Chapter 2 - Taxes, Tax Laws and Tax Administration

CHAPTER 2: SELF-TEST EXERCISES

Discussion Questions
1. Distinguish tax law from tax exemption law.
2. Enumerate the sources of tax l a w s . l a h sKoa
3. Discuss the nature of Philippine tax law.
4. Distinguish tax laws, revenue regulations, and rulings. blod
5. Define tax and identify its elements.
6. What are the classifications of taxes? Enumerate and provide examplesfor each
classification.
7. Compare tax with revenue, license, toll, debt, special assessment, tarif,
TE penalty.
8. What is a tax system? What are its types?
9. Enumerate the principles of a sound tax system. Explain each.
10. Enumerate the powers of the BIR.
11. Enumerate the non-delegated powers of theC I R . 0

DExercise Drill No, 1uC

Identify the type of tax that is described by the following:
1. Aconsumptiontax collected by non-VAT businesses
2. Tax on gratuitous transfer of property by a living
donor
3. Tax that decreases in rates as the amount or value of
the tax object increases eTay
4. Tax collected upon personswho are not the statutory
taxpayers
5. Tax that is imposed based on the value ofthe tax objectabscar
6. Tax for general purpose
7. Tax imposed by the national government
8. A tax on sin products or non-essential commodities
9. Imposed on the gratuitous transfer of property upon
death
10. Tax on residents of a country
11. Tax that remains at flat rate regardless of the value of
the tax object
12. Tax which is collected on a per unit basis
13. Tax is collected upon the statutory taxpayer
14. Tax imposed to regulate businesses or professions
R15. Tax upon performance of an act or enjoyment of a egulaty Tay
privilege

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Exercise Drill No, 2

Identify which item is described by the following:
1. Itrefers to all income collections of the government.
2 It is an imposition for the support of the government,
Revenue
3. It is imposed upon land adjacent to public improvements. Specaal AACsseot
4. It isimposed onimported and exported commodities.
5. It is a charge imposed prior to the commencement of
business or exercise of a profession. License tet
6. Itis a post-activity rather than apre-activity imposition. |Tax
7. It is subject to compensation or set-off. |Delat
It is acharge for the use of others' property.
9. It is an imposition intended to discourage an act.
10. It arises from contracts rather than from law. Delbt
Exercise Drill No. 3
Indicate the criteria for the selection of large taxpayer for each of the following:
Asto payment Criteria
1. Value Added Tax
2. Excise Tax
3. Income Tax
4. Withholding Tax
5. Percentage Tax
6. Documentary Stamp Tax
As to conditions and operations
1. Gross receipts or sales
2. Net worth
3. Gross purchases

Multiple Choice - Theory: Part 1

1. Which is not a source of tax law?
a. CHEDregulations c. Judicial decisions
b) BIR Rulings d. Constitution

2. When tax is collected upon someone who is effectively reimbursed by another, the
tax is regarded as
a.) direct. C. personal.
b. indirect. d. illegal.
3. Allare ad valorem taxes, except one. Select the exception.oto
a. Poll tax c.Real property tax.
b. Estate tax d. Capital gains tax on real property capital asset
p4. Taxation power can be used to destroy
a. as a revenue measure. Ceas an implement of policepower.
b. even if the tax is invalid. d. when the State is in dire need of funds.
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D 5. Which is not a characteristic of tax?

a. It is an enforced contribution.
6 It isgenerally payable in money.
C. It is subject to assignment.
d. Itis levied by the law-making body ofthe State having jurisdiction.
6. Tax as to source is classified as
A Fiscal or regulatory c. National or local tax
Direct or indirect tax d. Specific or ad valorem tax
7. Which of the following is a local tax?
(a.) Value added tax c. Documentary stamp tax
b. Real property tax d. Other percentage taxes
8. Tax as to purpose is classified as
Fiscal or regulatory c. National or local tax
(b.yDirect or indirect tax d. Specific or ad valorem tax

(9. Tax as to incidence is classified as

Fiscal or regulatory c.National or local tax
b Direct or indirect tax d. Specific or ad valorem tax

D10. Which is not a nature of tax?

a. Enforced proportional contribution
b. Enforced within the territorial jurisdiction of the taxing authority
Levied by the lawmaking body
(d Generally payable in kind
A 11. 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.
2 12. Tax classifications as toobject do not include
a. Poll tax c. Regulatory tax
b. Property tax d. Excise tax

13. Which is a local tax?

a. Donor'stax c. Documentary stamp taX
b.) Professional tax d. Excise tax

14. As to subject matter, taxes do not include

a. Property tax c. Poll tax
b. Regulatory tax . Excise tax

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P 15. Atax that is imposed upon the performance of an act, the enjoyment of a privilege
or theengagement in a profession is known as
a. income tax. (Cèxcise tax.
b. license. d. transfer tax.

