SAINT JOSEPH COLLEGE of SINDANGAN INCORPORATED

Sindangan, Zamboanga del Norte, Philippines

Telefax No. (065) 224-2710/ +639121561506

INCOME TAXATION

Lesson 1: Basic Principles of Taxation

Learning Target/s: At the end of the lesson, the students CAN:

1. Define taxation
2. Describe the nature, basis and objectives of taxation
3. Differentiate the three inherent powers of the state
4. Explain the principles of a sound tax system
5. Identify and explain constitutional and inherent limitations
6. Describe various sources of taxation laws
7. Define tax and describe its essential characteristics
8. Identify and distinguish classification of taxes
9. Have fair knowledge of the sources of tax authority and sources of tax law.
10. Describe the powers of the Commissioner of Internal Revenue.

1.

Reference/s: Income Taxation by Win Ballada and Susan Ballada

Values/s: Courage, Love of Wisdom

Time Duration: 3 hours

Week: 1

Activating Prior Knowledge (APK): “When you hear the word tax, what comes into

your mind? What is tax for you?

I. Essential Ideas

INTRODUCTION

Most people receive their initial exposure to the Philippine Income Tax System
when first faced with the responsibility of filing their own tax returns. As a result,
tax work is sometimes viewed as a robotized process of filing out government
forms, not a very challenging activity.

Actually, the perception of tax work as a routine clerical process is grossly

distorted view of the tax profession. Historically, most professional-level work has
concerned conceptual issues. In today’s society, that emphasis is greater than
ever with computer system handling an ever-increasing share of the mechanical
chores of tax practice. This allows tax professionals and business managers to
devote an even greater share of their time to substantive matters.

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DEFINITION, NATURE AND BASIS OF TAXATION

Taxation is the process or means by which the sovereign, through it law making
body, raises income to defray the necessary expenses of the government.
Taxation, as a power of the state, is inherent in sovereignty.

Taxes are lifeblood of the government and their prompt and certain availability
are an imperious need. A government cannot continue to exist and operate
without financial means. This inherent power gives government the right to tax
citizens and properties within its jurisdiction

Indeed collection of taxes remain one of the primary undertakings of any

government in order to provide sufficient funds with which a nation’s economy
may be sustained and developed. In this right, it has become the enduring goal of
every tax authority, be it one that serves a developed or a developing nation, to
seek and implement strategies and technologies that shall support the continuing
improvement of their collection systems. In the Philippines, the premier tax
agency is the Bureau of Internal Revenue (BIR).
Upon taxation depends the government’s ability to serve the people for whose
benefit taxes are collected (Vera Vs. Fernadez, 89 scra 199). The ultimate
beneficiaries in the process are both the government and the citizens. The state
collect taxes in the exercise of its sovereign rights for the support of the
government, for administration of the laws, and as a means for the continued
operation of the various legitimate functions of the state.

OBJECTIVES OF TAXATION

Taxation is much more than just a means of raising revenue for the government.
It is also one of the major means by which the national government attempts to
achieve various economic and social objectives. These objectives include shifting
wealth from the rich to the poor, maintaining price stability, stimulating economic
growth, and encouraging full employment.

In its effort to achieve these objectives, Congress tends to use tax provisions in
two different ways. First, some tax rules are enacted for the purpose of mitigating
certain undesirable economic and social conditions already existing. For
instance, low-income individuals often pay little or no national taxes because of
the elaborate system of exclusions, deductions, and credits of current law.
Second, other tax rules provide incentives for certain desirable activities. For
instance, business can claim deductions for depreciation of productive assets
much faster than the assets actually wear out. This provides incentive for
businesses to invest in these assets, leading to increased employment of low and
middle income workers.

Perhaps, it is because of these conflicting objectives that the congress so often

seems to exhibit ‘confused’ behaviour when writing tax rules. When an incentive
provision is enacted, numerous limitations and restrictions will usually prevent its
application in many circumstances. These may also be exceptions to the
exceptions. Often the congressional process of fine-tuning incentive tax
provisions will create a maze of statutory law under which significant tax savings
are possible, but only if transactions are carefully planned to fit within statutory
requirements.

