General Principles of taxation

1. After having been informed that most of the massage parlors in the city are being used as fronts for prostitution, the
Sangguniang Panlungsod of Manila passed a tax ordinance subjecting massage parlors within its jurisdiction to such
onerous taxes that leave them no alternative but to stop operating. The passage of the ordinance is a valid exercise
of
a. Taxation b. Police Power c. Eminent domain d. All three
e. Police Power and Taxation only e. Taxation and eminent domain

2. A tax maybe imposed for a public purpose. Which of the following is not a public purpose?
a. National Defense c. Public Education
b. Improvement of Sugar Industry d. None of the mentioned

3. Fixing the tax rate to be imposed is best described as a (an):

a. Tax administration aspect c. Aspect of taxation which could be delegated
b. Tax legislative function d. Function that could be exercised by the executive branch

4. All of the following are administrative functions of taxation except

a. Selection of object to tax c. Equalization of assessment
b. Valuation of property for taxation d. collection of taxes

5. Which of the following is correct?

a. The BIR Commissioner has the power to interpret the provision of the tax code without a need of review by the
DOF Secretary.
b. The BIR has the authority to prescribe additional procedural/documentary requirements for taxpayers.
c. The BIR shall have commissioners and a deputy commissioner.
d. The BIR Commissioner can delegate the power to abate tax liabilities

6. Where does taxing power of the provinces, municipalities and cities precede from?
a. Constitutional Grant c. Legislative enactment
b. Presidential decree or Executive act d. Local Legislation

7. The Congress enacted a new law, known as Expanded Value Added Tax law. An association of taxpayers questions
the constitutionality of this law on the ground that it did not originate exclusively in the House of Representatives as
required by the constitution because it is in fact the result of the consolidation of two distinct bills, one from the
House of Representatives and the other from the Senate. Is the VAT law unconstitutional?
a. Yes because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local
application and private bills shall originate exclusively in the House of Representatives.
b. Yes, because the senate has no authority to propose or concur any amendments with the revenue or tax bill
proposed by the house of representatives.
c. No, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local
application and private bills shall be initiated by the Senate.
d. No, because it is not the law but the revenue bill which is required by the constitution to originate exclusively in
the house of representatives and insisting otherwise would violate the coequality of legislative power the Congress
and the senate.

8. Which of the following statement is not correct?

(a) Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the state;
(b) The state can have the power of taxation even if the Constitution does not expressly give it the power to tax;
(c) For the exercise of the power of taxation, the state can tax anything at anytime;
(d) The provisions of taxation in the Philippine Constitution are grants of power and not limitations on taxing
powers.

9. In case of conflict between tax laws and generally accepted accounting principles (GAAP):
(a) Both tax laws and GAAP should be enforced.
(b) GAAP shall prevail over tax laws.
(c) Tax laws shall prevail over GAAP.
(d) The issue shall be resolved by the courts

10. Statement 1: A license fee at an amount at an amount that is more than necessary for regulation is a tax, and hence
may be imposed only on a clear authority under the law to impose tax.
Statement 2: A tax levied for a special purpose (as road tax), which is spent for purposes other than those stated in
the law for its use, If involving a huge amount, may tantamount to the crime to plunder.
(a) True,true; (b) False, false; (c) True, false (d) False, True;
11. Which statement is wrong?
(a) A tax is a demand of sovereignty;
(b) A toll is demand of owner ship;
(c) A special assessment is a tax;
(d) Customs duty is a tax.

12. Statement 1: the value-added tax is a property tax;

Statement 2: the estate tax is a direct tax.
(a) True, true; (b) False, false; (c) True, false (d) False, True.

13. Which of the statement is false?

(a) A tax is a demand of sovereignty while a toll is a demand of property ownership;
(b) Non-payment of a tax does not make the activity tax unlawful;
(c) A grant of police power to a unit of local government carries with it a grant of the power to tax.
(d) Customs duty is a tax.

Tax Remedies
14. First statement: In cases where a return is filed beyond the period prescribed by law, the three (3)-year period shall
be countered from the day the return was filed.
Second statement:A return filed before the last day prescribed by law for the filing thereof shall be considered as
filed on such last day.
a. Both statements are correct.
b. Both statements are incorrect.
c. Only the first statement is correct.
d. Only the second statement is correct.

15. Which of the following cases may not be compromised?

a. Delinquent accounts
b. Cases under administrative protests after issuance of the Final Notice of Assessment to the taxpayer still
pending in the BIR
c. Civil tax cases being disputed before the courts
d. Criminal violations involving criminal tax fraud.

