Chapter 2 – Taxes, Tax Laws and Tax Administration

Exercise Drill No. 1

Identify the type of tax that is described by the following:

1. A consumption tax collected by non-VAT
businesses
2. Tax on gratuitous transfer of property by
living donor
3. Tax that decreases in rates as the amount or
value of the tax object increases
4. Tax collected upon persons who are not the
statutory taxpayers
5. Tax that is imposed based on the value of the
tax object
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
15. Tax upon performance of an act or enjoyment
of a privilege

Exercise Drill No. 2

Identify which item is described by the following:

1. It refers to all income collections of the
government.
2. It is an imposition for the support of the
government.
3. It is imposed upon land adjacent to public
improvements.
4. It is imposed on imported and exported
commodities.
5. It is a charge imposed prior to the
commencement of business or exercise of a
profession.
6. It is a post-activity rather than a pre-
activity imposition.
7. It is subject to compensation or set-off.

8. It is a charge for the use of other’s property.

Chapter 2 – Taxes, Tax Laws and Tax Administration

9. It is an imposition intended to discourage an

act.
10. It arises from contracts rather than from
law.

Exercise Drill No. 3

Indicate the criteria for the selection of large taxpayer for each of the following:
As to 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. 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.

2. All are ad valorem taxes, except one. Select the exception.

a. Poll tax c. Real property tax.
b. Estate tax d. Capital gains tax on real
property capital asset

3. Taxation power can be used to destroy

a. as a revenue measure. c. as an implement of police
power.
b. even if the tax is invalid. d. when the State is in dire
need of funds.

4. Which is not a characteristic of tax?

a. It is an enforced contribution.
b. It is generally payable in money.
c. It is subject to assignment.
Chapter 2 – Taxes, Tax Laws and Tax Administration

d. It is levied by the law-making body of the State having

jurisdiction.

5. Which of the following is a local tax?

a. Value added tax c. Documentary stamp tax
b. Real property tax d. Other percentage taxes

6. Which is not a source of tax law?

a. CHED regulations c. judicial decisions
b. BIR rulings d. Constitution

7. Tax as to purpose is classified as

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

8. Tax as to incidence is classified as

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

9. Tax as to source is classified as

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

10. Which is not a nature of tax?

a. enforced proportional contribution
b. enforced within the territorial jurisdiction of the taxing
authority
c. levied by the lawmaking body
d. generally payable in kind

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.

12. Which is a local tax?

a. Donor’s tax c. Documentary stamp tax
b. Professional tax d. Excise tax

13. As to subject matter, taxes do not include

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

14. A tax that is imposed upon the performance of an act, the

enjoyment of a privilege or the engagement in a profession is known
as
a. income tax. c. excise tax.
b. license. d. transfer tax.

15. Which is a national tax?

a. Real property tax c. Income tax
b. Community tax d. Professional tax
Chapter 2 – Taxes, Tax Laws and Tax Administration

16. Which of the following distinguishes license from tax?

a. Unlimited in imposition c. Does not renders business
illegal
b. Imposed for revenue d. Pre-activity in application

17. Which is correct?

a. Taxes may be subject to compensation.
b. Toll, 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.

18. Tax as to determination of amount is classified as

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

19. Tax classifications as to object do not include

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

20. Tax must not violate constitutional and inherent

limitation.
B. Tax must be uniform 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?
a. All of the above c. None, except F
b. All except F d. None of the above

21. To limit the production of an environmentally harmful

commodity, Congress passed a law subjecting the sales of an
environmentally unfriendly commodity to a P10/kilo tax but a 5% tax
is imposed on sales exceeding P100,000.

Which is incorrect?
a. The tax is a combination of an ad valorem tax and specific tax.
b. This is an example of a regulatory tax.
c. This is a national tax.
d. This is a local tax.

22. Which is not an excise tax?

a. Income tax c. Estate tax
b. Community tax d. Occupation tax

23. Which is an indirect tax?

a. Value added tax c. Income tax
b. Donor’s tax d. Real property tax

24. Which is not an ad valorem tax?

a. Real property tax c. Income tax
b. Excise tax on cigar d. Donor’s tax
Chapter 2 – Taxes, Tax Laws and Tax Administration

25. A tax that is imposed based on per unit or per head basis is
known as
a. Proportional tax c. Ad valorem tax
b. Specific tax d. Progressive tax

26. Tax as to rates excludes

a. Specific tax c. Mixed tax
b. Progressive tax d. Proportional tax

27. Mr. A has a tax obligation to the government amounting to

P80,000. Since he is leaving the country, he entered into a contract
with Mr. B wherein Mr. B shall pay the P80,000 tax in his behalf. On
due date, Mr. B failed to pay the tax. The BIR sent a letter or
demand to Mr. A which he refused to pay.

Which of the following statements is correct?

a. The government cannot enforce collection charges against Mr. A
since he has validly transferred his obligations to B under the
contract.
b. The government can no longer run after Mr. A because he is already
outside the Philippine territory.
c. The government should wait until Mr. B becomes solvent again.
d. The government should force Mr. A to pay because taxes are non-
assignable.

28. Philippine tax laws are, by nature,

a. political. c. political and civil.
b. civil. d. penal and civil.

29. Motor vehicles tax is an example of

a. Property tax c. Income tax
b. Privilege tax d. Indirect tax

30. Which of the following 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
after approval by congress.
d. It is in the public interest that errors of public officials
should bind the government to limit government abuse.

31. Tax rulings are issued by the

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

32. Which of the following is limited in application?

a. Tax laws c. Tax treaties
b. Revenue Regulations d. BIR Ruling

33. Which is not a source of tax law?

a. Judicial decisions c. Opinions of tax experts
b. Revenue Regulations d. Tax treaties and ordinances
Chapter 2 – Taxes, Tax Laws and Tax Administration

34. Which issues revenue regulations?

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

35. Which is not an element of tax?

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

36. 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. Tax as to object includes

a. Personal tax c. Excise tax
b. Property tax d. All of these

39. Which is not an indirect tax?

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

40. A tax that cannot be avoided is

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

41. Statement 1: Taxes are voluntary contributions to the

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

42. Which is an indirect tax?

a. Other percentage tax c. Donor’s tax
b. Income tax d. Estate tax

43. Income tax is not a/an

a. Ad valorem tax c. Revenue tax
b. Direct tax d. Property tax

44. A transfer tax is not a/an

a. Regressive tax c. National tax
b. Ad valorem tax d. Excise tax

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

a. Tax law geared to phase out a deficit balance of the government.
Chapter 2 – Taxes, Tax Laws and Tax Administration

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.

Multiple Choice - Theory: Part 2

1. Which is not an excise tax?
a. Income tax c. Personal tax
b. Business tax d. Transfer tax

2. Which of the following do not relate to tax?

a. Does not render business illegal when not paid
b. Arises from law rather than from contracts
c. Intended to cover cost of regulations
d. Intended for public purpose

3. A levy from a property which derives some special benefit from public
improvement is
a. Special assessment c. Taxation
b. Eminent domain d. Toll

4. A. Government revenue may come 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

5. 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 imposition.

6. Which of the following distinguishes license from tax?

a. It is imposed under taxation power.
b. It is a charge for other's property.
c. Non-compliance to it will render businesses illegal.
d. It is generally payable in money.

7. The amount imposed is based on the value of the property

a. Eminent domain c. Toll
b. License d. Special assessment

8. Which is intended to regulate conduct?

a. Penalty c. Police power
b. License d. Toll

9. Toll exhibits all of the following characteristics, except one. Which

is the exception?
a. Demand of ownership
b. Compensation for the use of another's property
c. Maybe imposed by private individuals
d. Levied for the support of the government

10. Which of the following is incorrect?

a. The collected tax is referred to as revenue.
Chapter 2 – Taxes, Tax Laws and Tax Administration

b. Tax is the sole source of government revenue.

c. License is imposed before commencement of a business or
profession.
d. Debt can be subject to compensation or set-off.

11. Debt as compared to tax

a. It is a demand of ownership.
b. It is not assignable.
c. It will not cause imprisonment when not paid.
d. It is generally payable in money.

12. Select the incorrect statement.

a. Tax may be unlimited in amount.
b. Non-payment of license renders the business illegal.
c. Special assessment is not a liability of the person owning the
property
d. Special assessment can be imposed on building and other real right
attaching
or pertaining to land.

13. Tax as to subject matter does not include

a. Real property tax c. Excise tax
b. Personal tax d. Regulatory tax

14. What distinguishes debt from tax?

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

Multiple Choice - Theory: Part 3

1. 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.

2. 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. To prescribe assessed value of real properties
d. To inquire into bank deposits only under certain cases

3. The principles of a sound tax system exclude

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

4. Which of the following best describes the effect of tax condonation?

a. It only covers the unpaid balance of a tax liability.
b. It is conditional on the taxpayer paying some portion of the
unpaid tax.
c. It generally applies to all taxpayers.
d. All of these

5. Which is not an application of a principle of a sound tax system?

a. Taxes should adjust based on government needs.
b. Taxation should be progressive.
c. Taxation should encourage convenient compliance.
Chapter 2 – Taxes, Tax Laws and Tax Administration

d. None of these

6. By which principle of a sound tax system is the elasticity in tax

rates is justified?
a. Theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. All of these

7. Violation of this principle will make a tax 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 to select 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 one of the following is the BIR not empowered to do?

a. Assess national taxes
b. Collect income, business and transfer taxes
c. Assess and collect local taxes
d. Enforce forfeitures, penalties and fines

10. Which principle demands that tax should be just, reasonable, and
fair?
a. Theoretical justice c. Administrative feasibility
b. Fiscal adequacy d. Economic consistency

11. Which among the following powers of the Commissioner of Internal

Revenue can
be delegated?
a. The power to conduct inventory surveillance
b. The power to recommend promulgation of revenue regulations.
c. The power to issue rulings of first impression.
d. The power to reverse a ruling, amend or modify an existing ruling.

12. The Commissioner of Internal Revenue is not empowered to

a. Make or amend a tax return for and in behalf of the taxpayer.
b. Obtain information and to summon, examine, and take testimony of
persons
to effect tax collections.
c. Compromise tax liabilities of taxpayers.
d. Grant amnesty for erring taxpayers.

13. Which is true with tax amnesty?

a. It is unconditional
b. It covers both criminal and civil liability of the taxpayer.
c. It applies for past and future non-compliance.
d. All of these

14. Which of the following may tax exemption come from?

a. Contract c. Law
b. Constitution d. All of these

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

Chapter 2 – Taxes, Tax Laws and Tax Administration

a. Contract c. Law
b. Constitution d. None of these

16. Select the incorrect statement regarding tax amnesty and

condonation.
a. In tax amnesty, violators are required to pay a portion of the tax
assessed.
b. When the remaining unpaid portion of the tax is condoned, the
taxpayer cannot ask for refund for the balance 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,
taxpayer can ask for refund for the paid portion of the tax.

17. Which of the following is a power of the Commissioner of Internal

Revenue?
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 laws

18. The Commissioner of Internal Revenue can delegate the power to

a. refund or credit internal revenue tax.
b. recommend rules and regulations to the Secretary of Finance.
c. assign and re-assign revenue officer to establishments of
excisable articles.
d. compromise or abate tax liability.

19. The BIR is under the supervision of

a. the Bureau of Customs.
b. the President.
20. Who is not a large taxpayer?
a. Mining companies
capital
b. Listed companies
c. the Department of Finance
d. Congress.
c. Banks with P120M authorized
d. None of these

21. In terms of financial measures, which of the following threshold

for qualification as large taxpayers is incorrect?
a. Gross receipts exceeding P1B
b. Net worth exceeding P300M
c. Gross purchases exceeding P800M
d. Gross sales exceeding P1.5B

22. As to tax payments measures, which of the following threshold for

the qualification as large taxpayer is incorrect?
a. Annual income tax payments of P1M
b. Annual value added tax payments of P1M
c. Quarterly percentage tax payments of P200,000
d. Annual documentary stamp tax of P1M