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STATE POWERS

1. Taxation. The power of the state by which the sovereign raises revenue to
defray the necessary expenses of the government.

2. Eminent Domain. The power of the state to take private property for public use
upon payment of just compensation.

3. Police Power. The power of the state to enact laws to promote public health,
public morals, public safety and general welfare of the people.

ASPECTS OF TAXATION

1. Levying of Tax. The imposition of tax requires legislative intervention. In the

Philippines, it is congress that levies taxes.
2. Collection of the Tax Levied. This is essentially an administrative function

BASIC PRINCIPLES OF A SOUND TAX SYSTEM

1. Fiscal Adequacy. Sources of revenue are sufficient to meet government

expenditures.
2. Equality or Theoretical Justice. The tax imposed must be proportionate to
taxpayer’s ability to pay.
3. Administrative Feasibility. The law must be capable of convenient, just and
effective administration.

LIMITATIONS ON THE POWER OF TAXATION

The power of taxation is however, subject to constitutional and inherent limitations.

Constitutional Limitations are those provided for in the constitution or implied from its
provisions while Inherent Limitations are restrictions to the power to tax attached to its
nature. The following are inherent limitations.

1. Purpose. Taxes may be levied only for public purpose;

2. Territoriality. The state may tax persons and properties under its jurisdiction;
3. International Comity. The property of the foreign state may not be taxed by
another;
4. Exemption. Governmental agencies performing government functions are
exempt from taxation.
5. Non-delegation. The power to tax being legislative in nature may not be
delegated.

SOME DOCTRINES IN TAXATION

Prospectivity of Tax Laws

Taxes must be imposed prospectively. But if the legislative intent is for a tax statute to
operate retroactively, then such statute must state so explicitly and clearly. In the words
of the Supreme Court: “Taxes may be imposed retroactively by law but, unless so
expressed by such law, these taxes must only be imposed prospectively.”

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Double Taxation

Double taxation standing alone and not being forbidden by our fundamental law is not a
valid defense against the legality of a tax measure. However, if double taxation amounts
to a direct duplicate taxation, in that the same subject is taxed twice when it should be
taxed but once, in a fashion that both taxes are imposed for the same purpose by the
same taxing authority, within the same jurisdiction or taxing district, for the same taxable
period and for the same kind or character of a tax, then it becomes legally objectionable
for being oppressive and inequitable.

Indirect Double Taxation is one other than the direct double taxation. Though this type
may not prove unconstitutional, it is being avoided so as not to bring injustice to the
taxpayer. An example of this occurs when business tax is imposed by the municipal
government prior to the issuance of a business license to a taxpayer for engaging in an
advertising business. His income from his advertising business shall later be imposed
income tax by the national government.

SET-OFF OF TAXES

Taxes are not subject to set-off or legal compensation under Article 1279 of the Civil
Code. This has been the Supreme Court ruling in Republic vs. Mambulao Lumber Co. (6
SCRA 622). However the high court reversed itself in the subsequent case of Domingo
vs. Garlitos (8 SCRA 443), when it decided that legal compensation can take place when
the taxes and the taxpayer’s claim are fully liquidated, due and demandable.

In a more recent case the supreme court echoed the Mambulao Lumber Doctrine: “We
have consistently ruled that there can be no offsetting of taxes against the claims that
the taxpayer may have against the government. A person cannot refuse to pay tax on
the ground that the government owes him an amount equal to or greater than the tax
being collected.

ESCAPE FROM TAXATION

It is common for taxpayers resort to tax avoidance and tax evasion in order to escape
from taxation. Tax Avoidance happens when the taxpayer minimizes his tax liability by
taking advantage of legally available tax planning opportunities. This is otherwise known
as Tax Minimization; others call it Tax Planning. It is a process of controlling one’s
actions so as to avoid undesirable tax consequences. Tax Avoidance is a completely
legal activity. Just as the penalties of criminal law can be avoided by not committing a
crime, taxes can be avoided by not engaging in those activities that are taxed. The law is
not violated in any way. Rather, tax savings are achieved by arranging one’s affairs, and
thereby controlling the facts, so as to avoid the application of those rules of law that
would otherwise trigger a large tax liability.

