions
D. Giving tax money directly to a religious group for missionary work

c

Which of the following tax classifications would violate the rule of uniformity and equity in taxation?

A. A higher tax rate on luxury cars compared to public utility vehicles
B. A special tax on a certain product that applies only for one year during a festival
C. A sin tax on cigarettes intended to fund public health programs
D. An excise tax on imported liquor applied consistently over time

b

1. Which of the following BEST describes direct double taxation?
A. Two taxes imposed on the same person, but by different authorities.
B. Two taxes imposed on different subjects, within the same jurisdiction.
C. Two taxes imposed on the same subject, by the same authority, within the same period, for the same purpose.
D. Two taxes imposed on the same taxpayer, but for different purposes.

c

2. Which is an example of indirect double taxation that is generally allowed?
A. A city imposing two annual real property taxes on the same land.
B. A national income tax and a local business tax levied on the same company.
C. A barangay charging the same tax twice in a year.
D. A municipality taxing the same sales transaction twice.

b

Double taxation always means the tax is unconstitutional.

f

For double taxation to be considered indirect (and therefore allowed), which of the following elements of direct double taxation may be missing?

A. Same subject matter
B. Same taxing authority
C. Same purpose
D. Any one of the above

d

Which agency is responsible for collecting import duties and tariffs?
A. Bureau of Internal Revenue
B. Department of Finance
C. Bureau of Customs
D. Local Government Units

c

Which judicial body specializes in handling tax disputes?
A. Sandiganbayan
B. Court of Appeals
C. Court of Tax Appeals
D. Supreme Court

c

The BIR is responsible for national internal taxes.

t

The Supreme Court is the final arbiter on tax cases.

t

Local Government Units (LGUs) can impose national taxes.

f

Which of the following is an example of shifting in taxation?
A. A business lowers its production cost to absorb taxes.
B. A taxpayer hides part of their income to reduce tax liability.
C. A store adds VAT to the selling price, so the customer pays it.
D. A taxpayer claims deductions allowed by law.

c

Transformation occurs when a business:
A. Transfers the tax burden to consumers through higher prices.
B. Reduces its own costs so it can pay the tax without raising prices.
C. Illegally conceals income to avoid paying taxes.
D. Uses exemptions provided by law to lessen tax liability.

b

Only indirect taxes (like VAT) can be shifted, while direct taxes (like income tax) cannot.

t

Tax exemptions are allowed only when:
A. Claimed by the taxpayer as a right
B. There is a clear provision granting it
C. Taxes are too burdensome
D. The taxpayer files an appeal in court

b

Which principle governs tax exemption?
A. Exemptions are presumed in favor of the taxpayer
B. Exemptions are highly favored in law
C. Exemptions are strictly construed against the taxpayer
D. Exemptions can be granted without a legal basis

c

Which of the following BEST describes tax amnesty?
A. Temporary suspension of tax collection
B. Complete waiver of both tax and penalties, regardless of circumstances
C. Absolute forgiveness by the State of its right to collect, including immunity from criminal, civil, and administrative liabilities
D. A partial tax discount granted to taxpayers

c

Tax exemptions can be implied when a transaction clearly falls outside the scope of a taxing provision.

t

If a tax exemption law is ambiguous, the taxpayer automatically gets the benefit of exemption.

f

Which of the following is an example of a statutory tax exemption?
A. Exemption of the government from paying taxes under the Constitution
B. A law granting tax holidays to new businesses
C. The right of churches to be tax-free as provided by the Constitution
D. Immunity of government entities from property tax by nature of sovereignty

b

A tax exemption that is not explicitly written in the law, but is recognized because the subject matter falls outside the scope of the taxing provision, is called:
A. Express
B. Implied
C. Total
D. Statutory

b

Statutory exemptions come from legislation, while constitutional exemptions originate directly from the Constitution.

t

A total tax exemption means that no tax liability remains.

t

In taxation, capitalization means:
A. Transferring the tax burden to consumers through higher prices.
B. Lowering production costs to absorb the tax.
C. Reducing the selling price of property because the buyer will shoulder future taxes.
D. Illegally avoiding taxes by concealing income.

c

In capitalization, the buyer adjusts the selling price downward to account for the burden of future taxes.

t

Capitalization occurs when a store adds VAT to the price of goods, making the customer pay it.

f

Income tax is imposed on:
A. The person who earns income
B. The property itself
C. The act of receiving income
D. The income earned, regardless of the person

b

Why is “income” not strictly defined in the NIRC?
A. To simplify tax computations
B. To prevent any type of income from being excluded from taxation
C. Because income is only based on cash receipts
D. Because only passive income is taxable

b

Gross income means:
A. Only income from legal sources
B. All income from whatever source, legal or illegal
C. Income after deductions
D. Income that exceeds ₱250,000

b

After a taxpayer dies, rental income from their property is:
A. Exempt from income tax
B. Subject only to estate tax
C. Still subject to income tax
D. Taxed only if the heirs declare it

c

The issuance of shares for cash or property produces no taxable gain or loss.

t

From the lessor’s perspective, which item is not income upon receipt?
A. Advance rentals
B. Pre-termination penalties
C. Refundable security deposits
D. All are income immediately

c

Advance rentals are considered income to the lessor in the year received, even if unearned.

t

Pre-termination penalties are taxable income for the lessor and deductible expense for the lessee in the year incurred.

t

Interest expense is deductible for the payor, while interest income is taxable for the payee.

t

PEZA-registered entities may enjoy:
A. Exemption from VAT
B. Income tax holidays, exempting them from income tax
C. Automatic donor’s tax exemption
D. No tax obligations at all

b

Salaries of minimum wage earners are exempt from income tax.

t

Agency fees form part of business income and are subject to taxation.

t

In the sale of real property, the taxable base is:
A. Always the selling price
B. Always the fair market value
C. Whichever is higher between selling price and fair market value
D. Whichever is lower between selling price and fair market value

c

Overpayments by the buyer in a real estate transaction are not income to the seller since they must be refunded.

t

If a creditor condones debt with intent to donate, it is subject to:
A. Income tax on debtor
B. Donor’s tax (on creditor)
C. VAT
D. Capital gains tax

b

If debt is condoned without intent to donate, the forgiven amount is taxable income to the debtor.

t

If an insolvent debtor’s obligation is condoned, the condoned amount is:
A. Still taxable income
B. Subject to donor’s tax
C. Not taxable, since there is no real increase in net worth
D. Refundable to the creditor

c

If a creditor forgives a debt out of generosity, it is subject to:
A. Donor’s tax, payable by the debtor
B. Donor’s tax, payable by the creditor
C. Income tax on debtor
D. No tax at all

b

When condonation is made with intent to donate, the debtor must pay income tax on the forgiven amount.

f

If debt forgiveness is done for business reasons and not generosity, the forgiven debt is treated as the debtor’s income, and is therefore taxable.

t