Fundamental Principles of Taxation

1. The State, having sovereignty can enforce contribution (tax) upon its citizens even without a
specific provision in the Constitution authorizing it. Which of the following will justify the
foregoing statement?
Statement 1: It is so because the State has the supreme power to command and enforce
obedience to its will from the people within its jurisdiction.
Statement 2: 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.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
2. Which statement is wrong?
a. The power of taxation may be exercised by the government, its political subdivisions, and
public utilities.
b. Generally, there is no limit on the amount of tax that may be imposed.
c. The money contributed as tax becomes part of public funds
d. The power to tax is subject to inherent and constitutional limitations
3. They exist independent of the constitution being fundamental power of the state, except
a. Power of taxation
b. Police Power
c. Power of eminent domain
d. Power of recall
4. Statement 1: The constitution is the source of the State’s taxing power.
Statement 2: The police power of the government may be exercised through taxation
Statement 3: The constitution cannot take away inherent powers of the State but may only
prescribe its limitations.
Statement 4: No laws are necessary to confer the inherent powers of the State upon any
government exercising sovereignty.
5. Which of the following statements are true?
a. The power of taxation and eminent domain are both exercisable only by the government
and its political subdivision.
b. In police power, the property taken is preserved for public use.
c. The power of eminent domain is created by the constitution.
d. The exercise of the power of eminent domain and police power can be expressly delegated
to the local government units by the law-making body.
6. Statement 1: The amount of money raised for the government in the exercise of its power to tax
and police power is based on the needs of the government.
Statement 2: The amount of money raised for the government in the exercise of its power of
eminent domain is based on the cost of processing the transfer of property from private entities
and/or individuals to the government.
a. Only Statement 1 is correct
b. Only Statement 2 is correct
 c. Both Statements are correct
d. Both Statements are incorrect
7. Statement 1: Police power of taxation are exercised primarily by the legislature but not eminent
domain.
Statement 2: Taxation and eminent domain interferes with private rights and property but not
with the police power.
a. Only Statement 1 is correct
b. Only Statement 2 is correct
c. Both Statements are correct
d. Both Statements are incorrect
8. The existence of the government is a necessity and that the state has the right to compel all
individuals and property within its limit to contribute
a. Basis of taxation
b. Situs of taxation
c. Scope of taxation
d. Theory of taxation
9. The reciprocal duties of support and protection between people and the government
a. Basis of taxation
b. Situs of Taxation
c. Scope of Taxation
d. Theory of Taxation
10. The principal purpose of taxation is
a. To encourage the growth of home industries through the proper use of tax incentives
b. To implement the police power of the state
c. To reduce excessive inequalities of wealth
d. To raise revenue for government needs
11. After having been informed that most of the massage parlors in the city are being used as fronts
for prostitution, the Sanguniang Panglungsod of Manila passed a tax ordinance subjecting
massage parlors within its jurisdiction to such “onerous taxes” that leave them no other
alternative but to stop operating. The passage of the ordinance is a valid exercise of
a. Taxation
b. Police power
c. Eminent Domain
d. Police power and power of taxation
12. Statement 1: A provision on taxation in the Philippine Constitution is a grant of power
Statement 2: The power to tax includes the power to destroy
Statement 3: Sumptuary purpose of taxation is to raise funds for the government
a. One Statement is true
b. Two statements are true
c. All Statements are True
d. All Statements are False
13. A tax must be imposed for a public purpose. Which of the following is not a public purpose?
a. National defense
b. Public education
 c. Improvement of sugar industry
d. None of the choices
14. The following are the aspect of taxation
I – Levying or imposition of the tax on persons, property or excises
II – Collection of taxes already levied
III – Sufficiency of governments sources to satisfy its expenditure

a. I, II and III
b. I and II only
c. I and III only
d. II and III only
15. All of the following are legislative aspect of taxation except
a. Selection of the object or subject to tax
b. Valuation of property for taxation
c. Fixing of tax rates
d. Prescribing the general rules of taxation
16. All of the following are administrative functions of taxation, except
a. Selection of object of tax
b. Equalization of assessment
c. Valuation of property for taxation
d. Collection of taxes
17. The commissioner of Internal Revenue is granted certain powers under the Tax code. Which of
the following is not a power granted to the commissioner under the Code?
