CPA REVIEWER IN TAXATION WITH SPECIAL TOPICS AND SAMPLE FILLED-UP BIR FORMS 3 a a ee Ip ut -Boyanian o Recover 0s One At aso known as BAYARIHAN gnihan fo Heal as One Ac) (also known as BAYANIHAN 1) ENRICO D.TABAG, CPA, MBAPhilippine Copyright, 2021 ISBN: 978-621-96299-5-9 By ENRICO D. TABAG ‘All Rights Reserved Printed in the Philippines. Published by EDT Book Publishing 1A Meleguas St., Torres Subdivision, Tandang Sora, Quezon City. No part of this book may be used or reproduced in any form and by any means, or stored in a data base or retrieval system, without prior written permission from the author and EDT Book Publishing. Any copy of this book without the signature of the author shall be considered as coming from an illegal source. Distributed by EDT Book Shop Unit 307 Corporate 101 Building Mother Ignacia Ave., Bray. South Triangle, Quezon CityPREFACE CPA Reviewer in Taxation, 2021 edition This humble work of the author is primarily intended to address the needs of BSA graduates preparing for the ever challenging Certified Public Accountant Licensure Examination (CPALE). The discussions and quizzers presented in this book were primarily lifted from RA No, 8424, otherwise known as the National Intermal Revenue Code (NIRC) of 1997 or the Tax Code of the Philippines, as amended by RA 11534, also known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, RA No. 10963 or the Tax Reform for Acceleration and Inclusion Law (TRAIN Law) and RA 11494 or the Bayanihan to Recover ae One Act. : Special Topics in Taxation covered in the CPALE are likewise included in this humble undertaking, such as: Magna Carta for Senior Citizens Magna Carta for PWDs Special Economic Zone Act Omnibus Investment Code {Book 1 of EO 226) Barangay Micro Business Enterprises (BMBEs) Excise Taxes Documentary Stamp Taxes Local Taxation Tax Incentives - Chapter Xill of the Tax Code under CREATE Law The author is confident that this will Accountancy in realizing their dreams to May 2021 4 — i S008 D. TABAG Envico-D. Tabag, CPA, MBAPart Table of Contents TOPIC Fundamental Principles of Taxation Notes Quizzer Individual Taxpayers Notes Quizzer Co-ownership, Estates and Trusts Notes . Quizzer Corporations Notes Quizzer Partnerships Notes Quizzer Gross Income Notes Quizzer Deductions from Gross Income Notes Quizzer Accounting Methods and Installment Reporting of Income Notes Quizzer Page 17 55 73 159 162 177 198 301 306 331 349 395 407 443 44710 1 12 13 14 15 16 17 18 19 20 a Estate Tax Notes Quizzer Donor's Tax Notes Quizzer Value Added Tax Notes Quizzer Other Percentage Taxes Notes Quizzer Remedies Notes Quizzer Senior Citizens and PWDs Notes Quizzer Barangay Micro Business Enterprise (BMBE) Documentary Stamp Taxes (DST) PEZA and BOI Registered Entities Local Taxation Principles Community Tax Real Property Tax Local Business Taxes Tax Incentives under the CREATE Law Excise Tax Exercises - Special Topics and Tax Incentives Gi] 455 475, 531 537 569 597 663 673 713 723 745 750 759 762 769 777 779 781 789 795 803 812This humble undertaking is dedicated to my wife, Cherry, forar consinaad suppore and love throughout the writing of the book and to the twinkle of my eyes, ‘Niah, who always serve as my source of inspirationPART 1 LPrincthles The Inherent Powers of the State ° Inherent power means a power existing as a natural or basic part of every sovereign State, without being conferred or granted by the people or the Constitution, THE 3 INHERENT POWERS OF THE STATE: 1. POWER TO TAX + The act of levying or imposing a tax. * It is the process or means by which the sovereign (independent State) through its law-making body (legislative branch of the government) raises income to defray the necessary expenses of the government by apportioning the cost among those who, in some measure, are privileged to enjoy its benefits, and therefore, must bear its burdens. + The power of Taxation is the power to impose burdens on subjects and objects (person, property and excises/privileges) within its jurisdiction. POLICE POWER - it is the power of the state to promote public welfare by restraining and regulating the use of liberty and property. It may be exercised only by the government. The property taken in the exercise of this power is destroyed because it is noxious or intended for a noxious purpose. EMINENT DOMAIN - it is the power to take private property for public purpose upon payment of just compensation, SIMILARITIES among Taxation, Eminent Domain and Police Power a. They are inherent in the State. b. They exist independently of the constitution although the conditions for their exercise may be prescribed by the constitution, ¢. Ways by which the State Interfere with private rights and property. - d. Legislative in nature and character. e.Presuppose an equivalent compensation received, directly or indirectly, by the persons affected.inp 1. Primary Purpose ~ To raise revenues/funds to defray the necessary expenses of the government (also called Revenue or Fiscal Purpose). 2. Secondary Purpose: @. Regulatory Purpose - Taxation is employed as a devise for regulation or contro! (to implement the police power of the State for the promotion of the general welfare) by means of which certain effects or conditions envisioned by the government may be achieved. Purposes of Taxation b. Compensatory Purposes * Reduction of Social Inequality- + Economic Growth * Protect local industries against unfair competition ‘Nature and Characteristics of Taxation 1, Inherent Power - may be exercised although not expressly granted by the constitution 2. Essentially a legislative function — only the legislative can impose taxes 3. Subject to inherent and constitutional limitations ~ not an absolute power 4. For public purpose 5. The strongest of all the inherent powers of the State. 6. Subject to intemational treaty or comity. 7. Generally payable in money - 8. Territorial in scope - In the absence of inherent and constitutional limitations, the power to tax is comprehensive, plenary, supreme and unlimited. It is so comprehensive that in the words of Justice Marshall (was an American lawyer and civil rights activist who served as Associate Justice of the Supreme Court of the United States), the power to tax includes the power to destroy. Taxes Defined “Taxes are enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty for the support of the government and for all Its public needs, ESSENTIAL CHARACTERISTICS OF TAX ‘A tax is a forced charge, imposition or contribution Itis a pecuniary burden payable in money It is imposed for public purpose - It is imposed pursuant to a legislative authority Tis levied within the territorial and legal jurisdiction of a state - tis assessed in accordance with some reasonable rule of apportionment ppaosePrinegples 1. Necessity Theory ~The power of taxation proceeds upon the theory that the existence of government is a necessity. It Is a power predicated upon necessity (Phil Guarantee Co,, Inc. v. Commissioner (13 SCRA 775)}. The government cannot continue to perform of serving and protecting Its people without means to pay Its expenses. For this reason, the state has the right to compel all its citizens and property within its limits to contribute. ‘Theory and Basis of Taxation 2. Lifeblood Doctrine - Taxes are the lifeblood of the government without which it can neither exist nor endure. Upon taxation depends the State's ability to serve the people for whose benefits taxes are collected. MANIFESTATION OF THE LIFEBLOOD DOCTRINE/THEORY: + No Estoppel against the Government Collection of taxes cannot be enjoined (stopped) by injunction Taxes could not be the subject of compensation or set-off A valid tax may result in the destruction of the taxpayer's property Right to select objects (subjects) of taxation \.:! 3. The Benefits-Protection Theory - The basis of taxation is the reciprocal_duties of “protection and support” between the State and its inhabitants. The State collects taxes from the subjects of taxation in order that it may be able to perform the functions of government. The citizens, on the other hand, pay taxes in order that they may be secured in the enjoyment of the benefits of organized society. This theory spawned the Doctrine of Symbiotic Relationship which means, taxes are what we pay DISTINCTIONS AMONG THE THREE (3) INHERENT POWERS OF THE STATE pein es Emer NATURE Power to enforce contibutions Power to make and implement Power to take private property for to raise govt funds. laws forthe general welfare. public use with ust compensation. ‘AUTHORITY Government only Goverment only May be granted to public servicaluility companies ~ PURPOSE For the suppor of the Promotion of general welfare The taking of private propery for ovement through regulation ~ public use. PERSONS Community or a class of Community or a class of On an individual as the owner of AFFECTED —_indivduals. individuals, personal property ‘Applies to al persons, property Apples to all persons, property Only particular property is and excises that may be and excises that may be subject comprehended. subject thereto thereto, Property is wholesome and is Property is noxious or intended Property is wholesome and is devoted to publc uso or for a noxious purpose and as devoted to pubic use or pupose. purpose, ‘such taken and destroyed.7 fp Lai CS Emenee) ceria eis There is a transfer of tile to EFFECT Contribution becomes part of No transfer or tlle. There may public fund ust be a restraint on the property injurious use of property. RIGHTS Property right Property ight an liberty Property right AFFECTED SCOPE Pleniry, comprefiensive, Broader in application. General Merely a power to lake private supreme- Power fo make and implement propery for public use law. BENEFITS In form of protection and 'No direct and immediate benefit Market value of property taken RECEIVED benefits received from but only such as may arise from ‘government the maintenance of a healthy economic standard of society. AMOUNT OF No limit Sufcient to cover cost of the No imposition. The owner is paid IMPOSITION license and the necessary equivalent to the fair value of his expenses of police surveltance property ‘and regulation. Similarities among the three Inherent Powers 1, They are inherent in the State,- 2. They exist independently of the constitution although the conditions for their exercise may be prescribed by the constitution. \ntresw¥ 3. They constitute the three methods by which the State interfere with private rights and property. 5 4. Legislative in nature and character. 5. Presuppose an equivalent compensation received, directly or indirectly, by the persons affected. Scope of the Taxing Power of the Legislative The Supreme Court held that the power of taxation is the most absolute of all Powers of the government. It has the broadest Scope of all the powers of the government because in the absence of limitations, it is considered as comprehensive, unlimited, plenary and supreme (130 SCRA 654), The matters within the competence of the legislature include thie determination of the following: 1. The subject or object (person, property and excises/privileges) to be taxed 2. The purpose of the tax as long as it is a public purpose 3. The amount or rate of the tax - 4. Kind of tax - 5. Apportionment of the tax (ie., whether the tax shall be general or limited to 2 particular locality or partly general and partly local) . 6. Situs of taxation - 7. ‘The manner or method of collection~ Principles Stages/Aspects of Taxation Aspects referto "stages or phases”that are Included or embodied in the term “taxation”, such as: 1, Levying or Imposition. This process involves the passage of tax laws or ordinances (in the case of local government units) through the legislature, 2. Assessment and Collection. This process involves the act of administration and implementation of tax laws by the executive through its administrative agencies such as the Bureau of Internal Revenue and the Bureau of Customs. * Assessment refers to the determination by the executive branch (i LGU) of the correct amount of the tax. BIR, BOC, * Collection of the tax levied, which is essentially administrative in character. Principles of Sound Tax System Basically, a sound tax system should satisfy all the principles of taxation, such as the ability to generate sufficient revenues, fulfill the socio-economic objectives and should fot hamper the productive system of the economy (Refer to the elements of sound tax system below). ELEMENTS OF SOUND TAX SYSTEM 1. Fiscal Adequacy - The sources of government revenue must be sufficient to meet government expenditures and other public needs. 2. Theoretical Justice - A good tax system must be based on the taxpayer's ability to pay. This suggests that taxation must be progressive conformably with the constitutional mandate that congress shall evolve a progressive system of tamation, (11) To gy CURT) 3. Administrative Feasibility - Tax laws must be capable of convenient, just and effective administration- free from confusion and uncertainty. Thus, the tax system should have the merits of simplicity, flexibility and diversity. LIMITATIONS ON THE TAXING POWER A. Inherent Limitations- inherent limitations proceed from the very nature of the taxing power itself. The taxing power has very distinct and positive limitations some of which inhere in its very’ nature and exist whether declared or not declared in the written constitution. 1. Public purpose - Proceeds from tax must be used for: a. Support of the government. » b. Some of the recognized objects of government. c. To promote the welfare of the community (not individuals).winccthe E ney cS ‘Situs of taxation or territoriality - the taxing power of a country Is limited to Person and property within and subject to Its jurisdiction. PLACE OF TAXATION @. The state where the subject to be taxed has a situs may rightfully levy and collect the tax. b, The situs is necessarily In the State which has jurisdiction or which exercises dominion over the subject In question. FACTORS TO CONSIDER IN DETERMINING SITUS OF TAXATION Subject matter (person, property, or activity) ~ Nature of the tax - Citizenship « Residence of the taxpayer~ Romer eer 5 MATTER u Persons Residence of the taxpayer - Real Property Location - Tangible Personal Property Location - Intangible Personal Property Domicile of the owner Income Residence, citizenship, source of income Business Place of business Gratuitous Transfer of Property Residence or citizenship of the transferor or location of property International comity or treaty - a'State cannot tax another State based on the principle of Sovereign Equality among States. ie. tax law passed imposing taxes on foreign ambassadors is not a valid law. Non-delegability of the Taxing power (Enactment of Tax Laws) - Power of taxation Is purely legislative, hence the power cannot be delegated elther to the executive or judicial departments. The limitation arises from the doctrine of separation of powers among the three branches of the government.Priveisles ‘a. Delegation to the President, subject to some limitations and restrictions, to fix within specified limits, tariff rates and tonnage or wharfage duties and other duties and imposts. EXCEPTIONS TO THE RULE AGAINST DELEGATION: b. Delegation to local governments the power to create its own sources of revenues and to levy taxes, subject to such limitations as may be provided by law. c. Delegation to administrative agencies certain aspects of the taxing process that are not legislative such as: = the power to fix value of property for purposes of taxation pursuant to fixed rules = the power to assess and collect taxes. Tax Exemptions of the government a. Agencies performing governmental functions are tax-exempt unless expressly taxed. b. Agencies performing proprietary functions are subject to tax unless expressly exempted. c. GOCCS performing proprietary functions are subject to tax, however, the following are granted exemptions: = Government Service Insurance System (GSIS) = Social Security System (SSS) ‘ = Philippine Health Insurance Corporation (PHIC) ate = Local Water Districts (RA 10026) NOTE: Philippine Charity Sweepstakes Office (PCSO) is tax-exempt prior to January 1, 2018 (effectivity of the TRAIN Law). Constitutional Limitations on the Taxing Power- the following provisions may be said to be limitations prescribed in the Constitution on the taxing power of the government. Observance of due process of law | Equal protection of law Uniformity in taxation‘ Ww Progressive scheme of taxation 'Non-imprisonment for non-payment of poll tax Non-impairment of the obligations of contracts Free-worship clausePrinciples aL mpton of cate tens, uch, paronages, or caves * puma vert mote sd amp concer to al uns Sotdrge an inoue amy, cry ow exe ed fr figs, arta or edaatorl uposes in Exemption fom taxes of the reverses and assets of nom prft,non-stock educational inttutions indudng grants, endowments, donatens or ‘ontebutions for edvetonal pups, 10 Non-appreprision of pubic funds or propsty for the benefit of any church, sect orsytem of rigon, ee. No money shall be pon! out of the Treasury except in pursuance of an 2ppropiion made by on. 12 Concurrence of 3 majorty of ALL. MEMBERS OF CONGRESS forthe passage ‘of alaw granting tax exemption 18 Nondveseation of tax collections ‘The Present shall have the power to veto any particlar emis) in an appropriation, revenve or tar but the veto shall nt affect the em(s) to ‘ich no objection hasbeen made. Nnmparment ofthe jurisdiction o the Supreme Court to review tax cases ‘Appropriations, revenue or tan bis shal originate excusvely in the House ‘of Represantatives but the Senate may propose or concur wit amendments. Esch local goverment unt shall exercse the power to create ts own ‘sources of revenue and shal have aus share nthe rational axes NATIONAL TAXES vs. LOCAL TAXES eacert etoeal ‘ans ‘oy the Conese rnones by "the ea and he Senate Priecieles # "National Internal Revenue Taxes under the administration of the BIR: Income Tax Estate and donor's tax Value-added tax ter percentage taxes ose tes Documentary stamp taxes DOUBLE TAXATION KINDS OF DOUBLE TAXATION ” » 9 ® © © rect Dupheate Taxation ‘Ths is objectonable and prohibted because it voles the constitional rovson on uniformity ad equality. It means = Taxing twice; By the same taxing authority, hin the same urction o taxing tit For the same purpose; Inthe same year o taxing ped; and ‘Same king or chatter of tax Indirect Dypeate Taxation [Rs not lgaly objectonabe. It tends to all cases in which there i 3 burden of two or mre pecuniary impostion Bik imposed by diferent fonng authors ‘SOURCES OF TAX LAWS Construton |e ier tl =) ‘Tax Testes and Conventions wih Foreign Counties } The “Tax Code” [RA No. 9424 - National (Ge, RA 1OS63-TRAIN Law; RA 11534 CRE end porton ofthe Local Government Code) Internal Revenue Cade, a6 omended ATE Law), Tarif and Customs Code, Statutes and ows ke RA 1125 (20 Act Creating the Cour of Tax Appeals) and RA TAG (EAT Law) Presitetal Decrees and Executive Orders our Decisions | TePrinesples 19) Revenue tsuances promulgated by the Department of Finance such as Revenue Regulations (RR) Revenue Memorandum Creu (RAC), Revenve Memorandum ‘Orders (RMOs), BIR Revenue Rulngs and these of the Bureau of Customs like ‘Cstoms Memorandum Orders 1) Local Tax Orinances ORDER OF PRIORITY: Cconstuton ~ Tax treaties ~ ‘Tax Laws/tatues and jal dedsons Revenue issuances (revenue regulations, revenue memorandum ceulars, revenue memorandum orders, revenue rungs, et) swe NATURE OF TAX LAWS ‘Tax laws are ch and not pen in nature, athough there oe penshies provided fo their olaton. ‘The purpose of tax laws In imposing penalties for delinquencies sto compel the ‘Smely payment of taxes oto punish evasion or neglect of duty in respect tered, [CONSTRUCTION OR INTERPRETATION OF TAX LAWS IN CASE OF DOUBT OR AMBIGUTTY ‘3. Tex statis are construed striety against the government and iserally In favor ofthe tepayer. Taxes, being burdens, are not to be presumed beyond what the statute ‘expres and carly decares, '.Provsons granting tax exemptions are construed sticty against the taxpayer aiming ‘ax exemption and iberaly in favor ofthe government APPLICATION OF TAK LAWS ‘ax lane are prospective in operation because the nature and amount ofthe tax cul ot be fresen and vnderstod by te taxpayer atthe tine the Vonsactons wich the aw seeks tox was completed, excePrION: Wl ss fovored, a statute may nevertheles operat trace (, some Brovilons of CREAT) provided ts expres decared or & dat the gist Intent. But 2 tax aw should not be given retroactive application when I would be harsh and oppressive. 10 Principles CLASSIFICATION OF TAXES 2. According to Subject Matter: + Personal, Pll or Capitation Tax - tax of 2 fixed amount imposed upon Individual, whether ciizens or not, residing within 2 spectied terntory without regard to thelr property oF the occupation In which he may be engaged (2.9, basic communly tax); 1+ Property Tax ~ tax imposed on property, whether real of personal, lo ‘proportion ether tots value, or In accordance with some other reasonable method ¢f apportionment (e.g el estate tat) Excise Tax any tax wich does not fll within the clasfiaton ofa poll tax for 2 property tax. This Is a tax on the exercise of certain ngs and Privileges (e. Income ta, estate tax, donor’ tax, VAT) b. According to Who Bears the Burden: vues uate DIRECT TAX (e.g. income ta, estate tax, donor's tax) oer ‘Imposed on the person obliged to pay the same and this burden 1 ‘cannot be shifted or passed onto another. soy % ALOE in which the taxpayer Whe Bays the tax is drecty Hable “S"* therefor, thats, the burden of paying the tax falls recy on the Teme person paying the tax > Demanded from the very person who, as intended, should pay the {ax which he cannot shit fo another * INDIRECT TAX (e9, VAT and OPT) 546% Payment is demanded from a person whol allowed to transfer the > ‘burden of tration to another. cue hee ores % ADE pald by a person who I net drecty Hable therefor, and who ° ‘may therefore shit or pass the tax to another person or entity, voy lc utmately assumes the tax burden (Macedav. Macaraig, 197 set Sera 771} YOUNGS > IS demanded in the fst instance form one person vith the pecaton that he can shit the burden to someone else, not as 8 tax butas pat ofthe puchase price According to Determination of Amount: > Specie Tox— this isa fed amount based on volume, weight or quant of ‘00s as measured by teks Instruments or standards. (eg, excise tay on {gars and lors) > Ad Valorem Tax ~ tls inposon is based on the value of the property subject to tax, (e9. VAT, income tx, donors tax ond estate tax) uPrineples According to Purpose: % TAXVS, ASSESSMENT ecw Consinitie. Tet = tel ois este pent —— fore (ease, ovr and ese ay = em has > Raut clint To = ose werd ale sore ee or zamena (a to dues ong} tm brad conn + Set yc to eo peat ntadnscino atonty Sie tree bn oe > National Tax - imposed by the National Government Sof peel abcheaton > Local Tar- imposed by municpal corporations (e, real estate ta) 4 TAX VS, LICENSE FEE 7 {According to Graduation or Rate a 7 BE Teed in the cardia oF te + Proportion Rit Rate Tox unary or sgl rate (e.g. VAT, OPT) + the pups of is to generate | 2 Progressve/Graduated Tox~ as te tox base gros the tk at increases, ee {e5. income tax on nial, estate, trusts, eat tax, donor's tx) a) | . Soren | + Regressive Tax the tx ate neeases 3 the ax base cease. eo {imposed on person, oroperty, rhs | i Teivonts Waynes te omy cr transaction + nonpayment does not make the busines egal ‘TAX DISTINGUISHED FROM OTHER CHARGES AND FEES \ = TAXVS. CUSTOMS DUTIES Ta & tees. Tou + apa on pon FSP, RE t TAX TOLL ortancaaion ° "yRenaan ecomomy“ airs demand opp = + Ecomrehends ore than the tem See caesar Yor te Sis a camperaton fete use of ccsom tes gone ‘oneboayeses propery + "iret opty te goverment «mabe imposed y the goverment oc + ited on goremmenal nate” bette nds & Taxvs. eer + darn y the cst f propery o a Inpovemen ten" |) tam } + not assignable Dayal ney # TAXVS. PENALTY 1 feteibea ose To PENALTY b Segnmene may ret to Tena ereseeinie RT LE Cn OR inprsoment \simpmnd oy by he goverment" purer and sapreson tiene + Stes on elnuer tors om + ay.be impose by te goverment by seta prea money bens ‘= Emay are from aw or contract ‘= maybe pain money ori kind SPECIAL ASSESSMENT —_ Tevied on tana ‘cannot be made the personal labity of the person assessed, because I the land that ‘nse for he aby ‘based whaly on Denes received It is exceptional la application for the recovery of cost andlor maintenance of Improvement LICENSE FEE Tansee emanate from the paige power ofthe sate the purpese of ts regltory limted tothe necessary expenses of regulation and contra Imposed on the exercise of 2 right or prelogs non-payment makes the business llega ‘custom ouries Triposed on imprted or exported goede Risakoa tar Dest Tied on conract assignable payable in knd or in money subject to setoff No Imprisonment (except when debt arses from cima) Interest depend pon the stpulston of the ates2 asl > SUBSIDY refers to 8 pecuniary ak! dec granted bythe goverment to an indvial or eter conver enterprise deemed beneficial to te pubtc. Ror a Tax though tax may have tobe pose to pay 8. (¢ REVENUE + fers to athe funds or Income dered bythe goverment, whether from tx oF anyother source. + Amount cle © INTERNAL REVENUE Internal Revenue means taxes Inposed by the leglsature other than duties on Imports and exports. = TARIFF ‘May be usd in one of three (3) senses 1. A book of rates raw usualy In alphabetical order containing the names of several knds of merchandise wih Ue corresponding des to be pai forthe same; oF 2. The dues payable on goods imported or exported or 3. The system or prindple of Imposing duties on the Importation (or exportation) of goods. ‘The tem tar and customs duties ae used interchangeaby Inthe Tariff and ‘customs Code, [SYSTEMS OF “INCOME” TAXATION |. Gloat 5ystom~ Al ems of gros income deductions are reported in one income tax etum and the applicable tax rate applied onthe tx base. 1b. Schedoor Stem ~ Diterent types of Income are subject to diferent sets of ‘raduated or at income tax rates. 4 Prinses (OTHER DOCTRINES/RULES IN TAXATION Equtable Recoupment - Calm for refund which is prevented by prescnption may be ‘allowed tobe used as payment for unsettled tx lables I bath taxes arse fom the same transaction n which overpayment is made and underpayment fs due Seto taxes Taxes are not subject to set-off or legal compensation because the ‘government and the taxpayer ae net mutual cedtors and debors ofeach other. Suit This prowdes that a taxpayer suit can ony be allowed Ifthe act valves @ rect and Wega dlsbursementof public fonds derived fom taxation, ‘Taxpayers sult ‘case where the act complained of direct Involves the gal deburserent of publ funds drved fom tara. Taxpayers have focus sand to queston the Valty of tx measures ola expenatures of pubic money. In sch cass, they are artes In interest who wil be prejudiced or benated bythe aval ofthe Sut The (poneral rule that ot ky persone dsl sfected bit ako taxpayers Nave Siticent interest of preventing the Ihgal expences of money asad by taxation. ‘They may, therefore, quesion in the proper court the costtutenalty of statites fequtng the expencure of public funds." But a tpayer snot reeved fom the ‘oblgaton of paying a tax because of is belet that fs berg misapreprata By fain offal, for etherse,colecton of tares would be hampered and ths may resut nthe parelzalon of important goverment functions Exemptions from Taxation It sa grant ofimmunty, express or imple, to particu pesons, o corporations of a patcular cass, rom a tax upon property or an excise tax which persons and crportins ‘eneral within the same taxing dist, are obliged to pay. ‘LASSIEICATION OF EXEMPTION: 2, Express or affrmatie— these ae express provisions inthe Constitution, states, treaties, oriances, franchises or convecs . Linptied or exemption by omision ~ ths ocurs wien a tx Is levied on certain ‘asses of persons, properties or transactions wlhout mentioning other lasses. “Those not mentioned are deemed exempted by omission INTERPRETATION OF EXEMPTION GRANT. Exemption grants are stcty construed epsinst the person or enty lenin ‘exemption, One mast usty sich calm by dear an postive grant. 