Tax Evasion occurs when the taxpayer resorts to unlawful means to lessen or to get
away with his tax liability. This is also known as Tax Dodging. Examples of tax evasion
are under declaration of sales, overstatement of expenses and backdating an important
document.

SITUS OF TAXATION

The situs of taxation is the place of taxation. The rule is that the state may rightfully levy
and collect the tax where the subject being taxed has a situs under its jurisdiction. The
situs of taxation is determined by a number of factors:

1. Subject Matter – or what is being tax. He may be a person or it may be a

property, an act or activity.

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 2. Nature of Tax – or which tax to impose. It may be an income tax, an import duty
or a real property tax;
3. Citizenship of the taxpayer
4. Residence of the taxpayer.

The following situs of taxation apply:

1. Persons – Residence of the taxpayer

2. Real property or tangible property – location of the property
3. Intangible personal property – as a rule, situs is a domicile of the owner unless
he has acquired a situs elsewhere.
4. Income – Taxpayer’s residence or citizenship, or place where the income was
earned.
5. Business, occupation and transaction – Place where business is being operated,
occupation being practiced and transaction completed.
6. Gratuitous transfer of property – Taxpayer’s residence or citizenship, or location
of the property.

TAXES

Taxes are enforced proportional contributions from persons and property levied by the
law making body of the state by virtue of its sovereignty for the support of the
government and all public needs.

Tax, in a general sense, is any contribution imposed by the government upon

individuals, for the use and service of the state, whether under the name of toll, tribute,
tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name. Tax, in
its essential characteristics, is not a debt

Essential Characteristics of Tax

1. It is an enforced contribution;
2. It is levied by the law making body;
3. It is proportionate in character;
4. It is generally payable in money;
5. It is imposed for the purpose of raising revenues; and
6. It is to be used for public purpose.

CLASSIFICATION OF TAXES

As to Subject Matter

1. Personal, Poll or Capitation – Tax of a fixed amount imposed on individuals,

whether citizens or not, residing within a specified territory without regard to their
property or the occupation in which they may be engaged. Example: Community
Tax.
2. Property – Tax Imposed on Property, whether real or personal, in proportion
either to its value or in accordance with some other reasonable method of
apportionment. Example: real estate tax
3. Excise – Tax imposed upon the performance of an act, the enjoyment of
privilege or the engaging in an occupation. Examples: estate tax, donor’s tax,
income tax, value added tax.

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 As to Who Bears the Burden

1. Direct – Tax demanded from persons who are intended or bound by law to pay
tax. Examples: Community tax, Income Tax, Estate Tax, Donor’s Tax
2. Indirect – Tax which the taxpayer can shift to another. Examples: custom duties,
Value-added tax, some percentage taxes.

As to Determination of Amount

1. Specific – Tax imposed based on a physical unit of measurement, as by head

or number, weight, or length or volume. Examples: tax on distilled spirits,
fermented liquors, cigars, wines, firework, etc.
2. Ad Valorem – tax of a fixed proportion of the value of property; needs an
independent appraiser to determine its value. Examples: real estate taxe, certain
custom duties, excise taxes on cigarettes, gasoline and others.
Excise taxes on certain specific goods imposed under the National Internal Revenue
Code are either specific or Ad valorem taxes.

As to Purpose

1. General, fiscal or revenue – Tax with no particular purpose or object for which
the revenue is raised, but is simply raised for whatever need may arise.
Examples: Income tax, value added tax.
2. Special or Regulatory – Tax imposed for a special purpose regardless of
whether revenue is raised or not, and is intended to achieved some social or
economic end. Example: protective tariffs or custom duties on certain imported
goods to protect local industries against foreign competition.

As to Authority Imposing the tax or scope

1. National – Tax imposed by the national government. Examples: Internal

Revenue Taxes, tariff and custom duties.
2. Municipal or local – Tax imposed by the municipal governments for specific
needs. Examples: real estate taxes, Municipal licenses.

