Republic of the Philippines

City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

College of Business and Accountancy

Program: Bachelor of Science in Accountancy

Course Code: TAX 101

Course Title: Income Taxation

DETAILED LEARNING MODULE

Title : Introduction to General Principle of Taxation

Module No. : 1

I. Learning Module
This Module discusses the fundamental principles of taxation.

II. Learning Objectives

After this module, students must be able to comprehend of the following:
1. Concept of taxation and its necessity for every government
2. Lifeblood doctrine and its implication to taxation
3. Theories of government cost allocation
4. Inherent powers if the State
5. Scope of the taxation power
6. Limitation of taxation power

III. Topics and Key Concept

Definition of Taxation

Taxation may be defined as a State Power, a Legislative Process, and a mode of Government to cost
distribution.
a. As to State Power – Taxation is an inherent power of the State to enforce a proportional
contribution from its subject for public purpose.
b. As a Process – Taxation is a process of levying taxes by the legislature of the State to enforce
proportional contributions from its subjects for public purpose.
c. As a mode of cost distribution – Taxation is a mode by which the State allocates its costs
or burden to its subject who are benefited by its spending.

Purposes of Taxation

 Revenue of fiscal: The primary purpose of taxation on the part of the government is to provide
funds or property with which to promote the general welfare and the protection of its citizens
and to enable it to finance its various types of activities.

 Non-revenue or regulatory: Taxation may also be employed for purposes of regulation or

control. e.g.:
a. Imposition of tariffs on imported goods to protect local industries.
b. The adoption of progressively higher tax rates to reduce inequalities in wealth and income.
c. The increase or decrease of taxes to prevent inflation or ward off depression.
Definition of Taxes

It is the enforced proportional contributions levied by the law making body of the state by virtue of
its sovereignty upon the persons or property within its jurisdiction for the support of the government
and all public needs.

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Essential Characteristic of Tax

1. Enforced contribution
2. Legislative authority
3. Proportionate in character
4. Generally payable in money
5. Levied on persons and property within the jurisdiction of the state
6. Commonly required to be paid at regular intervals

Note: Don’t be confused between Taxation with Taxes.

Taxation is one of the powers of the State, while Taxes is the result of the exercise of the power
of taxation.

Theories and Basis of Taxation

A. Lifeblood Theory
The lifeblood theory constitutes the theory of taxation, which provides that the existence of
government is a necessity; that government cannot continue without means to pay its
expenses; and that for these means it has a right to compel its citizens and property within
its limits to contribute.

Every Government provides a vast array of public services including defense, public order and
safety, health, education and social protection among others.

a. Taxes are the lifeblood of the Government and their prompt and certain availability are
imperious (expecting obedience) need
b. Upon taxation depends the government’s ability to serve the people for whose benefit taxes
are collected
c. Manifestation of lifeblood theory:
 Imposition of tax even in the absence of constitutional grant
 Right to select objects of taxation
 No command to enjoin (or stop) tax collection

B. Basis of Taxation

The reciprocal duties of protection and support between the state and inhabitants (benefits
received theory).

The Government provides benefits to the people in the form of public services, and the people provide
the funds that finance the government. This mutuality of support between the government and the
people is referred to as the basis of taxation

This mutuality is illustrated as:

Receipt of benefits is conclusively presumed – Every citizen and resident of the State directly or
indirectly benefits from the public services rendered by the government. These benefits can be in
the form of daily usage of public infrastructures, access to public health or educational services,

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

the protection and security of person and property, or simply the comfort of living in a civilized and
peaceful society which is maintained by the government. Thus, taxpayer cannot avoid payment of
taxes under the defense of absence of benefit received.

C. Theories of Cost Allocation

Taxation is a mode of allocating government costs or burden to the people. In Distributing the costs
or burden, the government regards the following general considerations in the exercise of its taxation
power.

1. Benefits received theory – presupposes that the more benefits one receives from the
government, the more taxes he should pay.
2. Ability to pay theory – presupposes that taxation should also consider the taxpayer’s ability to
pay. In short, those who have more should be taxed more even if they benefited less from the
government. Those who have less contribute less even if they receive more of the benefits from
the government.

Other Doctrines in Taxation

1. Taxpayer’s suit – this suit can only be allowed if the act involves a direct and illegal
disbursement of public funds derived from taxation.
2. Equitable recoupment – this states that a claim for refund which is prevented by prescription
may be allowed to be used as payment for unsettled tax liabilities if both taxes arise from the
same transaction in which overpayment is made and underpayment is due.
3. Tax amnesty – it is a general pardon or the intention overlooking by the State of its authority
to impose penalties on persons otherwise guilty of violation of a tax law. It partakes of an
absolute waiver by the government of its right to collect what is due it and to give tax evaders
who wish to relent a chance to start with a clean slate.

Basic Principles of a Sound Tax System (Canons of Taxation) – (FAT)

1. Fiscal adequacy – the source of revenues must be adequate to meet government

expenditures.
2. Theoretical Justice/Equality on theoretical Justice – based on the ability to pay (Equity)
and proportionate character.
3. Administrative Feasibility – which means
a. The tax law must be clear and concise
b. Convenient
c. Just and effective administration

Inherent Powers of the State

The Inherent powers of the state are as follows:
1. Police power – to promote the general welfare. It is the power to regulate liberty, public health and
morals.
2. Eminent Domain – it is also called as expropriation. The power of the state to take the private
property for public use upon payment of just compensation.
3. Power of taxation – the power of the state to collect revenue for the necessary expenses of
government.

Similarities among the Fundamental Power of State

1. They are inherent in the state.
2. They are independently exists of the constitution.
3. They are not only necessary but indispensable, as the state cannot continue or be effective
unless it is able to exercise them.
4. They are methods by which the state interferes with private rights.
5. Each presupposes an equivalent compensation.
6. They are legislative in nature.

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Differences among the Fundamental power

a. As to authority which exercises the power
Taxation Government only
Police power Government only
Power of eminent domain Government, public service companies and public utilities

b. As to purpose
Taxation Support of government
Police power Promote public welfare
Power of eminent domain Public purpose

c. As to Affected
Taxation Community or class of individuals
Police power Community or class of individuals
Power of eminent domain Individuals as owner of a particular property

d. As to Effect
Taxation Taxes become part of public funds
Police power No transfer of title, there is restraint on the injurious use of property
Power of eminent domain There is transfer of the right to property, either ownership or a lesser
right
e. As to Benefits Received
Taxation Equivalent of tax in the form of protection and benefit
Police power No direct and immediate benefit, only such as may arise from the
maintenance of a healthy economic standard of society (damnum
absque injuria or damage without injury)
Power of eminent domain Market value of the property taken from him
f. As to Amount of Imposition
Taxation No limit
Police power Limited to the cost of the license and the necessary expenses of police
surveillance and regulation
Power of eminent domain No imposition, the owner is paid the fair market value of his property

g. As to Relationship to the Non-Impairment of Obligations Clause of the Constitution

Taxation Inferior to the clause
Police power Superior to the clause
Power of eminent domain Inferior to the clause

h. As to Compensation
Taxation For the protection and benefits received from the government
Police power The maintenance of a good economic standard of society
Power of eminent domain Just compensation for the property taken

Nature of Power of Taxation

d. The power is inherent in the state. It may be exercises although not expressly granted by the
constitution.
e. It is essentially a legislative function. Only the legislature can impose taxes (high prerogative
of sovereignty)
f. Based ability to pay
g. Subject to inherent and constitutional limitation. It is not an absolute power than can be
exercised by the legislature anyway it pleases.

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Scope of Power of Taxation (CUPS)

a. Comprehensive
b. Plenary
c. Unlimited -
d. Supreme – The highest degree of application, considered the strongest among the inherent
powers of state
The power of taxation is subject to inherent and constitutional limitation.

Limitations of Taxation

Inherent Limitation (PENTI) – are those which restrict the power although they are not embodied
in the constitution.
1. Public purpose - This is the purpose affecting the inhabitants of the State as a community and
not merely as individuals
2. Exemption from taxation of government entities - Government agencies performing
governmental functions are exempt from tax unless expressly taxed while those performing
proprietary functions are subject to tax unless expressly exempted
3. Non-delegation of the power to tax - The power to tax is purely legislative, and it cannot be
delegated by the legislature to the executive or juridical departments of the government.
4. Situs of Taxation or Territorial jurisdiction - The tax laws of a state are enforceable only
within its territorial limits
5. International comity - The property of a foreign state or government may not be taxed by another.

Constitutional Limitation (DEO NUER) - are those which are expressly found in the constitution
or implied from its provisions
1. Due process of law
2. Equal protection of the laws
3. Non-impairment of obligation of contract
4. Non-imprisonment for non-payment of poll tax
5. Rule of taxation shall be uniform and equitable
6. Exemption from real property tax of charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, and non-profit institutions, and all lands, buildings and
improvements actually, directly and exclusively used for religious or charitable purposes.
7. All revenues and assets of non-stock, non-profit educational institutions used actually, directly
and exclusively for educational purposes shall be exempt from taxes and duties. Proprietary
educational institutions, including those cooperatively owned, may likewise be entitled to such
exemptions subject to the limitations provided by law.
Who are exempt? Charitable, educational and Non-stock, non-profit
religious institutions educational institutions

Aspect/Process/Phases/System of Taxation (Embodied in the Term Taxation) – Stages of

Taxation

1. Levying or imposition of the tax – Legislative act. This is pertains to the passage of tax laws
and tax ordinance through legislature. (Impact of taxation / process of determining)
2. Assessment aspect – refers to the appraisal and valuation process of the subject or object of
taxation to arrive at total amount of collectible tax.
3. Collection of the tax – essentially administrative character (BIR or BOC)
4. Payment – an incidence of taxation. This is the compliance phase.

 The impact of taxation corresponds to the imposition of the tax, shifting refers to transfer of tax and incidence
consist of the payment of tax.

Matters within the Competence of the Legislature to Determine

1. The subject matter or object to be taxed

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

2. The purpose of the tax so long as it is a public purpose

3. The amount or rate of the tax
4. The manner, means and agencies of collection of the tax.

Tax Legislative Function

1. Prescribe the general rules of taxation
2. Selection of the object /subject to be taxed
3. Determination of the purpose for which taxes shall be imposed
4. Fixing the amount of the tax to be imposed
5. Fixing the amount of tax rate
Tax Administrative Function
1. Valuation of property for taxation
2. Equalization of assessment
3. Collection of tax

Situs of Taxation
Situs – place of taxation, the country that has the power and jurisdiction to levy and collect the tax.

The Situs will help in determining the source of an income, whether from within the Philippines or from
abroad or sources outside the Philippines. For taxpayers other than resident citizen and domestic
corporation which are taxable on incomes from all sources, this will serve to identify income which are
taxable in the Philippines.
Subject Situs
Poll tax on persons Residence of the person
Real property tax State where the property is located whether the owner is resident or not
Tax on tangible State where it is physically located although the owner resides in
personal properties another jurisdiction (lexi rei sitae)
Tax on intangible Domicile of the owner (mobilia sequntur pesonam)
personal properties
Income Tax State where the taxpayer is a resident or citizen
Business, occupation Place where the business is done, or the occupation is engaged in or the
and transaction transaction took place
tax
Gratuitous transfer of property State where the transferor is/was a citizen or resident, or where the
property is located

Factors to Consider in Determining Situs of Taxation

1. Subject matter ( person, property, or activity)
2. Nature of tax
3. Citizenship
4. Residence of the taxpayer
5. Sources of income
6. Place of exercise, business or occupation being taxed

Double Taxation - Can be defined as “taxing twice” by the same taxing authority same purpose, within
the same taxing:
1. in the same year or period,
2. the same subject by the same taxing jurisdiction,
3. same authority.

Constitutionality of double taxation. – There is no provision in the constitution specifically

prohibiting double taxation. It should, however, whenever possible, be avoided.

TAX101 – INCOME TAX. 1st Sem. 2020-2021 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Kinds of Double Taxation

1. Direct double taxation. This is prohibited by the constitution as it violates the rule of uniformity
Uniformity - that all properties or other taxable subjects belonging to the same class be taxed at
the same rate or measure.
2. Indirect double taxation.

Example:
You may have gross receipts of the business establishment subject to income tax and VAT under the NIRC and
business tax under local taxation. There is no double taxation (income tax and VAT) because they are for 2
different purposes – one is for income and the other is for excise. Income tax and VAT are imposed by the state
and the business tax is imposed by the LGU. So, there is not double taxation because they are imposed by
different taxing authorities.

In a deed of sale, that sale is subject to capital gains tax and doc stamp tax, both under the NIRC. There is no
double taxation because the 6% capital gains tax is for income and the doc stamps tax is an excise tax for the
privilege of entering into a transaction.
Forms of Escape from Taxation
1. Shifting
2. Capitalization
3. Transformation
4. Evasion
5. Avoidance
6. Exemption

Shifting – transfer of the tax burden by the person on whom it is imposed by law to another
who bears it. Kinds of shifting
1. Forward shifting – this takes place when the burden of the tax is transferred from a factor or
production through the factors of distribution until it finally settles on the ultimate purchaser
or consumer.
2. Backward shifting – this is effected when the burden of the tax is transferred from the customer
or purchaser through the factors of distribution to the factor of production
3. Onward shifting – this occurs when tax is shifted two or more time either forward or backward

Capitalization – Form of backward shifting whereby future taxes on property sold are capitalized at
the time of purchase and deducted in lump sum from the selling price.

Transformation – The process of production.

Evasion – known as tax dodging, is the use by the taxpayer or illegally permissible methods in order
to reduce tax liability

Avoidance – Known as tax minimization, is the used by the taxpayer or legally permissible methods in
order to reduce tax liability

Exemption from Taxation - Exemption from taxation – is a grant of immunity, express or implied, to
particular persons or corporations, or to persons or corporation of a particular class, from a tax upon
property, or an excise tax which persons and corporations generally within the same taxing district, are
obliged to pay.
Classification of exemptions
1. Express or affirmatives – these are express provisions in the constitution, statutes, treaties,
ordinances, franchise or contract.

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

2. Implied or exemption by omission – these occurs when a tax is levied on certain classes of
persons, properties, or transactions without mentioning other classes. Those not mentioned
are deemed exempted by omission

Classes of Taxes

As to subject matter
Personal, poll, capitation – tax of fixed amount imposed on individuals residing within a specified territory
without regard to their property or the occupation in which they may be engaged. Example Residence tax
(community tax)

Property – tax imposed on property, whether real or personal, in proportion, either to its value or in
accordance with some other reasonable method of apportionment. Example Real estate tax

Excise – tax imposed upon the performance of an act, the enjoyment of a privilege or the engaging in an
occupation. Example income tax, privilege tax on business or occupation, transfer tax, VAT and Other
percentage tax

As to who bears the burden

Direct – tax which is demanded from the person who is intended to pay it. Example: Income tax,
immigration tax, transfer tax (estate tax and donor’s tax).

Indirect – tax which is demanded from one person in the expectation and intention that shall indemnify
himself at the expense of another or tax which the taxpayer can shift to another. Example Percentage
tax, Value added tax (Tax on Business)

As to Determination of amount
Specific – tax of a fixed amount imposed by the head or member, or by some standard of weight or
measurement; it requires no assessment other than a listing or classification of the objects to be taxed.
Example: Excise tax on distilled spirits, excise tax on cigar, cigarettes and liquors

Ad-valorem – tax of a fixed proportion of the amount or value of the property to which the tax is assessed.
It requires the intervention of assessors or appraisers to estimate the value of such property before the
amount due from each taxpayer can be determined. The most common ad valorem tax examples include
property taxes on real estate, sales tax on consumer goods, and VAT on the value added to a final
product or service. Ad valorem taxes comprise one of the primary sources of revenue for state, county,
and municipal governments.

As to purpose
General, fiscal or revenue – tax imposed for the general purpose of the government or to raise revenue
for governmental needs Example- Sales tax, Income tax, Donor’s tax, Estate tax

Special or regulatory – tax imposed for a special purpose or to achieve some social or economic ends.
Example: Tariff or customs duties.

As to authority imposing the tax/ As to Scope

National – tax imposed by the National Government. Example Income tax, estate tax, donor’s tax, valued
added tax, other percentage tax, and documentary stamp tax.

Municipal or local – imposed by the municipal governments. Example Real estate taxes, Municipal
licenses, community tax

As to graduation or rate
Proportional – tax based on fixed percentage of the amount of property income or other basis to be fixed.
Example: VAT, Percentage Tax, and Real Estate Tax

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Progressive or Graduated Tax – the rate increase as the tax base increases. Example: income tax, estate
tax, donor’s tax

Regressive tax – the tax rate decreases as the tax base increases. The Philippines is not practicing the
Regressive tax.

Degressive tax – increase of rates is not proportionate to the increase of tax base

Sources of Tax Laws

1. Constitution – The provisions of the constitution dealing on taxation merely regulate the exercise
of the power of taxation. They are not actually grants of the power, because of taxation can be
exercised by the government; the power of taxation is not a mere constitutional grant.
2. Statutes or laws – This refers to the tax laws passed by the Congress.
3. Administrative rulings and regulation – Administrative rulings are the less general interpretation
of tax laws which are issued from time to time by the Commissioner of Internal Revenue. They
are usually rendered on request of taxpayers to clarify certain provisions of a tax law. They are
commonly known as “BIR Rulings”. Regulations are intended to clarify or explain the law and
carry into effect its general provisions by providing the details of administration and procedure.
However, in case of conflict between a regulation and a statute, the latter shall prevail.
a. Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon
recommendation of the Commissioner of Internal Revenue, that specify, prescribe or
define rules and regulations for the effective enforcement of the provisions of the National
Internal Revenue Code (NIRC) and related statutes.
b. Revenue Memorandum Orders (RMOs) are issuances that provide directives or
instructions; prescribe guidelines; and outline processes, operations, activities,
workflows, methods and procedures necessary in the implementation of stated policies,
goals, objectives, plans and programs of the Bureau in all areas of operations, except
auditing.
c. Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the
Commissioner of Internal Revenue with respect to the provisions of the Tax Code and
other tax laws, as applied to a specific set of facts, with or without established precedents,
and which the Commissioner may issue from time to time for the purpose of providing
taxpayers guidance on the tax consequences in specific situations. BIR Rulings,
therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void
ab initio.
d. Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and
applicable portions, as well as amplifications, of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.
e. BIR Rulings are the official position of the Bureau to queries raised by taxpayers and
other stakeholders relative to clarification and interpretation of tax laws.
4. Judicial decisions – This refers to decisions of the Court of Tax Appeals and the Supreme Court
applying or interpreting tax laws. They constitute major part of the jurisprudence on taxation
and form part of the legal system of the Philippines. Decisions of the Court of Tax Appeals,
however, are still appealable to the Supreme Court of the Philippines.
5. Presidential decree
6. Provincial, City, Municipal and barangay ordinance
7. Treaties and international agreements

Basic Tax Laws of the Philippines

1. National Internal Revenue Code (NIRC)
2. Tariff and Custom Code
3. The Local Tax Code
4. The Real Property Tax Code

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

Legislation/Lawmaking of Tax Laws

Under the 1987 Philippine Constitution, all revenue and tariff bills shall originate from the House of
Representative. A revenue bill is one that levies taxes and raises funds for the government, while a
tariff bill specifies the rates or duties to be imposed on imported articles.

1. The bill is prepared.

2. The House of Representatives has its first reading.
3. A Committee Consideration/Action session is held.
4. The House of Representatives has its second reading.
5. The House of Representatives has its third reading.
6. The approved bill is transmitted to the Senate.
7. A conference committee is assembled.
8. The bill is transmitted to the President of the Philippines to be signed and passed.

Impact of Taxes in Nation-Building

Taxes are used to support government in nation-building. It is levied for public purpose such as:
1. Construction of roads and bridges
2. Pensions to retired government employees and their widows and children.
3. Assistance to victims of calamities.
4. Social welfare and health projects.

TAX Vs. TOLL

TAX TOLL
Demand of sovereignty Demand of proprietorship
Paid for the support of government Paid for the use of another’s entity
Amount is based on cost of construction or maintenance
Based on necessities of the state
of public improvement
Imposed only by the government Imposed by government, private individuals or entities

TAX Vs. LICENSE

TAX
Levied for revenue
Involves exercise of taxing power
No limit on the amount to be imposed
Failure to pay does not make the business illegal
LICENSE
Imposed on regulation
Involves exercise of police power
Amount is limited to expenses of regulation
Failure to pay makes the act of business illegal

TAX Vs. DEBT

TAX DEBT
Based on law Based on contract
Cannot generally be assigned Assignable
Generally payable in money Maybe paid in kind
Imprisonment is a sanction (except poll tax) Imprisonment is not a sanction for non-payment

TAX Vs. SPECIAL ASSESSMENT

TAX SPECIAL ASSESSMENT
Imposed on person, property or property rights Imposed on Land resulting from public improvements
Imposed regardless of whether there is benefit or not Imposed based wholly on benefits

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 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

TAX Vs. PENALTY

TAX PENALTY
Aimed at raising revenue Designed to regulate conduct
Imposed by Government only Imposed by Government or private entities

Other Charges / Related Terms

Subsidy – is monetary and directly granted by the government to an individual or private

commercial enterprise deemed beneficial to the public
Revenue – refers to all the funds or income derived by the government, whether from tax or any
other sources.
Internal revenue – refers to taxes imposed by the legislature other than duties on imports and
exports
Custom duties – are taxes imposed on goods exported to or imported from a country. Custom duties
are really taxes but the latter is broader
Tariff may be used in one of the following three senses:
1. A book rates drawn usually in alphabetical order containing the names of several kinds of
merchandise with the corresponding duties to be paid for the same
2. The duties payable on goods imported or exported
3. The systems of principles of imposing duties on the importation or exportation goods.