16. Which is a national tax?

Real property taxX c. Incomne tax
b. Community tax Aprofessional tax
) 17. Which of the following distinguishes license from tax?
a Unlimited in imposition c. Does not renders business illegal
b. Imposed for revenue dPre-activity in application
18. Which is correct?
Taxes may be subject to compensation.
b. Tol,being a demand of ownership, is exercised only by private entities.
C. Dacion en pago and cession in payment are applicable to taxation.
d) Special assessment applies only when public improvement is made.
19. Tax as to determination of amount is classified as
a. Fiscal or regulatory c.Nationalor local tax
b. Direct or indirect tax Td. Specific or ad valorem tax.

20. A. Tax must not violate Constitutional and inherent limitation.

B. Tax must be unifoYm and equitable.
C. Tax must be for public purpose.
D. Tax must be levied by the lawmaking body.
E. Tax must be proportionate in character.
F. Tax is generally payable in money.
Which of the above is/are not an essential characteristic of a valid tax?
Allof the above c. None, except F
b All except F dNone of the above
) 21. Tax as to rates excludes
Specific tax C. Mixed tax
b. Progressive tax (d,Proportional tax
D 22. To limit the production of an environmentally harnmful commodity, Congress
passed a law subjecting the sales of an environmentally unfriendly commodity to
a P10/kilotax but a 5% tax is imposed on sales exceeding P100,000.
Which is incorrect?
The tax isa combination of an ad valorem tax and specific tax.
by This is an example of a regulatory tax.
This is a national tax.
d. This is a local tax.
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A 23. Which is not an excise tax?

a.) Income tax c. Estate tax
Community tax d. Occupation tax
24. Which is an indirect tax?
a. Value added tax c. Income tax
b Donor's tax d. Real property tax

2 25. Which isnot an ad valorem tax?

a. Real property tax C. Income tax
Excise tax on cigar d. Donor's tax

26. A
taxthat is imposed based on per unit or per head basis is known as
a Proportional tax C. Ad valorem taX
Specific tax d. Progressive tax
) 27. Mr. dela Cruz has a tax obligation to the government amounting to P80,000. Sing
he is leaving the country, he entered into a contract with Mr. Garcia wherein Mr.
shallpay the P80,000 tax in his behalf. On due date, Mr. Garcia failed to pay th
tax. The BIR sent a letter of demand to Mr. dela Cruz which he refused to pay.
Which of the following statementsis correct?
a. The government cannot enforce collection charges against Mr. dela Cruz sing
he has validly transferred his obligations to Mr. Garcia under the contract.
b. The government can no longer run after Mr. dela Cruz because he is alread
outside the Philippine territory.
C The government should wait untilMr. B becomessolvent again.
d. The government should force Mr. Ato pay because taxes are non-assignable.
b 28. Philippine tax laws are, by nature,
a political. C. political and civil.
b. civil. d. penal and civil.
l 29. Motor vehicles tax is an example of
a. Property tax c. Income tax
b. Privilege tax d. Indirect tax

h30. Which of thefollowing statements is correct?

a. The Marshall Doctrine is not used in practice since it is unconstitutional.
b. An ex post facto tax law violates the constitution.
C. A tax bill personally drafted by the president shall become a law afte
d. approval by congress.
It is in the public interest that errors of public officials should bind t
government to limit government abuse.

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) 31. Who issues revenue regulations?

a. Department of Finance c. Commissioner of Internal Revenue
b. Congress d. Commissioner of Customs

) 32. Tax rulings are jssued by the

a. Secretary of Finance c. Court of Tax Appeals
b. Supreme Court d. Commissioner of Internal Revenue

P33. Which of the following is limited in application?