As to Graduation or Rate

1. Proportional – Tax based on a fixed percentage of the amount of property

income or other basis to be taxed. Examples: percentage taxes, real estate
taxes.
2. Progressive or Graduated – Tax rate increases as the tax base increases,
Examples: Income tax, Estate tax and Donor’s tax
3. Regressive – Tax rate decreases as the tax base increases.

TAX DISTINGUISHED FROM OTHER FEES

1. From Toll. Toll is a sum of money for the use of something, generally applied to the
consideration which is paid for the use of a road, bridge or the like, of a public nature.

A toll is a demand of proprietorship, is paid for the use of another’s property and may be
imposed by the government or private individuals or entities; while tax is a demand of
sovereignty, is paid for the support of the government and may be imposed only by the
state.

2. From Penalty. Penalty is any sanction imposed as a punishment for violation of law or
acts deemed injurious. Violation of tax laws may give rise to imposition of penalty.

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 A penalty is designed to regulate conduct and may be imposed by the government or
private individuals or entities. Tax, on the other hand, is primarily aimed at raising
revenue and may be imposed only by the government.

3. From Special Assessment. Special Assessment is an enforced proportional

contribution from owners of lands for special benefits resulting from public
improvements.

Special assessment is levied only on land, is not a personal liability of the person
assessed, is based wholly on benefits and exceptional both as to time and place. Tax is
levied on persons, property, or exercise of privilege, which may be made a personal
liability of a person assessed, is based on necessity and is of general application.

4. From Permit or License Fee. Permit or License Fee is a charge impose under the
police power for purposes of regulation.

License Fee is imposed for regulation and involves the exercise of police power while
tax is levied for revenue and involves the exercise of the taxing power. Failure to pay a
license fee makes an act or a business illegal while failure to pay tax does not
necessarily make an act or a business illegal.

5. From Debt. A Debt is generally based on contract, is assignable and may be paid in kind
while a tax is based on law, cannot generally be assigned and is generally payable in
money. A person cannot be imprisoned for non-payment of debt while he can be for non-
payment of tax (except Poll Tax)

6. From Revenue. Revenue is a broader than tax since it refers to all funds or income
derived by the government taxes included. Other sources of revenues are government
services, income from public enterprises and foreign loans.

7. From Custom duties. Custom duties are taxes imposed on goods exported from or
imported to a country. Custom duties are actually taxes but the latter is broader in scope.

TAX LAWS

Sources of Tax Authority

The three branches of the national government are the President and his administration
(executive), the congress (legislative), and the courts (judicial). Congress creates
statutory law. Republic Act 8424, the National Internal Revenue Code (NIRC) of 1997, is
a statutory law.

The administrative branch of the national government includes the Department of

Finance (DOF), of which the Bureau of Internal Revenue (BIR) is a bureau. Two
commonly encountered types of administrative tax authorities are Revenue Regulations
and Revenue Rulings. Most Revenue Regulations and administrative interpretations of
the statutes enacted by the congress and tend to be somewhat more detailed than the
code itself. Revenue Rulings are much more detailed, as they are issued in order to
explain the tax results of very specific transactions.

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 Sources of Tax Law

1. Constitution;
2. Statutes and Presidential Decrees;
3. Revenue Regulations by the Department of Finance;
4. Rulings issued by the Commissioner of Internal Revenue and opinions by the
secretary of Justice;
5. Decisions of the Supreme Court and the Court of Tax Appeals;
6. Provincial, City, municipal, and barangay ordinances subjects to limitations set
forth in the Local Government Code; and
7. Treaties or International agreements the purpose of which is to avoid or minimize
double taxation.

PHILIPPINE TAX LAWS AND TAXES

1. National Internal Revenue Code of 1997 (P.D. 1158, as amended)

a. Income taxes (individual and corporate);

b. Estate and Donor’s taxes;
c. Value-added tax;
d. Other Percentage Taxes;
e. Excise Tax; and
f. Documentary Stamp Tax.

2. Tariff and Customs Code of 1978 (P.D. 1464, as amended)

a. Import Duties; and

b. Export Duties.

3. Local Government Code of 1991 (R.A. 7160);

a. Real Property tax;

b. Business taxes, fees and charges;
c. Professional tax;
d. Community Tax; and
e. Tax on banks and other financial institutions.

4. Special Laws

a. Motor Vehicle Law (R.A. 4136) – motor vehicle fees;

b. Private Motor Vehicle Tax Law (P.D. 1958) – private motor vehicle tax;
c. Philippine Immigration Act of 1940 (C.A. 613, as amended) – immigration
tax; and
d. Travel Tax Law (P.D. 1183, as amended) – travel tax

INTERNAL REVENUE LAWS

Revenue law is a law passed for the purpose of authorizing the levy and collection of
taxes in some form to raise revenue. A revenue law is said to be a national revenue law
when it is applicable all over the country.

Internal revenue laws are neither nor penal in nature although there are penalties in
case of violations. Tax laws are civil in nature.

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THE BUREAU OF INTERNAL REVENUE

The Bureau of Internal Revenue (BIR) functions under the supervision and control of the
Department of Finance (DOF). The bureau was created by Commonwealth Act 466,
approved by the national assembly on June 15, 1939, effective July 1, 1939, which
revised and codified the internal revenue laws of the Philippines.

The mission of the BIR is “to collect taxes efficiently and effectively, for and at least cost
to the government, through impartial and consistent enforcement of internal revenue
laws, and convenient and honest service to taxpayers.”

BIR collection accounts for more 60% of the national government’s total revenues. The
BIR carries the bulk of the burden of solving the country’s budget deficit problem.

TAX COLLECTION SYSTEM

With a growing taxpayer population and limited resources, the BIR adopted the “self-
assessment system” when Republic Act 2343 was enacted in 1959. Republic Act 8424
otherwise known as the Tax Reform Act of 1997 retained this principle.

Under the self-assessment system, the taxpayer calculates the tax by himself or through
an accountant, fills up his tax return, files it with the proper tax office, and pays the tax
due thereon upon filing. The process by which the tax is computed and determined is
what is called the “self-assessment” method, and the resulting tax a “self-assessed” tax.

Over the years, the BIR has employed various collection methods, amending processes
or introducing innovations as the need arises. On the whole, however, the methods of
collection utilized by the BIR may be classified into two (2) major categories: collection
through voluntary compliance and collection by enforcement.

The act of tendering the payment of the self-assessed tax is referred to as “voluntary
compliance” or voluntary payment”. Collection by enforcement, on the other hand, is
conducted through the identification of sectors of business or industries, and/or
segments of economic activities where the degree of compliance is low, and the
subsequent audit or investigation of enterprises and companies that are part of these
selected industries.

POWERS AND DUTIES OF THE BUREAU OF INTERNAL REVENUE

The chief officials of the Bureau are the Commissioner and seven (7) Deputy
Commissioners. The Deputy Commissioners are tasked to handle particular groups
within the bureau such as information systems, legal and inspection, operations,
resource management, tax reform administration, special concerns and large taxpayers.
Its powers and duties follows:

a. Assessment and collection of all national internal revenue taxes, fees and
charges;
b. Enforcement of all forfeitures, penalties, and fines;
c. Execution of judgment in all cases decided in its favor by the Court of Tax
Appeals and ordinary courts; and
d. Administration of supervisory and police power conferred to it.

POWERS OF THE COMMISSIONER

a. Interpret tax laws and decided tax cases;

b. Obtain information and to summon, examine, and take testimony of persons;
c. Make assessments and prescribe additional requirement for tax administration
and enforcement;
d. Delegate powers vested in him by the code to any subordinate officer with rank
equivalent to a division chief or higher;

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 e. Suspend business operations of a taxpayer;
f. Compromise, abate, and refund or credit taxes.

INCOME AND INCOME TAXES

Income, in its broad sense, means all wealth, which flows into the taxpayer other than a
mere return of capital. It is the return in money from one’s business, labour, or capital
invested, e.g., gains, profits, salary and wages. The words ‘income’ from any source
whatever disclose a legislative policy to include all income not expressly exempted from
the class of taxable income under our laws

Income is also defined as the amount of money coming to a person or corporation within
a specified time, whether as payment for services, interest or profit from investment.
Unless otherwise specified, it means cash or its equivalent. Income may also be thought
of as a flow of the fruits of one’s labor.

