F-ACAD-22B

PRITAX – Principles of Taxation

Midterm Examination
Summer; AY 2020-2021

NAME: Date:

Professor: Section: Score:

PART I. MULTIPLE CHOICE

Choose the best answer. Write the letter of your answer in the following questions in the answer
sheet provided. WRITE YOUR ANSWERS IN CAPITAL LETTER.

1. Which statement refers to police power as distinguished from taxation?

A. It involves the taking of property by the government.
B. The amount imposed has no limit.
C. It can only be imposed on specific property or properties.
D. The amount imposed depends on whether the activity is useful or not.

2. Which of the following may not raise money for the government?
A. Land bank of the Philippines, a State-owned Financial Institution
B. Power of eminent domain
C. Police power
D. Power of taxation

3. In this power of the State, the person who is parting with his money or property is presumed
to receive a benefit.
A. Police power
B. Eminent domain
C. Taxation
D. Power Outage

4. The following are common to the inherent power of taxation, power of eminent domain and
police power, except for which of the following?
A. They affect all persons or the public.
B. They are legislative in implementation.
C. They interfere with private rights and property.
D. They are necessary attributes of sovereignty.

5. Under this basic principle of a sound tax system, the government should not incur a deficit.
A. Debt restructuring
B. Theoretical justice
C. Administrative feasibility
D. Fiscal adequacy

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6. Statement 1: A taxpayer has a right to question illegal expenditures of public funds.

Statement 2: A tax is based on law while debt is based on contract.
A. Only the first statement is correct.
B. Only the second statement is correct.
C. Both statements are correct.
D. Both statements are incorrect.

7. Statement 1: Imposition of taxes is a legislative act.

Statement 2: Collection of taxes is an administrative act.
A. Only the first statement is correct.
B. Only the second statement is correct.
C. Both statements are correct.
D. Both statements are incorrect.

8. What basic principle of a sound tax system is met when Congress evolves a progressive
system of taxation as mandated in the Constitution?
A. Theoretical justice
B. Fiscal adequacy
C. Administrative feasibility
D. Symbiotic doctrine

9. Which of the following is not a basic principle of a sound taxation system?

A. It must be sufficient to meet government expenditures and other public needs
B. It should be capable of being effectively enforced.
C. It must be a progressive tax.
D. It should be exercised to promote public welfare.

10. Which one of the following is not a characteristic of the State's power to tax?
A. It is subject to constitutional and inherent limitations.
B. It is inherent in sovereignty.
C. It based on the ability to pay.
D. It is legislative in character.

11. Statement 1: The power of taxation is inherent in sovereignty being essential to the
existence of every government. Hence, even if not mentioned in the Constitution, the State
can still exercise the power.
Statement 2: Taxation is essentially a legislative function. Even in the absence of any
constitutional provision, taxation power falls on Congress as part of the general power of
lawmaking.
A. Only the first statement is correct.
B. Only the second statement is correct.
C. Both statements are correct.
D. Both statements are incorrect.

12. Which of the following statements is not correct?

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A. The State can have the power of taxation even if the Constitution does not expressly
give it the power to tax.
B. For the exercise of the power of taxation, the state can tax anything at any time.
C. Taxes may be imposed to raise revenue or to provide ~incentives or disincentives for
certain activities within the State.
D. The provisions of taxation in the Philippine Constitution are grants of power and not
limitations on the taxing power.

13. Which is the best answer? A tax reform at any given time underscores the fact that:
A. The State can and should adopt progressive taxation.
B. Taxation is an inherent power of the state.
C. Taxation is essentially a legislative power.
D. Taxation is a power that is very broad.

14. The government's ability to serve the people depends on taxation. Since taxes are collected,
for their benefit, taxes may be imposed even in the absence of constitutional grants and
collection of taxes cannot be stopped.
A. Ability to pay
B. Government is a necessity theory
C. Benefits received theory
D. Lifeblood theory

15. One of the following is not a manifestation of lifeblood theory.

A. Equal protection of law
B. No injunction to enjoin tax collection
C. Right to select objects and subjects of taxation
D. Imposition of tax even in the absence of constitutional grant

16. That taxation is based on the principle of reciprocal duties of protection and support
between the State and its inhabitants.
A. Lifeblood theory
B. Ability to pay
C. Government is a necessity theory
D. Benefits received theory

17. First statement: In the exercise of the power of taxation, the State can tax anything, at any
time, and at any amount.
Second statement: Taxes may be imposed not only to raise revenue, but also to provide
incentives and disincentives to certain activities within the State.
A. The first statement is incorrect, the second is correct
B. The first statement is correct, the second is incorrect
C. Both statements are correct
D. Both statements are incorrect

18. First statement: Jurisdiction is the reason why citizens must provide support to the State so
the latter could continue to give protection.