18Principle [ESCAPE FROM TAXATION 1 Evason ay Coding the taxpayer uses uninnf meansto evade or lessen the payinent ota 2. Avodance, also cal tax minimization, ts the duction or totaly escaping payment of tax through fezaypermssie mans. 2, Shing, wscay, 6 the transfer of tax burden to another. The Imposton of tax transfered trom the stator taxpayer to another without wating the kw + Impacts the point which 9 tax orginally imposed + nexdonce the pot at which the tax burden finaly rests or stles down, TREE (3) KINDS SHETING ‘8. Forward siting 1 acaed ting Onward suing 4. Captatzaton, the seer swig to lower the price of the cammadty provided the {anes wil be shouldered by the buyer 5. Tansformstion, we manufacturer absorbs tho adlonal taxes toposed by the goverment wot passing H to the buyers fr fer of lst of Nts market sea, h/t Increases qunntty of prosucion, thereby turang thelr unit oF production ‘ower cox resting othe Wanformaton of Une tax nto a ga ugh the mun of proation, 6 Gxemption, Ws on immunity, priviege oF freedom from payment of a charge or torent wich thers ae obliged to pay. 6 Prin va hs QUIZZER Choos the lator ofthe coxect answer Inheront Powers ofthe State 1. The Sia, having sovroignly can enforce contibuions (lax) upon its citzons even wiiout a specie provision in fe Constuionautharzng W Which o th fllowng wl Justty to foregoing statment? Statomon 30 because the Sto has tho supreme power to command and enforce ‘bodionco ois wl om th peole wii is justo, ‘Stolomont 2: Aay provision in tho Coston regarding taxation doos rat coat rights for ho sovereignty to have the power to tax bu i merely consis lintations upon tho supromacy of tax poor ‘8 Only talons comact Only stalomant 2 croc Bath stalomants ar comroct <4 Both latent ee incerot & Angwor:C [ED Staton dsrpton fever awa” Stat 2~The pow foe ero 1 a power nord of ho Const Wea be ocd oven nance conan rant 2, Tho folowing stalomonts conactydoscrbod tho power ofthe Stato to ts, oxcopt 1 isa powor inbront in every soveroign late Vo knpoded a char o burden upon parsons, propartos or nigh to ralsn rovanuos for tho wo ad support of te {Jovernmant and to onablo o dschargo is uncon 1, Tho Slate can exarso the pwr of tration ony Wits oxpresly montoned in tho Constuion 1. Mpnsios a loisltve undertaking rough to onactmant of laws by tho Congioss hich wil be implemanid by to Exocuti Branch of to goverment tough He Buroau of nimal Rovoruo to ras sevonun for tha iba in order to py to ‘costar oxpontos othe govoront Is. way ofcallocting ad apprtoning ho cost of gowmmont among hone who ‘no prilogod to enjoy ts bono & Anawor: 8 3. Which satomont is wr? Tho gon of taxaiton may bo oxorcisod by tho governar, spol ubdvison, and pubic tos. . Gunoral, hao no mit on tho amount of tax ha may be kmposed © Tho money contibuled a ax bocomes parol pie nds Tho pow to axis subject to heron and constuvonal tations ”4 5, Principles Anewer: A The pone of taxation can be exrsos bythe goverman ony. The ony inert ower wich may be eersed by publ uty companies i amine! domain. {Ca Thore 10 ft onto moun that may be imposed becaus s based on the eed fe govermet They enstindependent of the consti being fundamental power ofthe sla, except 3. Power of taxation «Power of eminent domain », Police power 4. Power of recall Answer: 0 They ext ndopandnt of tw cont” moans, the power can be erected iod bang grated bythe costttn ‘Stotement t: The constitution isthe source ofthe State's taxing power. ‘Statement 2: Te police power of he government may be exercised through tration, Only statement ts carect >, Onlystatement is corect Both statements ae corect 4. Boh statements areincorect Answer: B {Cl The power fo tx is one of tho ihornt powor ofthe Sie. They exist “inependont of he consti’ ‘Statement ¥: The Consiuton cannot take away be inherent powers of he Stale but may only prescibe is lnitations. ‘Statoment 2 No laws are necessary to confer the inherent powers ofthe State upon ny goremment exercising sovereignty Oniy statement 1s comect Oniy statoment 2s comet Both statements are correct Bon statements are incoect peer & Answer: ¢ {G2 The consul souce ofthe erent powers ofthe Se, nr, ‘ann fake avay such powers ‘The power to demand proportonale conbuton from persons and property to daray the ‘necessary expenses ofthe goverment a. Power of taxation «. Power of eminent domain Police power 4. Power of recall Answer: A 18 10. 1 2, 8. -_ Principle ‘The power to rege erty and property to promote the general walle ‘8. Power al axaton ‘. Power of eninant domain Poles power 4. Power ofrecal Answer B {C1 The nights raged in th exeto of he ibuert powers of ho Sale ae a2 Poa tx ein nan = Pretest Police Power = Privale/Propedty nights and Liberty iia The power to aque pvale property upon payment of just compensation for pute Purpose 2. Power of taxation Power of eminent drain Poice power 6, Power ofrecal Answers ¢ Wile o the folowing requires public improvement? Taxation IL Police Power ML Eminent domain 2. lonly «Monty Land ony 4. Ward only Answer: ‘The stongest ofa inherent powers ofthe govemmentis 2. Power oftaxaion Power of eminent domain i, Police power 4. Power fecal Answer A ‘The flowin are the snares among the Furdamerl Powers ofthe Slate exoept: ‘They canbe ablished bythe Const, They constiute he three mets by which the Sat ines with private property ‘ahs, «Each presupposes an equivalent compensation tothe inhabits, {4 Theemergence ofthe Site cares wiht hese fundamental powers, Answer: A {C1 The cenit is mato seus of he ree (9) hat powers ofthe Sat, ance cant aba sich pone ‘The folowing statement correct sales te citferences among te inherent powers of he sia, excopt? ‘a The propery ten under eminent domain and taxation are preserved but that of pale power is dasroyed. 9Prin oles © Eon as tea ortu gb wl ba (Goa dons nero is xa yo Pal pier ee tbo exerted ony y Be grein Bt eniel es res 4 Pa yoerepes 8h pat an erty hb eniet dona and ‘taxation affects only property rights. Answer B 14 vetoing sone tere? a “ase apes yond rive reno prikle Uicenthes 10 oxen decer wan he Sa Te Gaentfme Peover nota een te Cosi does roles dette pw ot Ine exerase of the power of taxation, the State can tax anything at any time. & The poweral tan mb Pepe Canton ae gens of pve nt aes ota poms © termed {Rew avo pris ht cmt gory tis tpn he Eeeinlereenintneent re bouneadiataa 1S The felowng se Me cerences between the Power of Taxon and the Power of Enron Doman erat Powel Tarton Powe ‘2 Exkaced proportionate conrbuson Property Be taken for public use 5 Govermenthas nocbigatonio pay Govtisa debioro the propery taken © opeesina community ‘operates onan incvival a ‘Aarbue of sore Fundamental power © Answer: Ch Distt been too power cesrbed abo. 16. Which fe flowng sictoment is not correct? The goverment the power to collect tares from its ‘asomatcaly possesses the power a (The gorenment an enforce cotibton upon scien oly when he Const Taso pove et nsepaaby th Sato thas the supreme power to command and from the =e enforce contibuton © Answer: 8 ( L nie les ‘Satament t: The power ax'ssupome,plenay comprehensive and witout ay it ‘case th since ofthe govermalanecessy Siaement 2: The dcreton of Cnges in mposng owes extends othe mde, metad and kn ofa, even fhe enastuhn provides obese. a On statomentiscorect 8 Onysiatomen2iscoret 6 Bathsatemans re coect 4. Bothsatomens ar icoret 1. Answer D {The power to tax, hough broad in nature, is ot an abe power. subject ‘nh as elas conten oto 18. How brads the power of the lgisatue to impose taxes? ‘Answer ‘Tha legislature has imited discretion ast the persons, property or accupatons tobe taxed, where there are no consttutonalesictons, provided he prope is win the terol jurisdiction ofthe sae pine ‘The legjlature has the right only dotormine the amount or ate ola, inthe absence ‘of any constitutional prions and itmay levy a ax of any amount asi ee fit a Answers 18 2are fase Answer tis tue but answer 2s fase Answer is false but answer 2is tue Answers 1 and 2are tue & Ans 19. Which of the following statements is comec? Taxes are pecniay in nate eos with ne existence ofthe State |i. mposed on persons and property beyond the tetra uisicton of the Sate 2. Lonly © land only i Menly ¢.lland tt Answer: © 20. Which ofthe folowing statements is comect? |. Ataxcannot be imposed without ear and express words fr thal purpose. |The provisions of a taxing act ar nto be extended by implication IIL the twisepesed ares assessed bore repeal othe aw may no longer be alee, 2. Landilonly «. Allofthe above D. land tony d. None of the above & Answer: A aPrieipls 21, Sian We ncn cf mney dr he goverment exces over ‘tac ad pe ower is bad ne needs fe goer Sate 2 Te aun orey edhe omnes ti of poner fener dan asd on eet of press an ope Fon Ph tntes andr rus he govern a. Only statement 1 is correct Oyama ice Ba tei cnet 4. Both statements are incorrect Answer: "0" (Gh Inthe Power to Tax, the money raed by to gorumment is based on ts neds, hie in he exrose of ts pace power, the bal the cost of rgusin ‘Usefins ofthe acthty may also bo used as a bss ndetering Ue amount ‘aed under police power. The more use Ie acy, he owes heart imposto, ‘Thar sno manny asd by Be goverment ne exes fs power of einent domain. The goverment shoud instead pay Ue propaty omer an amount ‘quaint the far vabe of such propery, cthriso known as ust compensation’ 22. \Which ofthe folowing statomenisis true? The power of laxaion and eminent domain are both exercisable ony by the {government an is pltica subdivision. 1, _Inpoice power, te ropet taken is preserved fr pubic use. The power af eminent domain is created by te oosituon, 4. The exercise ofthe power of eminent domain and paloe power can be expressly delegated to the lca goverment units by the law making body Answer: "0" Ch “Ais icaactEninet domain may b execs by pu ity companies, “B'incoret. The propery tan ine exercised pace powe is dsiayed ‘ater than presen fr pubic use °Ctsincaset Eien domain isan horn power, consequent content vant nt oq 23. SJalemont 1: People pay taxes which their government uses to expan its powers and \ertora domination Statement 2: People demand from ther goverment cain responsibilies and ben ‘roid the government with the means to cary them ou. Only statement 1 is comect. Oniy statement 2s corect Both statements are corect Bat statements ae incoroct Answer: B ange ° Prineples 24, Statement 1: Taxaton and Poice Power may be exercised siuitaneouly ‘Stolemant 2 nthe exercise of taxation, the State can tax anting at anytime and at any ‘amount 2. Only statement ts comet b. Oni statement 2s comet ©. Both statements are conect 4. Both statements ae inoret Answer: 25, Statement 1: The power of taxation must et be expressly granted, either by aw or by {he Constitution, before he State ay vali exercise. ‘Staloment 2: The Phippine goverment may subject the land where embassies of ‘ren gveranens a ated el prety ts. ‘Only statement tis corect Only statement 2iscomect Bot statements are conect Both statements ar incorrect eee Answer: 26, Slalement 1: Since taxaton presupposes an equivalent form of compensation, the shoul be a drect and proximate advanage received by any taxpayer before he could be required to pay tax ‘Stolement 2: Compensation under police power isthe Intangible felng of contibution to the general welfare ofthe people a Onjystalement ti corest b Oniystatement 2s conect Both statements are corect Both statements are inconect Answer: B 27. Wich ofthe inerent powers maybe exercised even by pub uty comparias? ', Taxaion «Eminent main », Police Power 4. Aandc = Anewer:¢ 28, Wich o te follwing may not aise money forte goverment? Power of axon be Police powerPower of eninent domain (6. Prvaizato of govemments capital assets Answer: ¢ 23. Whieh of the folowing ents, in some cicumstarces, may exercise the power of ‘eminent domain? 1 Bcc cooperatives | Lending cooperates. iL Water cooperatives NV. Telecommuniationcomparies a landonly Mand 1 ony kana onty 6. Ato he above & Answers 30, Statement 1: Pole power and the power of taxation are exercised pimanly by the legislature but not eminent domain, ‘Stslement 2 Taxaon and eminent domain interferes with pale igh and property but at wi poite owe. 3 Oniysatoment tis conect Oni statement 2iscorect Bath statement ae corect 4 Both statemenis ae inorect Answer: Cr Alite 3 inherent powers ote Site ae ogtatie happen AN te 3 mheran pow tela wih pale is and propery. Hower, te pc power the Stalnereres wih anvalefopery gis and Iker. ‘THEORY AND BASIS OF TAXATION 31. The existence of the government is a necessiy and hat the state has the right to come allindvduas and propery within ts ims to conte 2, Basisoflaxation ©. Scope of taxation ». Situs of taxation 4. Theory of taxation Answer: 32, The recalls of support and protection between the people ad the government 3, Bass of taxation ©. Scope of taxation », Situs of taxation 4. Theory of taxation a Principle Answer: A {Ch Tho san cote as fa he sutct ofaaen ordre # may be abl 0 pmo fncons ef ovement To liars, onto cer and ay taxes» ‘rer tha hay may be stewed 1 ho ejymart of th berets of crpanaed city The ary sanned the Onin of Ste Relators whch mens {ares are wat wo pay ors ited scaly (Commoner v Ad) 58, Which statements below expresses the ifebloot theor/? 2. The assessed taxes must be enforced by he government The underlying basis of taxation is goverment necessiy, for wihout taxation, 2 goverment can ether ext no endure Taxation isan atirary methodol exacton by those who aren seat of power ‘The power of taxation isan inherent power of the sovereign to mpose burdens upon subjects and objects win ts jursdicion forthe purpose of raising revenues 4 4 Answor:B PURPOSE OF TAXATION 4. Tho pineal pupa fan: “To encourage the growth of home industies through the proper we of tax incentives. ', Toimplemen the poice poner ofthe State. Toreduce excessive inequalities of weal 4. Toraise revue for govermentl needs. & Answer:D 35. Aer having been iformad that most f tha massage palorsin the cy are being used as fronts for prosituton, the Sangurang Pariungsod of Manila passed a tax ordinance sibecing massage parlors wii is juidicon to such “onerous tres” thal leave them ro ober altematve but to stop operating. The passage of the arinance is valid exercise of- a Taxon 1b Police power Eminent domain {6 Pole power and power of taxation Answer: D {Cl The lesion tranch one LGU passed a ax ccna’, 2 va exer oh {LGU pow: ota. However. the main purpose of to tx rinance was a 0 rae rovente but to inpede the progress of gal massage pars, 2 valid exer opie power rough axaI IIIIIEDIDEEIE—OE BO SS —— Ee Princes Prine 36. Statnent 1: A provision on taxation inthe Phippine Constuton i grant of power. ‘Statement 2 The power fo tax incudes the powe to destroy. ee reg — “Th flovng tbe aspect taxation ‘Statement 3 & a = ees Mt. Tr euing or mposton of ta taxon persons, ropry or excises AB 1 Colecion of axes aeady levied ‘Statementt: Tre Tre False False Mh Sufficiency of governments sources to sabsy its ; rons ou erpendre ‘Statament2. Tre Tre Tne Tre @. |. and it c. tandill only Salonen Te False Tn __Flso 2. Venton 4. Wan tony © anemec © Answer {Concho poss on teaan a my iatns ino xo fe fovet atte Se. br ao osteoma 41, Th fica eno an oa urd by lw in ascrting te amex ox ue Sumptuary purpose refers to non-revenue purpose, hence, not to raise fund forthe under the law from a taxpayer is. ae . poormer, Asesren! ® Defsengy 2 oat a 37. Statement 1: Income tax coliected from the taxpayers is the main source of revenue of the / meee, vee fo powemment Answer ks ‘Satomen! 2 Tae ocd rte mai souce revenue fhe govern ot 42. Twat s excised bah by he eglav ad exccuve banch of he govenment =e ieee wy rb aca Cos? Sistema: _Tiwe_falbe_True_Fatso_ 2 hing amet tr Pressing nis otaion Answer 44 Assesment xaby 3B. A tax ast be posed fora ube pupee. Wich of the folowing I not pbc Anewer:D punose? 2 Natonaldeense 4, Fngthe tx ato be mone is est descbed as (a 2 Pin ecteaton a axodminttten ape. Improve tsar industy Tact han Nene of ches Aspe ron vc coud be delegate 4 Faneion at cod be enero byte enacbve branch © Answer: fin pape E Answer Cl ‘Wis not the immediate resut but the uttimate result that determifies, whether the we Bi ‘purpose is publ Or not. tis nt the numberof persons benefted but sth character 44, Allo he following are legislative aspect of taxation except the pupase tat eles the pb characte of schon. Wal sa lowed that. thas no Sok ope ete. Pk puposo i detominedby thous fo which ‘Selection of te abet or subject of tax {te tax money is dead. anos to exmmunty in general, en i fr puke See seep ‘oman cues ove Wow 4. Prescbing the general es oftaxaton, ‘ASPECTS OF TAXATION 3. The lenying and imposition of tax and the colection of tax are processes which onsttule Answer: B the taxation sytem © Execute faction 2. Basis of taxation ©. Nature of taxation 45. Allo the folowing ae administrative functions of taxation except Aspects of taxon 4. Theory of taxation tn euatu olaientioe Equalzaton t Answer: B i. Equalzatn of ssessnenPrin wpe {© Valuation of property for taxation 6 Colecton of taxes. SS Answec A 45 Wich ofthe folowing is comet? Logisaive Administrative Fang of tax ratos Yes Yos: ' Valuation ofcbjetoftax Yes No © Calecton of ax Yes No 4. Assessment ota bly No Yes & Answer: D “Ais wong, ing of xa sat nadia fncton S.Biiswrng. Vatotion object san admistatve ctor, nt lve © ‘Cisweng, Calton is an administrative ncn, nc ogi 47. The Commissioner of ltemal Revenue is granted certain powers under the Tax Code. ic ofthe folowing snot a power granted to the Commissioner under the Code? Interpret tax las and dee tax cases Issue sunmons and subpoena Enact taxlaws and make amendments Make assessment and prescabeadaional quirements Answers © Enacimant and amoncnont of tx ls ae fncons exec oot by the rout ranch sich the Cormier otal Revenue (IR) bu by Ihe logitine Canc of he govommont 48. Which ofthe folowing statement is comect? ‘2. The BIR Commissioner as the power to interpret the provision ofthe Tax Code without a need of evew by the DOF Secretary. b. The BIR has the auhoniy to presotbe ditional proceduraldocumentary ‘eauirement for taxpayers. The BIR stall have commissioners and a deputy commissioner. 6. The BIR Commissioner can delgale fe poner to abate tax lailes. Answer: 8 LLGU'S POWER TO TAX 48. \Where does taxing power ofthe provinces, munipalis and cles precade from’? ‘a Constituitonal gant >. Leglatve enacment &Presidenial decree or Executive at 4 Local egslaton st 83. Principle Angwor: A 1) Tha poror'o tax in tho ana govern isan tran power In corr. th power ‘lta of tha LGUs deagated pon, grated by a grosion th Cont How wlth foal govermont unis be aloo oxarisa thor taxing powers? By local lgislaon b, Byautbontyconferad by Congress ‘© Byte issuance ofthe Department of Finance {By ha hep ofthe Bureau of niomal Revenue Answer: A ‘When the power ta taxis delagated tote lcal goverment 1. Only he local execute can execs the power. b, Onl the legislative branch fhe local goverment can exercise the power. ¢Thelocal exzcutve andthe legislative branch ofthe local goverment can exercise the power. 