Capital, is a fund or property existing at one distinct point of time. Income on the other
hand, denotes a flow of wealth during a definite period of time. While capital is wealth
income is a service of wealth.

Income Tax is a tax on all yearly profits arising from property, profession, trade or
business, or is a tax on a person’s income, emoluments, profits and the like.

Income tax is generally regarded as an excise (privilege) tax. It is not levied upon
persons, property, funds, or profits as such but upon the right of a person to receive
income or profits. Income tax is based on income, either gross or net, realized in one
taxable year.

II. Learning Experiences

A. Clarifying Understanding

GENERAL PROCEDURES IN DETERMINING INCOME TAX

The following steps is a generalized overview of the computational procedure by which

the national income tax is determined. Being familiar with the basic steps of the tax
determination process should help you maintain perspective when studying subsequent
topics.

Step 1 – is to identify the taxpaying party or entity which the tax computation formula
applies. Some legal entities are taxed; others are not. Taxpaying entities include
individuals, most corporations, private partnerships and estates. Unincorporated
businesses such as proprietorships and General Professional Partnerships (GPPs) are
not taxed; rather, their income is taxed directly to the owners of such businesses.
Citizenship and residency are also considered. Other entities such as trusts are treated
in yet another fashion, with their income being taxed to the trusts if retained, but taxed to
the trusts beneficiaries if distributed.

Step 2 – is to determine the taxpayer’s gross income. Appreciation in market value is not
generally regarded as income for tax purposes unless realized through a sale or
exchange. Even if income is realized, the Code provides for several specific types of
income to be excluded that is, not counted for purposes of measuring gross income.

Step 3 – is to determine the expenses and certain other items that can be “deducted” in
computing the taxpayer’s taxable income.

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 Step 4 – is to apply appropriate tax rate to the taxpayer’s taxable income to find the tax
due. For any particular taxpayer, the applicable rate depends on the type of taxpaying
entity, level of income, and in the case of an individual; his or her marital status and
certain other aspects.

Step 5 – is to subtract any applicable tax credit/payments from the taxpayer’s tax due in
finding the tax payable. Unlike deductions that reduce taxable income, tax credit/
payments are a direct offset to the tax itself. These credits are specified for various
situations in numerous section of the code.

Step 6 – is to increase the tax by penalties and interest to obtain the total amount
payable.

Processing Questions

1. What is the difference between taxation and a tax?

______________________________________________________________________
______________________________________________________________________
____________________________________________________
2. What is meant by an inherent limitations on the power of taxation?
______________________________________________________________________
______________________________________________________________________
____________________________________________________
3. Why taxes are considered as a lifeblood of the government?
______________________________________________________________
______________________________________________________________
____

C. Lifelong Learning

1. What is the difference between an inherent limitation and constitutional limitations?

2. Are taxes subject to set-off? Why?

3. Differentiate tax evasion from tax avoidance.

D. Framing Concepts:

Think of at least three kinds of business you know, are they subject to tax?
What kind of tax?

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 SAINT JOSEPH COLLEGE of SINDANGAN INCORPORATED
Sindangan, Zamboanga del Norte, Philippines
Telefax No. (065) 224-2710/ +639121561506

COLLEGE DEPARTMENT

INCOME TAXATION

Name : Section:

Date :

ACTIVITY SHEET NO. 1 – General Principles

Instructions: Encircle the letter of your best answer. ERASURES AND ALTERATIONS
MADE INVALIDATE YOUR ANSWERS. BALL PEN MUST BE USED IN WRITING
YOUR FINAL ANSWERS.