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Second statement: Symbiotic relation is the reason why the government could impose taxes
on the income of the resident citizens derived from sources outside the Philippines.
A. Both statements are correct
B. Both statements are incorrect
C. Only the first statement is correct
D. Only the second statement is correct

19. The City of Sto. Tomas passed an ordinance imposing a license fee on all motor vehicles
entering the city between the hours of 9:00a.m. and 5:00p.m. The purpose of the ordinance
is to regulate the conduct of drivers for public welfare. Owners of motor vehicles assailed the
validity of the law. Is the law valid?
A. No, because it is not imposed by any other municipality
B. No, because it discriminates against those who are not able to pay the license fee,
particularly, the low-salaried employees, and is, therefore, class legislation.
C. Yes, because it was issued as a source of revenue.
D. Yes, because it is a legitimate exercise of police power.

20. The President of the Philippines and the Prime Minister of Japan entered into an executive
agreement in respect of a loan facility to the Philippines from Japan whereby it was
stipulated that interest on loans granted by private Japanese financial institutions in the
Philippines shall not be subject to Philippine income tax laws. What basic characteristic of
taxation has been violated by this agreement?
A. Theoretical justice
B. Inherent limitation Inherent limitation
C. Administrative feasibility
D. Legislative in character

21. The proceeds of the tax must be used for the support of the State or for some recognized
objects of government or directly promote the welfare of the community.
A. Exemption of government entities from taxation.
B. The power to tax is limited to the territorial jurisdiction of the taxing government.
C. There should be no improper delegation of the taxing power.
D. The tax imposed should be for public purpose.

22. One of the following is not a public purpose.

A. National defense
B. Improving sugar industry
C. Building of churches common to all religions
D. Retirement benefits of public officials

23. Is it possible for the tax to be used partly for public and partly private without violating the
limitation that a tax must be for public purpose?
A. No. The purpose to be accomplished by taxation need to be exclusively public. To
benefit private individuals will be tantamount to deprivation of property of those who
paid the tax without due process.
B. No. The purpose shall either be public or private. It cannot be both.

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C. Yes. The purpose to be accomplished by taxation need not be exclusively public.

Although private individuals are directly benefited (e.g. giving aid to flood victims),
the tax will still be valid provided such benefit is only incidental.
D. Yes. The purpose is not important as long as the use of the tax can be property
accounted for.

24. The principle of separation of powers ordains that each of the three branches of the
government has exclusive cognizance of and is supreme in matters falling within its own
constitutionally allocated sphere. This statement suggests that:
A. Exemption of government entities from taxation.
B. The power to tax is limited to the territorial jurisdiction of the taxing government.
C. The tax imposed should be for public purpose.
D. There should be no improper delegation of the taxing power.

25. Being legislative in nature, the power to tax may not be delegated, except:
A. When allowed by the Constitution.
B. When delegation relates merely to administrative implementation that may call for
some degree of discretionary powers under a set of sufficient standards expressed
by law or implied from the policy and purpose of the Act.
C. To local government (to be exercised by the local legislative bodies thereof) or
political subdivisions.
D. All of the choices.

26. The place or authority that has the right to impose and collect taxes.
A. Situs of taxation
B. Scope of taxation
C. Sources of taxable income
D. None of the choices

27. A fundamental rule in taxation is that, the property of one country may not be taxed by
another country. This is known as:
A. International inhibition
B. Reciprocity
C. International comity
D. Internationallaw

28. First statement: Our Constitution does not prohibit double taxation.
Second statement: If double taxation occurs, the taxpayer may seek relief under the
uniformity rule or equal protection guarantee.
A. Both statements are wrong
B. Both statements are correct
C. 1st statement is correct, 2nd statement is wrong
D. 1st statement is wrong, 2nd statement is correct

29. (Phil. CPA) Which of the following is not an element of double taxation?
A. Same subject matter
B. Two taxes
C. Same amount
D. Same year
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30. Compliance with procedural requirements must be followed strictly to avoid collision course
between the state's power to tax and the individual's recognized rights.
A. Non-impairment of obligation of contracts
B. Non-infringement of religious freedom
C. Equity in taxation
D. Due process of law

31. In 2020, Mr. Rody, a resident Filipino citizen, received dividend income from China. – Based
corporation which owns a chain of Chinese restaurant in the Wuhan, China. Under the
Philippine Taxation, the dividend is subject to:
A. Value added tax
B. Estate tax
C. Income tax
D. Real property tax

32. (Phil. CPA) The City Council of Masbate passed an ordinance imposing an occupation tax
on an air-conditioning technician. Antonio is the only person with such occupation in the city.
He challenged the validity of the ordinance as being discriminatory since he is the only one
adversely affected.
A. The ordinance is unconstitutional because Antonio is denied of his right to equal
protection of the law.
B. The contention of Antonio is tenable.
C. The contention of Antonio is not justified because the rule on uniformity is not
violated considering that the ordinance would also be imposed on all air-conditioning
technicians who may come with the jurisdiction of the city.
D. The issue on validity or invalidity of the ordinance should be set aside.