Tax laws c. Tax treaties
b. Revenue Regulations d. BIR Ruling
A34. Which is not a source of tax law?
a. Judicial decisions c. Opinionsof tax experts
b Revenue regulations d. Tax treaties and ordinances

^35. Which is not an element of tax?

a. It must be for publicpurpose.
b. It must not violate Constitutional or inherent limitation.
C. It must be progressive by nature.
d. It must be uniform and equitable.

D36. Tax as to purpose does not include

a. Revenue c. Regulatory
b. Sumptuary d. Poll

37. When the impact and incidence of taxation are merged into the statutory
taxpayer,the tax is known as
a. Personal tax c. Indirect tax
b. Direct tax d. National tax

38. Which of the following levy is fiscal or revenue by nature?

a. Tax law geared to phase out a deficit balance of the government.
b. Tax law intended to prohibit gambling in the Philippines.
C. Tax law intended to protect local industries.
d. Tax law supporting the development of a particular industry.
D39. Tax as to object includes
a. Personal tax c. Excise tax
b. Property tax d. All of these

40. Which is not an indirect tax?

a. Duties c. Excise tax
b. Impost d. Personaltax

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41. A tax that cannot be avoided is

a. Direct tax c. Specific tax
b. Indirect tax d. Personal tax

A42. Statement 1:Taxes are voluntary contributions to the government.

Statement 2: Taxes are mandatory contributions to the government.
Which is correct?
Only statement 1 is correct.
b. Only statement 2 is correct.
C Both statements are Correct.
d. Neither statement is correct.

)43. Which is an indirect tax?

Other percentage tax c. Donor's tax
b. Income tax d. Estate tax

44. Income tax is not a/an

a. Ad valorem tax c. Revenue tax
b. Direct tax d. Property tax
45. Atransfer tax is not a/an
a. Regressive tax c. National tax
b. Ad valorem tax d. Excise tax

Multiple Choice -Theory: Part 2

1. Which is intended to regulate conduct?
a.
Penalty c. Police power
b. License d. Toll
2. Which is not an excise tax?
Income tax c. Personaltax
b. Business tax d. Transfer tax
3. Which of the following do not relate to tax?
a. Does not render
b. Arises from law business illegal when not paid
C. Intended to cover
rather than from contracts
d. cost of regulations
Intended for public purpose
4. Alevy from a
property which derives some special benefit firom pub
improvement is
a. Special assessment c. Taxation
b. Eminent domain
d. Toll

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A. Government revenue may comne from tax, license, toll and penalties.
B. Penalty may arise either from law or contracts.
Which is false?
a. A only C. A and B
b. B only d. Neither A nor B

P6. What distinguishes tax from license?

a. Tax is a regulatory measure.
b. Tax is a demand of ownership.
C. Tax arises from contract.
d. Tax is a post-activity inmposition.
Which of the following distinguishes license from tax?
C7. a. Itis imposed under taxation power.
b. Itis a charge for other's property.
C. Non-compliance toit will render businesses illegal.
d. It isgenerally payable in money.
A8. The amount imposed is based on the value of the property
Eminent domain c. Toll
b. License d. Special assessment
characteristics, except one. Which is the
Toll exhibits all of the following
exception?
Demand of ownership
property
b. Comnpensation for the use of another's
individuals
C. Maybe imposed by privatethe government
d. Levied for the support of

10. Which of the following is incorrect?

a. collected tax is referred to as revenue.
The
revenue.
b. Tax isthe sole source of government
commencement of a business or profession.
C License is imposed before
compensation or set-off.
d. Debt can be subject to

11. What distinguishes debt from tax? imprisonment

a. Arises fromcontract c. Non-payment will lead to
b. draws interest
Never d. Generally payable in money

D2. DebtItasiscompared
a.
to tax
ademand of ownership.
b It is not assignable.
imprisonment when not paid.
C. It willnot cause
d. Itis generally payable inmoney.
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13. Select the incorrect statement.

a. Tax may be unlimited in amount.
b. Non-payment of license renders the business illegal.
C. Special assessment isnot a liability of the person owning the property.
right attachi.
d. Special assessment can be imposed on building and other real
or pertaining to land.
A 14. Tax as to subject matter does not include
c. Excise tax
a. Real property tax
b. Personaltax d. Regulatory tax
Multiple Choice - Theory: Part 3
1. Which is not an applicationof aprinciple of asound tax system?
D a. Taxes shouldadjust based on government needs.
b. Taxation should be progressive.
C Taxation should encourage convenient compliance.
d None of these
2. The Commissioner of Internal Revenue is not authorized to
a. interpret the provisions of the National Internal Revenue Code
b. promulgate Revenue Regulations.
C terminate an accounting period.
d. prescribe presumptive gross receipts.
3. Which is not a power of the Commissioner of Internal Revenue?
a. To change tax periods of taxpayers
b. To refund internal revenue taxes
C Toprescribe assessed value of real properties
d To inquire intobank deposits only under certain cases

4. The principles of a sound tax systen exclude

a. Economic efficiency c. Theoretical justice
b. Fiscal adequacy d. Administrative feasibility
) 5. Which of the following best describes the effect of tax condonation?
a. It only covers the unpaid balanceof a tax liability.
b. It is conditionalon the taxpayer paying some portion of the unpaid tax.
C. Itgenerally applies to all taxpayers.
d. Allof these
3 6. By which principle of a sound tax system is the elasticity in tax rates is
justiied:
a. Theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. All of these

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7. Violation of this principle will make atax law invalid

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

8. Which of the following is not an application of the lifeblood doctrine?

a. The government has the right toselect the object of taxation.
b. Taxation is the rule; exemption is the exception.
C. Claim for exemption is strictly construed against the taxpayer.
d. None of these

9. Which is true with tax amnesty?

a. It is unconditional.
b. It covers both criminal and civil liability of the taxpayer.
C. Itapplies for past and future non-compliance.
d. Allof these
10. Which one of the following is the BIR not empowered todo?
Assess national taxes
b. Collect income, business and transfer taxes
C
Assess and collect local taxes
Enforce forfeitures, penalties and fines
reasonable, and fair?
11. Which principle demands that ax should be just,
Theoretical justice C. Administrative feasibility
Fiscal adequacy d. Economic consistency
Commissioner of Internal Revenue can
) 12. Which among the following powers of the
be delegated? surveillance
a. The power to conduct inventory
b The power torecommend promulgation of
revenue regulations.
impression.
C. The power to issue rulings of first modify an existing ruling.
d. The power to reverse a ruling, amend or
Revenue is not empowered to
13. The Commissioner of Internal
behalf of the taxpayer.
a. Make or amenda tax return for and in testimony of persons
b. Obtain information and to summon, examine, and take
to effect tax collections.
C Compromise tax liabilities of taxpayers.
d. Grant amnesty for erring taxpayers.
exemption come from?
14. Which of the following may tax
C. Law
a. Contract
b. Constitution
d. Allof these

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( 15. Exemption based upon which of the following is repealable?

Contract C. Law
b. Constitution d. None of these
D16. Select the incorrect statement regarding tax amnesty and condonation.
a. Intax amnesty, violators are required to pay a portion of the tax assessed.
b. When the remaining unpaid portion of the tax is condoned, the taxpare.
cannot ask for refund for thebalance already paid.
C Tax amnesty operates as a general pardon and is rarely available.
d Tax condonation operates on the whole balance of the assessed tax; hence, th.
taxpayer can ask for refund for the paid portion of the tax.
17. Which of the following is apower of theCommissioner of InternalRevenue?
a. Assessment and collection of taxes
b. Enforcement of all forfeitures, penalties, and fines
C. Interpretation of the provisions of the NIRC
d. Giving effect to and administering the supervisory and police powers
conferred by the NIRC and other lavws
18. The Commissioner of Internal Revenue can delegate the power to
refundor credit internal revenue tax.
b recommend rules and regulations to the Secretary of Finance.
C. assign and re-assign revenue officer toestablishments of excisable articles.
d. compromise or abate tax liability.
19. The BIR is under the supervision of
a. the Bureau of Customs. C. the Department of Finance.
b. the President. d. Congress.
20. As to tax payments measures, which of the following threshold for the
D qualification as large taxpayer is incorrect?
a. Annual income tax payments of P1M
b. Annualvalue added tax payments of P1M
C.
Quarterly percentage tax payments of P200,000
d. Annual documentary stamp tax of P1M
D 21. Who is not a large taxpayer?
a. Mining companies c. Banks with P120M authorized capital
b. Listed companies d. None of these
22. In terms of financial measures,which of the following threshold for qualificatiou
as large taxpayers is incorrect?
a.
Gross receipts exceeding P1B
b. Networth exceeding P300M
C. Gross purchases exceeding P800M
d. Gross sales exceeding P1.5B
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