“A poor appetite for good books eventually leads to intellectual malnutrition”

1. The following are similarities of taxation, eminent domain, and police power
except
a. Are necessary attributes of sovereignty
b. Interfere with private rights and property
c. Superior to non-impairment clause
d. Are legislative in character
2. Tax as distinguished from a license fee
a. Non-payment does render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover the cost of regulation
3. All are objectives of taxation except
a. Revenue purpose
b. Regulation
c. Increase of social inequity
d. Encourage economic growth
4. All are essential characteristics of tax, except
a. It is enforced contribution
b. It is generally unlimited in amount
c. It is generally payable in money
d. It is a proportionate burden
5. All are characteristics of sound tax system, 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 non-impairment clause of the constitution
6. Below are characteristics of a sound tax system, except
a. Administrative feasibility and compliance
b. Fiscal adequacy
c. Theoretical justice
d. Uniformity of taxation
7. It refers to a fraudulent act of minimizing tax
a. Ta avoidance
b. Tax evasion
c. Tax minimization
d. Multiple taxation
8. One of the following is not an inherent limitations
a. Taxes must be for public purpose
b. Equality of taxation

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 c. Territoriality rule
d. Rule on double taxation
9. All of the following is territoriality doctrine except
a. Residence of the taxpayer
b. Source of income
c. Situs of the thing or property tax
d. International organization
10. Taxation is equitable in all of the following except
a. Its burden falls on those better to pay
b. It is based on ability to pay
c. It is based on benefits received
d. It is based on uniformity rule
11. The only tax where non-payment of which will not result to imprisonment
a. Excise tax
b. Donor’s tax
c. Personal tax
d. Property tax
12. One of the following is not a major tax under the tax code
a. Income tax
b. Donor’s tax
c. Excise tax
d. Estate tax
13. A demand of proprietorship
a. Tax
b. Special assessment
c. Toll
d. License fee
14. A proportional tax
a. Individual income tax
b. Corporate income tax
c. Donor’s tax
d. Estate tax
15. Imposed to regulate conduct
a. Tax
b. Toll
c. Penalty
d. License fee
16. One of the following is not a source of our tax laws
a. Administrative rulings and opinions
b. Judicial decisions
c. 1987 constitution
d. Expert opinion on taxation
17. The theory that most justifies the necessity of taxation
a. Protection and benefit theory
b. Revenue purpose theory
c. Lifeblood theory
d. Ability to pay theory
18. One of the characteristics of internal revenue laws is that they are
a. Criminal in nature
b. Penal in nature
c. Political in nature
d. Generally prospective in application
19. Our tax laws are
a. Political in nature
b. Civil in nature
c. Penal in nature
d. Social in nature
20. Also known as tax administration
a. Collection of taxes
b. Levying of tax

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 c. Payment of taxes
d. Incidence of tax
21. Taxation is an inherent power because
a. It is the life blood of the government
b. Protection and benefit theory
c. It co-exist with the existence of the state
d. It is exercise for the general welfare of the people

22. Our tax laws are both

a. Progressive and prospective
b. Civil and prospective
c. Penal and regulatory
d. Personal and regulatory
23. The national internal revenue code is also known as
a. Republic Act 9337
b. Republic Act 8424
c. Republic Act 2484
d. Presidential Decree 464
24. Where does the taxing power of the provinces, municipalities and cities precedes
from
a. Constitutional grant
b. Legislative enactment
c. Presidential or executive act
d. Local legislation
25. How will the local government units be able to exercise their taxing powers?
a. By local legislation
b. By the authority conferred by the congress
c. By the issuance of department of finance
d. By the help of BIR
26. The least source of our tax laws
a. Statutes
b. Presidential decrees
c. Revenue regulations
d. Tax treaties and conventions
27. Aspects of taxation except
a. Levying of tas
b. Administration of tax
c. Collection of tax
d. Interpretation of tax
28. Which of the following has no power of taxation
a. Provinces
b. Cities
c. Barangays
d. Barrios
29. Which is the correct and best statement? A tax reform act at any given time
underscores the fact that
a. Taxation is an inherent power of the state
b. Taxation is essentially legislative power
c. Taxation is a power that is very broad
d. The estate can and should adopt progressive taxation
30. Which statement refers to police power as distinguished from taxation
a. It is an inherent power of the state
b. The benefit derived is the protection given by the state
c. It involves the taking of property
d. The amount collected is limited to the cost of regulation

Prepared by: Checked and Approved by:

Arnel J. Alantay, CPA, MBA, CTT, Robinson D. Berhay, CPA, MBA, JD

Subject Teacher Accat Dean

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