33. A fixed license fee on the sale of bibles and other religious literature is a violation of :
A. exemption of revenues and assets of non-stock, non-profit educational institutions
and donations for educational purposes from taxes and duties
B. exemptions of religious, charitable or educational entities, nonprofit cemeteries and
churches from property taxation
C. non-infringement of religious freedom
D. no appropriation for religious freedom

34. Statement 1: A license fee is a charge imposed under the police power of the state.
Statement 2: Penalty is imposed by the state only.
A. Both statements are wrong
B. Both statements are correct
C. 1st statement is correct, 2nd statement is wrong
D. 1st statement is wrong, 2nd statement is correct

35. Congress granted a franchise to Ruthie Shipping Lines for the operation of a passenger or
freight service between Manila and Cebu City subject to the condition that the shipping line
should carry government mails free of charge. It was then exempted from the payment of
the franchise tax. In a law that was passed later, the shipping line's exemption from the
franchise tax was removed on the ground that the government needed funds for its projects.
Was the law valid?
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A. Yes, because the Congress has the sole prerogative to enact laws including removal
of exemptions.
B. Yes, because the government has the power to remove exemptions if the need for
public funds arose.
C. No, because the grant of the franchise tax exemption was a valid consideration,
which may be considered a contract. To remove the tax exemption would impair the
obligation of contract.
D. No, because Congress can only enact laws. It cannot remove or withdraw
exemptions.

36. Global system of income taxation means:

A. Separate graduated rates are imposed on different types of income
B. Capital gains are excluded in determining gross income.
C. All types of income except those subject to final tax are aggregated to arrive at gross
income
D. Compensation income and business/professional income are taxed at different
places in the world

37. Statement 1: There can only be a tax if there is a law imposing the tax.
Statement 2: The power to tax is inherent.
A. Both statements are wrong
B. Both statements are correct
C. 1st statement is correct, 2nd statement is wrong
D. 1st statement is wrong, 2nd statement is correct

38. Statement 1: A person cannot be imprisoned for non-payment of property tax.

Statement 2: A law may be passed violating uniformity of taxation.
A. Both statements are wrong
B. Both statements are correct
C. 1st statement is correct, 2nd statement is wrong
D. 1st statement is wrong, 2nd statement is correct

39. Statement 1: An excise tax is also called privilege tax.

Statement 2: A tax which is neither personal nor property is an excise tax.
A. Both statements are wrong
B. Both statements are correct
C. 1st statement is correct, 2nd statement is wrong
D. 1st statement is wrong, 2nd statement is correct

40. All are objectives of taxation except:

A. Revenue purpose
B. Regulation
C. Increase of social inequity
D. Encourage economic growth

41. The power to enforce proportional contribution from the people for the support of the
government
A. Taxation
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B. Police power
C. Eminent domain
D. Exploitation

42. All are characteristics of the power of taxation, except:

A. It is subject to inherent and constitutional limitations.
B. It is civil in nature.
C. It is legislative in character.
D. It is an inherent power.

43. Taxation is an inherent power because:

A. It co-exists with the existence of the state.
B. It is exercised for the general welfare of the politicians.
C. It is proportionate burden.
D. It is an enforced contribution.

44. A demand of proprietorship:

A. Special assessment
B. Toll
C. Tax
D. License fee

45. Levied only on lands:

A. Special assessment
B. Toll
C. Tax
D. License fee

46. A tax imposed based on the number:

A. Specific tax
B. Real property tax
C. Ad valorem tax
D. Cedula

47. Which of the following is not example of excise tax?

A. Basic community tax
B. Income tax
C. Value added tax
D. Excise tax on sin products

48. Tax as distinguished from license fee:

A. Non-payment does not necessary render the business illegal
B. Limited to cover cost of regulation
C. A regulatory measure
D. Imposed in the exercise of police power

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49. For speculation purposes, Rodrigo bought a parcel of land in the Municipality of Kalayaan,
Palawan Province, Republic of the Philippines in 2018. The land appreciates its value in
2020. He is currently residing in Davao. For the year 2020, the land is subject to:
A. Value added tax
B. Estate tax
C. Income tax
D. Real property tax
E. None of the choices

50. Bato owned a property valued at P1,500,000 at the time of his death. The said property was
divided and distributed to his heirs. For Philippine tax purposes, which of the following is the
kind of tax that should be imposed in the transfer of ownership of that property?
A. Estate tax
B. Income tax
C. Real property tax
D. None of the choices

~Nothing follows~

“It does not matter how slowly you go as long as you do not stop.”

~Confucius~

God bless!!! 

~Clay Perez~

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Prepared by: Checked by:

Mr. Clieford T. Perez, CPA, MBM Mr. Clieford T. Perez, CPA, MBM

Instructor Program Head, BSAC

Approved by:

Dr. Niña B. Macarandang

Dean

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