a. Interpret tax laws and decide tax cases
b. Issue summons and subpoena
c. Enact tax laws and make amendments
d. Make assessments and prescribe additional requirements
18. Where does taxing power of the provinces, municipalities and cities precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or executive act
d. Local legislation
19. When the power to tax is delegated to the local government
a. Only the local executive can exercise the power
b. Only the legislative branch of the local government can exercise the power
c. The local executive and the legislative branch of the local government can exercise the
power
d. Neither the local executive not the legislative branch of the local government can exercise
the power.
20. The Congress, after much public hearing and consultations with various sectors of society, came
to the conclusion that it will be good for the country to have only one system of taxation by
centralizing the imposition and collection of all taxes in the national government. Accordingly,
passed law that would abolish the taxing power of all locals government units. Would such a law
be valid under the present constitution?
 I. Yes, the law centralizing the imposition and collection of all taxes in the national
government would not contravene the constitution as long as a new law is
enacted for the common good of the people.
II. No, because under the present constitution, each local government unit shall
have the power to create their own sources of revenue and to levy taxes, fees,
and charges subject to such guidelines and limitations as Congress may provide
consistent with the basic policy of local autonomy.
III. No. It is clear that Congress can only give the guidelines and limitations on the
exercise by the local governments of the power to tax but what was granted by
the fundamental law cannot be withdrawn by the Congress.
a. I only
b. II and III only
c. I, II and III
d. None of the above
21. The City council passed a tax ordinance imposing an occupation tax or profession or occupation
of an “industrial engineer”. GJ is the only person with such occupation in the city. Which of the
following is correct?
a. GJ can successfully challenge the validity of the ordinance being discriminatory since he is
the only one adversely affected.
b. The ordinance violates the constitutional rule of equality in taxation.
c. The ordinance is a “class legislation” since it does not subject to occupation tax the other
industrial engineers.
d. The ordinance is valid exercise of the council’s power to enact tax ordinance to raise
revenue under the Local Government Code.
22. One of the following is not a characteristic or an element of tax.
a. It is levied by the legislature
b. It is payable in money or in kind
c. It is proportionate in character
d. It is enforced contribution
23. Under the basic principle of a sound tax system, the government should not incur a deficit:
a. Theoretical Justice
b. Administrative feasibility
c. Fiscal Adequacy
d. None of the above
24. The basic principle of a sound tax system, where, “Taxes must be based on the taxpayer’s ability
to pay” is called:
a. Equality in taxation
b. Ability to pay theory
c. Theoretical Justice
d. Equity in taxation
25. The tax must be capable of convenient, just and effective administration
a. Theoretical Justice
b. Fiscal Adequacy
c. Administrative feasibility
 d. Rule of apportionment
26. The following constitute double taxation, except one
a. Both taxes are imposed in the same amount
b. Both taxes are levied for the same purpose
c. Both taxes are imposed by the same taxing authority
d. Both taxes are imposed upon the same person
27. Statement 1: Inherent limitations are the natural restrictions to safeguard and ensure that the
power of taxation shall be exercised by the government only for the betterment of the people
whose interest should be served, enhanced and protected.
Statement 2:Constitutional limitations are provisions of the fundamental law of the land that
restrict the supreme, plenary, unlimited and comprehensive exercised by the State of its
inherent power to tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
28. Which of the following is incorrect description of taxation?
a. Legislative and inherent for the existence of the government
b. Necessary and for the public use
c. Supreme and absolute power of the State
d. The strongest of all inherent power of the state
29. It literally means “place of taxation” the country that has the power and jurisdiction to levy and
collect the tax
a. Basis of taxation
b. Situs of taxation
c. Scope of taxation
d. Theory of Taxation
30. Statement 1: A revenue regulation must not be contrary to the provision of the law that it
implement
Statement 2: A revenue regulation cannot expand the provision of the law that it implements by
imposing a penalty when the law that authorizes the revenue regulations does not impose a
penalty.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect