COLLEGE OF LAW

UNIVERSITY OF SAN AGUSTIN

Iloilo City

FINAL EXAMINATION IN TAXATION REVIEW

December 27, 2022

a. Why is the power to tax considered inherent in a sovereign State? Explain.

b. May Congress, under the 1987 Constitution, abolish the power to tax of local
governments? Explain.

II

Mr. H decided to sell the house and lot wherein he and his family have lived for the past
10 years, hoping to buy and move to a new house and lot closer to his children’s school.
The contract price of the house and lot is P5 million while the fair market value as
reflected in the records of the City Assessor and the Bureau of Internal Revenue is P4.5
million.
a. Is the sale of the house and lot subject to value added tax? Briefly Explain.
b. What are the requirements in order for him to avail of the exemptions for the capital
gains tax?

III

USA Events and Catering Services (USA) is a Value-Added Tax (VAT)-registered

company which has been engaged in the catering business for the past 10 years. It has
invested a substantial portion of its capital on flat wares, table linens, plates, chairs,
catering equipment, and delivery vans. USA sold its first delivery van, already 10 years
old and idle, to Pinagpala Sand and Gravel Enterprises, a company engaged in the
business of buying and selling gravel and sand. The selling price of the delivery van
was way below its acquisition cost. Is the sale of the delivery van by USA to Pinagpala
Sand and Gravel Enterprises subject to VAT?

IV

Briefly explain the following: (a) Tax pyramid; (b) Tax Benefit Rule; and (c) Tax
Arbitrage Rule

a. Onyoc, an amateur boxer, won in a boxing competition sponsored by the Gold Cup
Boxing Council, a sports association duly accredited by its national sports association,
the Philippine Boxing Association. Onyoc received the amount of One Million Pesos
(P1,000,000.00) as his prize which was donated by Ayala Land Corporation. The BIR
tried to collect income tax on the amount received by Onyoc. Decide.

b. XYZ Corporation decides to close its operations due to continuing losses and to
terminate the services of its employees. Under the Labor Code, employees who are
separated from service for such cause are entitled to a minimum of one-half month pay
for every year of service. The corporation paid the equivalent of one month pay for
every year of service and the cash equivalent of unused vacation and sick leaves as
separation benefits. Are such benefits taxable? Decide with reasons.

VI

A taxpayer received an assessment notice from the BIR on February 3, 2021 covering
taxable year 2018. The following day, he filed a protest, in the form of a request for
reinvestigation, against the assessment and submitted all relevant documents in
support of the protest. On September 11, 2021, the taxpayer, apprehensive because he
had not yet received notice of a decision by the Commissioner on his protest, sought
your advice.

What remedy or remedies are available to the taxpayer? Explain.

VII

a. May the courts enjoin the collection of revenue taxes? Explain briefly your answer.
b. What are the conditions that must be complied with before the Court of Tax Appeals
may suspend the collection of national internal revenue taxes?

VIII.

Under what conditions may the Commissioner of Internal Revenue be authorized to:
Compromise the payment of any internal revenue tax? (2%), and abate or cancel a tax
liability?

IX
The Municipality of St. Joseph caused the publication of Municipal Ordinance No. 2,
Series of 2022 entitled “An Ordinance Levying Customs Duties and Fees on Goods
Coming into the Territorial Jurisdiction of the Municipality” on February 15, 2022 with
effectivity date on March 1, 2022.
a. Is there a ground for opposing said ordinance?
b. What is the proper remedy, if there is any, and the applicable time periods for
challenging the ordinance?

X
a. Discuss the meaning and the implications of the following statements: (1) Taxes are
the lifeblood of the government and their prompt and certain availability is an imperious
need; and (2) Tax exemptions are strictly construed against the taxpayer.
END OF EXAMINATION