16. What is the technical term for a tax assessment made by an authorized Revenue Officer (RO) without the benefit of
complete or partial audit, in light of the RO’s belief that the assessment and collection of a deficiency tax will be
jeopardized by delay caused by the taxpayer’s failure to comply with audit and investigation requirements to
present his books of accounts and/or pertinent records, or substantiate all or any of the deductions, exemptions or
credits claimed in his return?
a. Jeopardy assessment
b. Arbitrary assessment
c. Assessment issued on or before January 1, 1998 where demand notice allegedly failed to comply with
formalities prescribed in the Tax Code
d. Assessment made based on “Best Evidence Obtainable Rule”

17. The following are instances when penalties and/or interest imposed on the taxpayer may be abated or cancelled on
the ground that the imposition thereof is unjust and excessive, except when the:
a. filing of the return or payment of the tax is made at the wrong venue.
b. taxpayer’s mistake in payment of his tax is due to erroneous written official advice of a revenue officer.
c. assessment is brought about or a result of the taxpayer’s non-compliance with the law due to a difficult
interpretation of the said law.
d. taxpayer is declared insolvent or bankrupt.

18. Which of the following statements is incorrect?

a. A Tax Credit Certificate validly issued under the provisions of the Tax Code may be applied against any internal
revenue tax, excluding withholding taxes, for which the taxpayer is directly liable.
b. The original copy of the Tax Credit Certificate showing a creditable balance is to be surrendered to the
appropriate revenue officer for verification and cancellation.
c. In no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for
which no actual payment was made.
d. None of the choices.

19. Bam paid his income tax liability for 2017 on April 15, 2018. It was found out later on June 30, 2018 that he overpaid
by more than 100,000. The last day to file a claim for tax refund is?
 a. April 15, 2020 b. April 15, 2021 c. June 30, 2015 d. June 30, 2016

20. Which of the following offer to compromise a delinquent account shall be accepted on the ground of reasonable
doubt as to the validity of the assessment?
a. The taxpayer failed to file an administrative protest on account of the alleged failure to receive notice of
assessment
b. The taxpayer failed to file a request for reinvestigation or reconsideration within 30 days from receipt of final
assessment notice
c. The taxpayer failed to elevate to the Court of Tax Appeals (CTA) an adverse decision of the Commissioner of
Internal Revenue
d. All of the choice

Situation # 1
BIR, after investigating Mr. X’s internal revenue taxes for taxable year 2015, has found him to be liable for income taxes
in the amount of P1,000,000, exclusive of interest and penalties. The BIR proceeds to issue a Formal Assessment Notice
(FAN), requiring Mr. X to pay the deficiency taxes on or before June 30, 2017. However, it was only on December 31,
2017 that Mr. X paid the tax, plus interest.
1. How much is the surcharge that should be charged to Mr. X?
a. 250,000.00 b. 500,000.00 c. 625,000 d. zero
2. How much is the deficiency interest that must be paid by X on June 30, 2017 if ever?
a. 342,465.76 b. 241,643.84 c. 145,315.07 d. 251,212.31
3. How much is the delinquency interest that must be paid on December 31, 2017?
a. 103,215.09 b. 90,234.23 c. 150,390.39 d. 100,821.92
4. How much is the total amount that must be paid by X on June 30, 2017?
a. 1,491,643.84 b. 1,742,856.15 c. 1,498, 530.16 d. 1,395,315.07
5. How much is the total amount that must be paid by X on December 31, 2017?
a. 1,491,643.84 b. 1,742,856.15 c. 1,498, 530.16 d. 1,395,315.07

Situation # 2
Let us assume that Mr. X’s deficiency income tax for taxable year 2018 is in the amount of P1,000,000, exclusive of
interest and penalties. The BIR proceeds to issue a FAN, requiring Mr. X to pay the deficiency taxes on or before June 30,
2020. However, it was only on February 10, 2021 that Mr. X paid the tax, plus interest:
6. The correct amount of surcharge, if any, shall be:
a. 120,000 b. 250,000 c. 500,000 d. nil
7. The correct amount of deficiency interest (June 30, 2020- February 10, 2021) shall be:
a. 103,215.09 b. 145,315.07 c. 248,530.16 d. nil
8. The correct amount of delinquency interest on June 30, 2020 if ever shall be:
a. 103,215.09 b. 145,315.07 c. zero d. 1,498,530.16
9. The total amount due if paid on June 30,2020 shall be:
a. 1,395,315.07 b. 145,315.07 c. 1,248,530.16 d. 1,498,530.16

10. In which of the following cases shall the compromise be subject to the approval of the Evaluation Board which shall
be composed of the Commissioner and the four (4) Deputy Commissioners?
I- Where the basic tax involved exceeds One million pesos (P1,000,000)
II- Where the settlement offered is less than the prescribed minimum rates
a. Neither I nor II
b. Both I and II
c. I only
d. II only