4. Nether the local executive ot the legisatve branch ofthe local government can execs the power, & Answer ¢ {2 The aspect o tration fonig, assessment and colactn in the ratnal ova i ao _spacableo he power talon by he LGUS. onying= cal eta ranch ‘Assessment and lech = cl execute branch Leming focal government axes may be exercised by The local executive only ‘The legisaive branch of the local government only ‘Te local executive and he lgislaive branch ofthe local government unt "iter the loal exeoutve nor the leisave branch of the local govemment can everise the power. epee Answer: ich ofthe following statements snot comect? ‘Only the atonal goverment exercises theinerent power of taxation. . Local goverment unis coud exercise the power of taxaion through legislated ‘delegation. ‘c._Natonalgisiaton i exercised by Congres. . Taxlas are nether potical nor penalin nature, & The expostfaco' ris nol applicable in taxation. None othe above Answer: D 61. On January 1, 2017. the Congress enacted a law increasing te corporate income tax ‘rom 30% to 40%. The law provides retroactive effect starting January 1, 2010. The Pippine Chamber of Commerce questons the vaidiy of the law. Is the law ‘constitution? ‘2 No, because the retroactive efect ofthe law constutes depvation of ight to ‘property of corporation without due process flaw. . No, because the 40% interes rats vation of due process of aw for being ‘excessive and unreasonable. & Yes. because the power of taxation isan inherent power of a sovereign State adits based onthe eblood doctrine and necessity theory. 4 Yes because the power of taxaton is an essentially legislative power wihin the exclusive prerogative of the Congress that its wisdom is beyond the reach ofthe ‘Supreme Cou. Answer: B Principles 62, The 20% corporate income tax is increased to 36% bythe Congress for the purpose of raising revene tobe used fr national oad expansion projec near Bonfaco Goal Cy 8 pvt corporation. Is he exersedof he taxing power uncrsitutonal? Yes, because taxing power must be exercised exclusively fr pubic purpose without any incidental Benet to any private entity b. No, because the ts exercised drct for public purpose and the benef to 2 privat ett sony incideria Yes, because the increase in tx ate constiutes deprivation of rghit o propery of corporation without due process of law fr being excossive and unreasonate 4. No, because the constuton doesnot xoressl state ha the powe ol taxation ‘must be used onl forpublic purpose, ths, it maybe used to benef private cent, Answer: B (Gharactentsties/Elements of Tax 163. One of the folowing snot a characteris oan element of ax, ‘nis leved by he legiietue {is payable in money or inkind Its proportonate in character Its an enforced contrbution Answer: B £4. ig pdt nate. pox mayo lg, ee To local governments or pol subdvisons 8. Mhenalloned byte Corsten When delegation relates merely to administrative implementation tat may cal for some degree of iscraionary powers under a sot of sufcient standards expressed by lw or impos rom he policy and purpose ofthe Act 4. Alone choices Answer: ‘Sound Tax System 15, lof he flowing, except one, are basic pinciples ofa sound taxation system, a. Fscaladequacy Administrative feasibity ©. Theoretical use 4. _Ibherentin sovereignty & Answer: DPrinciples 168. Under bis basic principle ofa sound taxation system, the government should not ncur a ett ‘Theoretical justice ‘Adransratve feasbity Fiscal adequacy None ofthe above © Answer: 67. The basi principle of a sound taxation sytem, wher, “Taxes must be based on the taxpayer's abilty to pais cae ‘2 Equaltyintaxaton ——_¢. Theoroicaljusice . Ability 0 pay theory. Equity in taxation = Answer: (68, The tax law must be capable of convenien, just and offecive adminisalon 2 Theoretical justice b. Fiscal adequacy & Adminisatve foasbity Rule of appertionment © Answor: Double Taxation 69. Tho folowing constute doubl taxation, excopt ono 1. Both axos are imposed Inthe same amount ‘Both taxes ao lid for he samo purpose Both taxes ao imposed by tho samo taxing authorly 4 Both taxes ao imposed upon the same parton Anwar: A 70. Which is nota doubio taxation? 8 Aensor of propery pays a roa! ostal tax and income tax on tho samo property. 1b Impositen of tax on tho fnishod products and tho raw matarils usod In tho rocco oth sid rished product. Imposition of tax on corporat income and sharobolda’sdvionds from tho samo corporation, 4 Alco abov, & Anewor:D RO Principle 71, Ono ofthe lowing is afte statement abou double taxa, Which is? 1. There o constional pron on dol taxation b, Dict dupiate tration is avait dofena against a tax measu His volvo of the equal protectin cause Roane of ry oft ers cf drt double xaon makes re ee 4. 8.20% fal withing tax on interest income on bank doposis and a 5% gross recep tax on banks is det dupes tacton, Answer: 172, ich of he folowing statements is coreet? 2. Iie double taxation violas the Constvinal provision of unfony and equal protection Theres direct double taxation in taxing te come ofthe corporation and again subject the potion ofthat ince declared scion ofl tax © _Isiac ouble taxation i lagal a ong as there sno vation of equal protacton and unormiy clauses oft Conttuto, 4, Aothe above 4 Anawors 73, The vv mode(s of avoiding occurence of double taxation ilare a. Rocprocal exemption, ether by lw or ely b, Tax credo frign taxes paid ©. Doduction fr frig tas pala 4. Alot tho above Answer: Inhoront and Constitutional Lintations 74, Soloment 1: Inherent itatons rte natura restictons to safeguard and ensure that {tho powtr of taxation shal bo oxacsed bythe government only fr tho betarment of the ‘people whose intaoat shoul be srved, rhancnd and protect, ‘Stolamort 2: Constitutional iitations ar provera of tho fundamental aw of he land ‘hal ost th evra planary, unlined and comprehona exuciad by te Stato of ts inornt power to tx ‘Only stlomat i coct Only sllemant 2s conct © Bot stlomanis ar coroct Both stalomans are incoroct Answer: %Principles a cre dst of an? 75 Whe ogc adeno fb ere le goer 2 Nees an pti prose 2 Sipe dt tee power fe Se 4 Those here powers te Ste & Answer: © Tw power to ta natn abso wor, suit nor 3s Wl as, consonant 76 Which imitaon on the power of taxation inherenty imped that ho Site's primary ‘onoeis fo the common good afte people? ‘2. Equally taxation, Due process of aw > Equalprotecton of wd. Forpubic puposes Answer: Tr, These ae resscons imposed bythe Costituon. Inherent imatons ‘Constuona imitations Basic pncipls of sound tx system None of choices Answer: B 78, Which of the following i 2 constitutional imitation on he power of taxation? | Terioialty of axes | Publi purpose ML Legitabvein charactor IV. Non-approptiation for regicus purpose ‘a lonly . land V only bony 4. Wand only & Answer: B 79. “Equay in taxation’ means: |. Progressive sytem ol taxon shall be applied. |The tax laws and their applcaion must be fair, jus, reasonable and proprtionat to one's ably to pay. 1, The tax laws shal gve emphasis on direct rather than indict taxes or onthe _abity-oay principle of taxation, 2. Lonly . only tony Mand © Answer D Prin pple ‘Statement 1: Uniformly inthe imposition andl: collection of anes means that a taxable aries or kinds of property ofthe same dass shall be laxod atthe same rate. This requiement is complied wih when the tx operees wih tbe same force and ofc in ‘every place where the suet fis found ‘Stalomont 1: Uniterity ru is not violated when diferent articles ar taxod at diferent ‘amounis proved tha the rates undorm on the seme class eveyutore wi al pocpo a altinas 3, Only slatement i conect, >. Onlyslatement 2s conect Bol slaloments ar correct Both slalemants are incoret & Answer: ¢ Satoment 1: Ata s deemed to have satisfies tbe unlomily re when I operatos wih ‘he same force and effect in evry pace wher tre sutect may be found. ‘Stelement 2: The equal protection clause ofthe Consttuion forbid clasiiaton basod ‘on real and substantial difarencas having a reasonable rolabon to tho subject of the particular eisiaion. ‘& Only statement is corect 1b. Gnlystatement2s conect Bothslatemens ae corect 6 Bothslalements ar incarect Answer A Wich of the fooning statements corecy desorbed “Equal protection couse of the Consttan egaeg he goverment poe x? ‘Al persons. subject to legslaton shall be tated aike under sina ‘cumstances and conditons, bah in the prvieges conferred and labiies Imposed Il, The purpose is fo protct persons belonging to the samo ciass against intentional and arbitrary dscriinatin, |i, There is denial of equal protection of laws i thee Is dscrnintion in the ‘implementation of ax laws, 2. lard only «. Nandi only land only .Llland & Answer: D ' fundamental rein taxation is that The property of ene courry may nol be taxed by another county’ Tiss known as a. lnlematioallaw b. Reciprocity, L dinciples 6 elem comty 4 leestona ntittion © Answer: C the Phigpne goverment rete tx wittoling on te sala of Fitna open tone tan Erase Pres? 2 hs because sw vole te on hematin comity. No because fe Pippin goverment woud pose the requirement of tx vetoking on be sires of Fgna employees wating in te Piipine Entassy n te Prigpoes, 8 woud in fled requ tal the American rverment be coined os be wibioting agent of be Phipine {Perera 25 te taxes on be sles lhe Flpcn enpoyes are crc bone 4 Nanette ove & Aoswer:B £85, One fe folowing isnt Constuional imitation onthe power of taxation? 2. Ezemptn fom taxes of revenues ard assts of educational instutons, incuding (ants, endowments, donations and contributions. >. Non-mparment of ie xisicton of Supreme Coutin ax cases. Exemption ol fhe goverment rom as, 4. Nen-rngement of eiius freedom and worship. % Answer: 2%, Ths tems fromthe prince that we pay taxes forthe protection and senices provided be gaat wie ck rot be poe use e torial bandas lhe 22 The taximposed should be for public purpose. Thee shoud be no irproper delat ofthe taxing power, The power to taxis iit to the terra uriccion ofthe taxing government 4. Exemption of goverment ities rom taxation. & Answer: ¢ 87. Compliance with procedural requirements must be followed strictly Io avoid colison betwen te State's power to tax andthe individual minteapecaraiee ual’ recogize rights. Equally in taxation ©. Non-ningement of reigious freedom 6. Non-paimen of obigations and conracts Principles 4% nswer: A 28, Nopervon sil be ironed for non-payment thi. 2. Progeny lax Pola Excise tax 4: Income tax 4% Answer: 28, This roqutes that all subjects or objects of taxation, silat stuated are to be Weated ‘lke o gut on equal footing bot in pridleges and abt. 13, Due process ©. Progressive taxon Unitormity| 4. None ofthe choices & Answer: 8 90. The following ae the consttutonalitaons on the power of laxaton, except 2, Only Congress can exercise the poner of taxation. i Nonimgaiment ofthe cbigation of contracts, Taxes are nat subject to seo or compensation 6. The nde of taxon sal be undo. Answer: ‘Exemption trom Taxation ‘51, Nolaw granting any tax exemption shal be passed without the concuence of — ‘8. Majoty ofall members of Congress b. 28 vole ofall members of Congress © Yvote ofall members of Congress 4 Unanimous vote ofall members of Congress Answer: A (2 B's incorect. is used to override the elo power of the President. 1 Ie tax statute isnot eraining to tax exemption, the required voles mjrty of the quorumipresent. 82. Mapagbigay School, a nonstock non-proteducatonalnstuton, bought fom Pedro, 2 resident clizen his residential house and lot. Pedro would be using the proceeds of fhe ‘ae to buy his new residential house and lot. On the ther hand, the schol wal use the areal of land to constuct anew bulking forts dormitay forts medical students. Which ofthe folowing slatements regarding laity forthe payment of capa gains tax | Pero is able to capital gains tax. However, if whal was sold was his principal residence, he may apply fr tax exemption, provided that he complies with the requirements lid down nthe Tax Code,Principle | Pedro snot abe tot capital gains tax because the sale was made in favor of ronsiock nonprofit edvcatonal institution and thatthe ropoty wal be usod for ‘eccatonaly-eatd cons, ‘WL Pecos lable to capita gins tx becouse the taxis imposed on the sll; thus, ‘rotwtstanding any exemption enjoyed by te buyer, tot sal illbe Imposed, a 6. tantly 8 toy 4 Landen > Answer: D i. 83. As an incenve fer nvesos, a law was passed ging newt established companies in ‘eran economic zone exemption fom a txes, dues, fs, imposts and che charges for pond of twee years. ABC Corporation was aranized ard was granted such incanve. In the course of business, ABC purchased machancal equipment from XYZ |ncorporaed. The later, i its inary business dealing, is subject 0 vat. XYZ In, clas, However, that since it od the equipment to ABC Garp which is tax exempt should not be able to pay the vat. Isis li tenable? No, Exemption fom taxes is personal n nature and covers only tates for wich he taxpayer grario is crecty fable, Vatisa taxon the seller who isnot exemol from taxes. Sie XYZ In. s rect lable forthe vat and no tx exemption piviege fs ve ven him, as claim that the sais tax exapis not atl. Yes, exemption from ax shoud not be dscriinalry in nature A seler of goods or ‘sevice fo tax exempt Individual or enies shal be accorded the same exemption rride by aw oa buyer. © Yes, epelng uniformity no, None ote above Answer A ‘4. sen Dela Cruz Memorial Hospital is 3 100-ed domeste hospital rgeized fr charable Purposes. However, cut of 100bed capacity, Abbeds are aloted for paying pains, Paying pais, however, ae being used to improve he facies of the hoop. Can seid "osptal claim exemption fom income tax a wel 2 cl property lax? Anant: Ya, onl an cm eempon fone popety a. As a gene ‘principle, a charitable institution e thew nro ony teatgen Aco 2 Ta eps et 10 a on lan, cng “with the “predorninance test”, = 2 Gi ett wes ot Gites anes 98. Cd les ‘© Batharswers ere comect Bath answers ae incorect Answer: ¢ © Exeter: roroion 0 regis, CHARITABLE and cational intensely eget o mepartis tat ae acy, decty or exe used rar (CHARITABLE e eccatons poses.” Omerstp nase dosnt cous bt ‘abe he cof aut det and excise use such pope ‘Aran hsptlisa speci export etet operon ato 0 Saint Marys University (SMU) sa ranstock, ono educatoinstuon reper nth Secures ard charge Conmssion (SEO) 28a cxpoaon. Forth yot ended December 3, 2018 reported renal income emouning a PISIM fem vat enon, leasing partons of he sid corporation. The Bureau of rtemal Revenue (BR) assoseed SMU PAEM defeny income ta er etl income eames. Ise aton of eI proper? 8. No, because a prepay eduction instuion shal be subject ony to 10% ‘relerntacorrae neo ax td 5. No, because al erenues of monte, nen pot educational instuion shat be exempt fom taxes and dues 0s lng as they are used actualy, dety and excsively for advan puposes. & Yes, bcause leasing of prope not acl, ect and exSusiely raed > educational puposes, 4. Yes, because taxes ate the blood of he govenment and tax exemptions are ‘consued sticty aginst etapa and erly in aor ofthe government Answer ¢ 2 Grempt tom RT: Evarpton on regis, chatte and EDUCATIONAL instutons sty apical 10 popes that are actly, dict” or exclusively used er regis, chara or edicatona puposes Onno nel doe nol cour, utr, eft of acta, ect ad excuse woo sch per Mies the onner of 5,00. , parc fla locate n New Manila, Quezon Cy. He ‘eased the prpery for 50,000 year to religious congregation fa a pero fen (10) years. The regiousconeregaon but on 1,000 sq.m porion a seminary and a chapel \ahch used in connection wi is reigous aces, I aso cansvucte ten (0) soy bung on the remeinng 4000 sq.m. which it renied out fo venous commercial establishments, the proceeds of which go ote suport ofits vious seminars located ttroughou the Philppines. These soninaes ae cxganzed as nan goft and nostock ‘edvcatnalinsittons. aPringles io he lowe te ac ax mpl he regi dal wh pect o f ae ‘rom payment of income ta rental ete i exnat et on ‘eis rence ete cctv We sp Is VrosSeniaes Std aot Pps. 0 The ious conogten exe fom pane ree aes on rer ree pled etn tan 3 ets els wr ed aie 1 The regaus congegaon is sujet lo Income taxation. The constuonal tax exemptions refer onl to rel propery that are actualy, drety and excusvly used for religious, chartable o educatorl purposes, and thatthe only consttutonaly recognized exemption fom tazaon of revenues are Bose med by non-profit, nan- ‘tock educational instiutons which are acualy,drely and excsvey used for ‘educational purposes. 4. None oft above & Answer: C. {The 5,000 sam nae by theres constaton wil be red 3 flows: > Tho 100 oy m & oxo fom RPT bocce Iie acy, daly nd exces sed reigns poses. > Hower, be reming 400 sg. m leased for commer! puposs is ‘stjecto RPT, E or esto exemption of eal omned oF charabl enites fae ene Properties owned by egos, or © Use af heel propery b. Onmership ofthe real pepety 1 RRA ws amqenore meme ; ee” ene cos i | 4. Thathe wil derive no bent rom he tax. Answer: ‘SITUS TAXATION 100 I traly means “place of taxation” the county hat as the power an juritcflon to levy ‘and colt he tax 12. Basis of taxation », Situs ftaxaton ©. Seope of taxation 4. Theory of taxation Answer: B 401. Which among the folowing concepts of taxation isthe basis forthe situs of income taxation? 2 Lilebood doctine of taxation Symbiotic reatin inaction ‘© Compensatory pupose of taxon 4. Sumpluary pupose of taxation Answer B 102, The leas source of tax us: 2, States «. Revenue regulations », Presidental decrees 4. Tax teats or conventions Answer: ¢ SOURCES (er of piny) > Consisen ° Tealy Sto Low ing ji decons © Adminatve ings, evenvereqiatns, memorandum ra) 103, Statement t: A revenue regulation must not be contrary othe provision ofthe law that i ‘rpm ‘Statement 2: A revenue regdaton cannot expand the provision of the law that implements by imposing a penalty when te law thal aurizes the revenue regulation oes nl impose a penal. ‘8 Only statement is conect Only statement 2s conect Both statements ae corect 4 Bothstatemenisaeinconect, * Answer: ¢104. Which of the fotowing isnot a source of ou tax laws? |. Supreme Cour Judicial Decisions i. SEC Regulaons and Rulings ML Breau of Customs Memorandum Orders IV. Administrative rules and regulations V. Legislations, tax treats and tax otinances Vi Opinion of authors 4. lland Vi only «land Vl only th. Mand V only 4. None ofthe above % Angwer: 105, Which o the folowing statements is cont? ‘2. Revenue regulations have the force and effet of law and a memorandum order of the Commissioner final Reverue, approved by he Secrelay of Finance, has the same fore and effec as revenue reguiatos, . The revenue requations which aren confi with law) are nul and oi, The interpretations ofthe former Secretary of Finance do not necessary bind ther suocessors 6. Alot the above. © Answer: B TYPES OF TAKES 108. The Pifppine income tax system has the following features, excope 4. Comprehensive tax sus by using the nationality, residence, and source rues , The individual income tax. system is mainly progressive in nature © Indrct rather than direc system, 4. Semiglobal and sem-schedular system. “Answer: C 107. Tax of fix amount imposed among all persons residing wibhin a speci temiory wehout ‘gato thei property or occupation they may be engage ‘a Personal pollor capitation tax. Excise tax 1b. Property 4, Regressive © Answer: A 108, Tax imposed on personal or real propery in proportion to its value or some other ‘reasonable method of apportionment Personal pollorcapitaiontax 6, Excise tax b. Property 4, Regressive Answer: B Principles if 109, Which of te folowing isnot an example of excise tax? 2 Transfortax Real property ax b. Sales tax 4. Income tax Angwer: "10. Tax whichis demanded from the persons whom the law intends or desire to pay it a. Direct «. Excise b. Indirect 4. Income Angwer: A ‘11, Tax which is demanded fom one person in the expectaton and intention that he shall indemnity himsel at the expense of nother a. Direct Excise b. Indirect 4. Income Answer: B 112. Oneis not a drect tax 2. Immigration tax © Income tax B. Translertax 4. Value-added tax Answer: D 118. taxon business is 2 Dioct tax Property tax b. Indcect tx 4. None of the choles . Answer: B ‘14, Tax hich imposes @ specific sum by the head or number or by some standards of weight ‘or measurement and which requres no assessment other hana ting or casifcation of the objects tobe taxed a. Adsalorem | «. Excise b. Specie 4. Revenue Answer: 8 115. Tax which isa xed propoon ofthe amount or value ofthe property with respect 0 which the tax is assessed a. Adsalorem © Exise b. Specie 4. Revenue Answer: A 6Prin 116. This ype of tax requies an assessment ofthe valve ofthe subject of ax. A 8 O_O. Advaremtax Tne Te ‘False fetax Tue Falso__Trve F Answer "17.4 82 mining operator. The tax he has to pay s based on the actual value ofthe gross ‘output or mineral products extracted 3. Ming tx | «Rental D.Royaltes| 4. Ad valorem tax Answer: ‘18 Tax levied for paniouar or specie pupose imespectve of whether revenue is aclualy raised ornot a. Revenue tax © Specfic tax Regulatory tax 4. Ad valocem tax © Answer B 119 Tax based on a fix perontage of the amount of property, income or eer basis fo be taxed a. Progressive Regressive >. Proportonal 4. Indirect "Answer B 120-Taxwhere the rate decreases asthe tax base increases a Progressive ©. Regressive >. Proportonal Indirect Answer: ¢ 121, Taxwhere the at increases asthe tax base increases: Progressive . Regressive >. Proportional 4. lnirect Answer: 122 Aax dassted as a regressive tax, ‘8. excise tax «vale added tax . rea estat tax 4. none ofthe choi Answer: 123. Which ofthe fliovng taxes is aay proportional? 8. vale added tax estat ax income tax 4. donors tax % Answor: A '124.\hich of the folowing individual taxpayers isnot covered by progressive tax? a resgent citizen c.nonresident allen engaged in ade > resventalen 6. nonresident aan nol engaged in rade Answer: D (1 NRA NET er suecto poporaal taxol 25% oft gos income TAKS, OTHER IMPOSTONS 125.Taxas distinguished om icense fee 2. Non-payment doesnot necessary render the business iega >. Areguatory measue ©. Imposed in the exerse of pace power. 4. Limited to cover costofreulaton, Answer: A 128. The disincon of tax tom pemitor eens ee is that a toxis| ‘Imposed for regulation, . One which involves exercise of pace power ©. One inwhich thee i general no it on the amount tha may be imposed. 4. Answer not iven, © Answer: ‘21.Which of the folowing tas descbes this statement ‘that the Site has complete Aiscreton on the amount a be imposed afer dstinguishing between 2 uslul and non- sell activity? a Tx eto License Fee 4. Customs diy Answer 8 ‘The basis fr imposton fhe charges above are a olons: Tax = Needs ofthe State Police Power = Cosofregaton and usefulness ofthe acy Tol = Cost of constucton ‘Customs duly = valuation of imparted goeds aL Pincip 128. Tol as cstrguished rom tax. a. Demand of sovereignty Imposed by goverment ony b Amounts based onthe cos of constuction of public improvement used 4 aid forthe support of the goverment © Answer¢ 128. Which statement is wrong? 6 6 ‘Alaxis 8 demand of sovereignty. Atolis2 demand of ownership. ‘A spacial assessments tax. (Customs duty atx Answer ¢ 1 The amok colectad in special assassment sna ined fr public use but ‘ater fr tw manienance ofthe provements inoced by the goverment (nye owners of he popes sjced lo special sessment ee the ons banang fom such assssmert, bees, 0 130. Wich ofthe folowing isnot a characteris of deb? a, b 4 Generaly arses fom contact Payable ony money. Assqrable Impasormentis rot a sancon for non-payment. Answer: B 131, Debt as stngished fom tax ® © 4 350d on ew May be paid in and Does no raw interest except when dlnguent Generally not subject ta set-off or compensation Answer B 132 "Schedula system of income taxation” means Al types of income are added together to artive at gros income. Separate graduated rates ere imposed on deren types of income. Capital gains are exctuded in determining gros income Compensaton incime and busness/pcessional income are added together in ‘aman at goss income. + Answer B Prneiplo 183.Under the Credible Winhoking Tax system, whlch of the flowing statrrents is incor 2. Tates wield on cenain income payments are Intended to equal of atleast prone the ax due ofthe payee on sad inca, , The recpent of tho income is no longer requed to fle an corr tax rotur s resenbed under the Tax Code, © The payee is requred to report the income and pay te diference between the tax the ad he tax de thereon, Taxes witht under this sytem ar cedtate in nature. Answer: B 194. Wied of th following statements i comet? 2. Wihboling tax fabilty may arise only when the agent has possession, custody or contel of he funds wath. . The witinoing tax system was devsed to provide the taxpayer a convenient manner to meet his probable income tax Ubity and to ensure collection of the income tx wich could oterva be lost or subslantly reduced trough fro to fie te conesponding retas Withholding ax system is designed to improve the govemment' cash ow. a. Alot te above Answer 0 135, Under the Final Witholing Tax system, which ofthe folowing statements isnt corse? ‘2. Income tx witht by the withholding agent is const as afl and fal payment of the income tax dv from ie payee onthe sad income ‘Theat for payment of te tx rests pray onthe payee asa eclen of income. (6 Incase of ele to witihold the tx. the deficiency lax shal be cotected from be \ithholing agent 1. The payee sno lnger required to fl an income tax retun for he parol income Answer: B 136, When the refund of a tax supposedly due to the axpayer as already been bared by ‘rescripion, andthe said arpayers assessed with tax al presen. he two taxes may ‘be sto win each other. This doctine is caed a Setoffdoctine ©. Tax sparing dosing >. Doctine ofreipeity 4. Equitable recoupment Answer: DFrag les 137 Rule ot No stone against he goverment means: ‘Rule ow atin the perfomance fs goverment inctons the late canol be topped by he reid of fs agents andfices. The govenment isnt esoped by the mikes or eros os agents; eroneous appicaton and enforcement of lw by public ofcers do nt ack the subsequent correct applcaton of states. © Bona ani Nother sorb Answer: (INTERPRETATION OF AMBIGUITIES IN TAXATION 138. tncas of ambiguity, tx laws imposing atx shal be interpreted Sticly aganst the taxpayer Uber favor of te taxpayer Liberal in favor of the goverment 4. None of the choices > Answer:B Ch Rus incase of ‘Area n Ux ans = Sty against the goverment, Hera fave of the *SAGLT) nae Arts ia omer = Sty ht be ae ey {aver of the goverment (SATLIG). “ “i 139, Which ofthe folowig propositions may be unienable? ‘The cour should constue a law granting tax exemption sil agains the taxpayer. b. The cour should consi a lw granting @ municipal corpraton the power to lax ‘most sy. The Supreme Court has jurist o review decisions of the Court of Tax Appel. 4. None ofthe above © Answer: B Wo vet ne ong seme 2° here dbs wal debi he it of ate, be dx mus be ‘he ot apn etapa info ee wing ». ‘The eeplo sonore nb tac aes ml sco eat he one cay te exon ¢ Teremette pot who kr ede vod tat papose 4. Allofthe above. bi Answer: L ra 14. In cases of deductions and exemptions, doubs shale resolved ‘2 Stel against he taxpayer Strictly against the government ‘Ubon favor ofthe taxpayer 4. None ofthe chicas & Answer: A 142. Statement 1 In case of conic between a everue reguation and the provision of the ‘Natonal intemal Revenue Code, te ltr shall preva Stament 2: The revocation of a revenue reglaton cannot be made retoacve even i tha eason forts revocaton i thats erroneous or contrary to lw. 2, Statement {is cect Statement 2is wong Both slatemens are corect _Sialement is Wrong, Statement 2s comect 4. Both statements are wreng Answer 143. Which ofthe folowing is corect regarding the pupose(s) of revenue reguations issued by the Deparment of Finance through the Bureau of intemal Revenue? 1. Topropery enforce and execute the laws b. Today and explain the tow 1 Toca ino effec the aw’ general provisions by providing deals of administration and proved. 4. Alofthe above © Answor:D ‘44, The Secrelay of Finance, upon recommendation of the Commissioner of lntemal Revenue, issued a Revenue Regulation using gross income as the tax base for ‘corporations doing business in the Phiippnes. The revenue regulation i 18 Valid. Coporaons are ateady taxable under our exsing tax laws. Hence, the acon of the Secretary consitutes administrative acon only which is wihin his powers. 'b. Valid if he tax sine to gross income without deductions. Such action is not tenlamount to changing the amount ofthe tax 2s said amount ultimately depends on the taxable base. ‘© Not valid because the acton of the Secretary constitutes lgislaion which is excusvly win the powers ofthe legiative branch ofthe goverment 4. None ofthe above & Answer: 0 st