CHAPTER EXERCISES

True or False
1. The three fundamental powers of the state may be exercised only by the government.
2. Taxation is a process or means by which the sovereign, through its law making body
raises income to defray the expenses of the government.
3. Eminent domain may be exercised even by public service corporations and public
entities.
4. Police power regulates both liberty and property.
5. Taxes are raised to cover the cost of governance.
6. Toll is one of the taxes collected by the government.
7. License fees are imposed in the exercise of police power.
8. License fee is imposed to raise revenue.
9. Tax is generally unlimited because it is based on the needs of the State.
10. The amount imposed in the exercise of police power depends whether the activity is
useful or not.
11. The distinction of a tax from permit or license fee is that a tax is one in which there is
generally no limit on the amount that may be imposed.
12. debt , as distinguished from tax may be paid in kind.
13. Special assessment is a tax.
14. Special assessment is imposed on persons, property and property rights.
15. In the exercise of the power of taxation, the State can tax anything at any time.

Multiple Choice
Definition, Purpose, Theory and Basis
1. Which of the following statements is incorrect?
a. Taxes are the revenues raised in the exercise of the police power of the State.
b. One of the special characteristics of tax is it is unlimited in amount.
c. The three fundamental powers of the State are inherent in the State and may be
exercised without the need of any constitutional grant.
d. All of the above.

2. The State having sovereignty can enforce contributions (tax) upon its citizens even
without a specific provision in the Constitution authorizing it. Which of the following
will justify the foregoing statement?
a. It is so because the State has the supreme power to command and enforce
obedience to its will from the people within its jurisdiction.
b. Any provision in the Constitution regarding taxation does not create rights for the
sovereignty to have the power to tax but it merely constitutes limitations upon the
supremacy of tax power.
 c. Both a and b
d. Neither a nor b

3. Statement 1: The distinction of a tax from permit or license fee is that a tax is imposed for
regulation.
a. Statement 2: Non-payment of tax does not necessarily render a business illegal.
b. Only statement 1 is correct.
c. Only statement 2 is correct.
d. Both statements are correct.
e. Both statements are incorrect.

4. 4.The primary purpose of taxation is to raise revenue for the support of the government.
However, taxation is often employed as a device for regulation by means of which,
certain effects or conditions envisioned by the government may be achieved such as:
a. Taxation may be used to provide incentive to greater production through grant of
tax exemptions.
b. Taxation can strengthen weak enterprises by creating conditions conducive to
their growth through grant of tax exemptions.
c. Tax may be increased in periods of prosperity to curb spending power and halt
inflation or lowered in periods of slump to expand business and ward off
depression.
d. All of the above.

5. Which of the following statements is correct?

a. The purpose of taxation may also be compensatory meaning it may be used to
make up for the benefit received.
b. Taxes may be imposed for the equitable distribution of wealth and income in
society.
c. Both a and b
d. Neither a nor b

6. Which theory in taxation states that without taxes, a government would be paralyzed for
lack of power to activate and operate it, resulting in its destruction?
a. Power to destroy theory
b. Lifeblood theory
c. Sumptuary theory
d. Symbiotic doctrine

7. On a theoretical basis of taxation, which of the following statements is true?

 a. People pay taxes which their government uses to expand its powers and territorial
domination.
b. People demand from their government certain responsibilities and then provide
this government with the means to carry them out.
c. State needs taxation to exist, while people must support taxation because they
need the presence of the state.
d. B and c

8. Incidence of taxation means

a. Shifting of tax
b. Refunds of tax
c. Payment of tax
d. Imposition of tax

9. The actual effort exerted by the government to effect the exaction of what is due from the
taxpayer is known as
a. Assessment
a. Levy
b. Payment
c. collection

10. Statement 1: Symbiotic relation is the reason why the government would impose taxes on
the income of resident citizens derived from sources outside the Philippines.
a. Statement 2: Jurisdiction is the reason why citizens must provide support to the
state so the latter could continue to give protection.
b. Only Statement 1 is correct.
c. Only Statement 2 is correct.
d. Both statements are correct.
e. Both statements are incorrect.

11. A law was passed by Congress which granted tax amnesty to those who have not paid
income taxes for a certain year and at the same time providing for the refund of taxes to
those who have already paid them. The law is
a. Valid because there is a valid classification.
b. Not valid because those who did not pay their taxes are favored over those who
have paid their taxes.
c. Valid because it was Congress that passed the law and it did not improperly
delegate the power to tax.
d. Not valid because only the President with the approval of Congress may grant
amnesty.

12. Congress passed a new law imposing taxes on income earned out of particular activity
that was not previously taxed. The law, however, taxed incomes already earned within
the fiscal year when the law took effect. Is the law valid?
a. No, because the laws are intended to be prospective not retroactive.
 b. No, the law is arbitrary in that it taxes income that has been already spent.
c. Yes, since the tax laws are the lifeblood of the government.
d. Yes, tax laws are an exception; they can be given retroactive effect.

13. Being a legislative in nature, the power to tax may not be delegated except
a. To local governments or political subdivisions
b. When allowed by constitution
c. When delegation related merely to administrative implementation that may call
for some degree of discretionary powers under a set of sufficient standards
expressed by law or implied from the policy and purpose of the act.
d. All of the above

Scope and Aspect of Taxation

14. Statement 1: The aspects of taxation are shared by the legislative and executive branches
of the government.
a. Statement 2: Taxes should be prospective and should not be given retroactive
effects because they are burdens.
b. Only Statement 1 is correct.
c. Only Statement 2 is correct.
d. Both statements are correct.
e. Both statements are incorrect.

15. The following are the aspects of taxation

I - Levy or imposition of the tax on persons, property or excises
II - Collection of taxes already levied
III - Sufficiency of government sources to satisfy its expenditure
a. I, II & III
b. I & II only
c. I & III only
d. II & III only

16. Which of the following is incorrect?

Legislative Administrative
a. Selecting the kind of tax Yes No
b. Fixing amount of tax Yes No
c. Prescribing rules of taxation Yes No
d. Assessment of tax liability Yes No
17. Which of the following is correct?
Legislative Administrative
a. Fixing of tax rates Yes Yes
b. Valuation of object of tax Yes No
c. Collection of tax Yes No
d. Assessment of tax liability No Yes
Inherent Powers of the State
18. Statement I: Inherent powers of the state exist independent of the constitution.
Statement II: The taxing power of the local government units precede from a
constitutional grant.
a. Statements I&II are false.
b. Statement I&II are true.
c. Statement I is true but Statement II is false.
d. Statement I is false but Statement II is true.

19. The following are the characteristics of the State’s power to tax except
a. The strongest of all inherent powers of the State
b. Involves power to destroy
c. Both a and b
d. Neither a nor b

20. Levying of local government taxes may be exercised by:

a. The local executive only
b. The legislative branch of the local government only
c. The local executive and the legislative branch of the local government unit
d. Neither the local executive nor the legislative branch of the local government can
exercise the power.

21. Where does taxing power of provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or executive act
d. Local legislation

22. Statement 1: Eminent domain may raise money for the government.
Statement 2: Barrios, barangays, municipalities/cities and provinces may collect taxes
from its inhabitants.
a. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
 c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true.

Nature , Characteristics and Construction of Tax Laws

23. The following are the nature of taxation except
a. Inherent and sovereignty
b. Essentially a legislative function
c. Subject to inherent and constitutional limitation
d. Subject to the approval of the people

24. The power to tax involves power to destroy means:

a. The power to tax is viewed as the power to destroy in the sense that a lawful tax
cannot be defeated just because its exercise would be destructive or would bring
about insolvency to a taxpayer.
b. The principle applies that an imposition of lawful regulatory taxes would be
destructive to the taxpayers and business establishments because the government
can compel payment of tax and forfeiture of property through the exercise of
police power.
c. Both a and b
d. Neither a nor b

25. There can be no tax unless there is a law imposing the tax is consistent with the doctrine
of
a. Uniformity in taxation
b. Due process of law
c. Non-delegation of the power of tax
d. All of the above

26. The tax should be based on the taxpayer's ability to pay. In relation to this, which of the
following is not correct?
a. No person shall be imprisoned for non-payment of tax.
b. A graduated tax table is in consonance with this statement.
c. As a theory of taxation, ability to pay theory.
d. As a basic principle of taxation, this is called “theoretical justice”

27. Rule of “no estoppel against the government” means

a. Rule of law that in the performance of its governmental functions, the state cannot
be estopped by the neglect of its agents and officers.
 b. The government is not estopped by the mistakes or errors of its agents; erroneous
application and enforcement of law by public officers do not block the subsequent
correct application of statutes.
c. Both a and b
d. Neither a nor b

28. Progressivity of taxation is also mandated in the Constitution.

Statement 1: Our income tax system is one good example of such progressivity because it
is built on the principle of taxpayer’s ability to pay.
Statement 2: Taxation is progressive when their rates go up depending on the resources of
the person affected.
a. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true,

29. One of the characteristics of our internal revenue law is that they are
a. Political in nature
b. Penal in nature
c. Generally prospective in operation although the tax statute may nevertheless
operate retrospectively provided it is clearly the legislative intent.
d. Criminal in nature
1.
30. Which of the following distinguishes tax from license fee?
a. Non-payment does not necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation

31. The least source of tax laws:

a. Statutes
b. Presidential Decrees
c. Revenue regulations
d. Tax treaties or conventions

32. In every case of doubt, tax statutes are construed

a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer
33. In every case of doubt, tax exemption are construed
a. Strictly against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and liberally in favor of the taxpayer
d. Liberally in favor of the government and strictly against the taxpayer

34. Tax of a fix amount imposed among all persons residing within a specified territory
without regards to their property or occupation they may be engaged
a. Personal, poll or capitation tax
b. Property
c. Excise
d. regressive tax

35. Tax of fixed proportion of the amount or value of property with respect to which the tax
assessed
a. Ad valorem
b. Specific
c. Excise
d. Revenue

36. Tax base on a fix percentage of the amount of property, income or other basis to be taxed
a. Progressive
b. Proportional
c. regressive tax
d. Indirect

37. Which of the following is a characteristic of taxation which distinguishes it from police
power and eminent domain?
a. For public purposes
b. Legislative in nature
c. Generally payable in money
d. Inferior to non-impairment clause in the Constitution

Sound Tax System

38. The following are the basic principles of sound tax system
I. It should be capable of being effectively enforced.
II. It must be progressive
III. Sources of revenue must be sufficient to meet government expenditures and other
public needs.
 IV. It should be exercised to promote public welfare.
a. I and II only
b. III and IV only
c. I, II and III only
d. All of the above

39. The sources of revenue should be sufficient to meet the demands of public expenditures.
This refers to
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment

40. The tax should be imposed proportionate to the taxpayer’s ability to pay
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment

41. The tax law must be capable of convenient just and effective administration
a. Equality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment
Inherent and Constitutional Limitations
42. Equality in taxation means
I. Progressive system of taxation shall be applied.
II. The tax laws and their application must be fair, just, reasonable and proportionate to
one’s ability to pay.
III. The tax laws shall give emphasis on direct rather than indirect taxes or on the
ability-to-pay principle of taxation.
a. I only
b. II only
c. III only
d. I, II & III only

43. Which of the following restrictions on the power of taxation recognizes that the country’s
tax laws shall not be applied to the property of foreign governments?
a. Taxation is inherently a legislative function
 b. Exercise of taxation is subject to international comity
c. Due process of law
d. Equal protection of law

44. This is an inherent limitation on the power of taxation.

a. The rule on taxation shall be uniform and equitable.
b. No law impairing the obligations and contracts shall be enacted
c. Charitable institutions, churches, personages or convents belonging thereto,
mosque and non-profits cemeteries and all kinds of lands, building and
improvements actually, directly and exclusively used for religious and charitable
purposes shall be exempt from taxation
d. The tax laws cannot apply to the property of foreign government
Exemption versus Amnesty
45. Exemption from tax is a privilege which is being looked upon by law with disfavor
because everyone should be sharing the burden of taxation. On account of this view,
exemption from tax is construed strictly against the taxpayer, except in certain situation
like:
a. Exemption is granted to the impoverished sector in certain situation
b. Exemption relates to a public official
c. Exemption refers to a public property
d. All of the above

46. Tax exemption is made different from tax amnesty:

a. It is a privilege or freedom from tax burden;
b. It allows immunity from all criminal, civil and administrative liabilities arising
from non-payment of taxes;
c. Amount foregone by the government is substantial;
d. It applies to past, present and future obligations.

47. Statement 1: Tax exemption applies only to government entities that exercise proprietary
functions.
Statement 2: All government entities regardless of their functions are exempted from
taxes because it would be impractical for the government to be taxing itself.
a. Statements 1&2 are false.
b. Statement 1 is true but statement 2 is false.
c. Statement 1 is false but statement 2 is true.
d. Statements 1&2 are true.
 Tax Avoidance/Double Taxation
48. Which of the following is to be regarded as tax minimization through legal means?
a. Not declaring all taxable income
b. Padding of expenses for deduction from income
c. Opting to transfer the property through sale rather than through donation where
tax liability is higher
d. All of the above

49. Which of the following is correct?

a. Tax avoidance or tax minimization through legal means is not punishable by law.
b. Deliberate reduction of taxable income that has been received is an example of
tax avoidance.
c. Evasion of tax takes place only when there are no proceeds on the part of the
government
d. All of the above

50. Double taxation in its general sense means taxing the same subject twice during the same
taxing period. In this sense, double taxation
a. Violates substantive due process.
b. Does not violate substantive due process.
c. Violates the right to equal protection.
d. Does not violate the right to equal protection