Exercises: - MULTIPLE CHOICES (ADAPTED)

1. The process by which the sovereign raises income to defray the expenses of the government is called
(RPCPA)
A. subsidy
B. tariff
C. taxation
D. tribute

2. In case of conflict between tax laws and generally accepted accounting principles (GAAP) (RPCPA)
A. Both tax laws and GAAP shall be enforced
B. GAAP shall prevail over tax laws
C. Tax laws shall prevail over GAAP
D. The issue shall be resolved by the court

3. Which of the following has no power of taxation? (RPCPA)

A. provinces
B. cities
C. barangays
D. Barrios

4. “Schedular system of income taxation” means (RPCPA)

A. All types of income are added together to arrive at gross income.
B. Separate graduated rates are imposed on different types of income
C. Capital gains are excluded in determining gross income
D. Compensation income and business/professional income are added together in arriving at
gross income.

5. One of the following is a primary purpose of taxation

A. Protection of local industries against foreign competition through imposition of high customs duties on
imported goods
B. Reduction of inequalities in wealth and income by imposing progressively higher tax rates
C. To secure revenue for the support of the government
D. Strengthening of anemic enterprises by giving tax exemptions

TAX101 – INCOME TAX. 1st Sem. 2020-2021 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

6. All of the following, except one, are canons of a sound tax system
A. Fiscal adequacy
B. theoretical justice
C. Administrative feasibility
D. inherent sovereignty

7. Under the basic principle of sound tax system, the government should not incur a deficit. (RPCPA)
A. Theoretical justice
B. Administrative feasibility
C. Fiscal Adequacy
D. None of the above

8. The following, except one, are basic principles of a sound tax system
A. It should be capable of being effectively enforced.
B. It must be progressive
C. Sources of revenue must be sufficient to meet government expenditures and other public needs.
D. It should be exercised to promote public welfare.

9. The power of taxation can only be exercised by the lawmaking body

A. subject to constitutional and inherent limitations
B. equality or theoretical justice
C. legislative in character
D. inherent in sovereignty

10. 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.

It is essentially a legislative function. Even in the absence of any constitutional provision, taxation
power falls to Congress as part of the general power of lawmaking
A. False, False
B. False, True
C. True, True
D. True, False

11. They restrict the exercise of the power of taxation although they are not embodied in the Constitution
A. theoretical justice
B. legislative in character
C. inherent limitation
D. constitutional limitations

12. A tax must be appropriated and spent for public purpose. Which of the following is not a public
purpose?
A. dole-out to victims of calamity
B. PantawidPamilyang Pilipino Program (4 Ps)
C. improvement of sugar industry
D. construction of a barangay chapel

13. Which of the following activities is not a public purpose?

A. Construction of bridges
B. Payment of Christmas bonuses of government officials and employees
C. Opening of road on a tract of land owned by a private individual
D. Scholarship to poor but deserving students

14. Question 1: Can the state tax the Armed Forces of the Philippines?
Question 2: Are the government-owned and controlled corporations subject to tax?
A. Yes, No
B. Yes, Yes
C. No, Yes
D. No, No

TAX101 – INCOME TAX. 1st Sem. 2020-2021 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
 Republic of the Philippines
City of Olongapo
GORDON COLLEGE
Olongapo City Sports Complex, East Tapinac, Olongapo City
Tel. No. (047) 224-2089 loc. 314

15. No person shall be imposed for non-payment of

A. property tax
B. excise tax
C. poll tax
D. income tax

-END-

TAX101 – INCOME TAX. 1st Sem. 2020-2021 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE ONLY
TAX101 – INCOME TAX. 1st Sem. 2020-2021 NOT FOR SALE. EXCLUSIVE FOR GORDON COLLEGE
ONLY