Northern CPAR: Taxation – Fundamental Principles of Taxation
NORTHERN CPA REVIEW Room 412 Pelizloy Centrum, Lower Session Road, Baguio City, Philippines Mobile Numbers: SMART 09294891758 & GLOBE 09272128204 E-mail:
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REX B. BANGGAWAN, CPA, MBA TAXATION FUNDAMENTAL PRINCIPLES OF TAXATION Taxation 1. As a power – refers to the inherent power of the state to demand enforced contribution for public purpose to support the government. 2. As a process – the legislative act of laying a tax to raise income for the government to defray its necessary expenses Purpose of Taxation 1. Primary – to raise revenue 2. Secondary a. Regulatory - To regulate the conduct of businesses or professions - To achieve economic and social stability - To protect local industries b. Compensatory - Key instrument of social control - Check inflations - Reduces inequities in wealth distributions - Tools on international bargains - Strengthens anemic enterprises - Promotes science and inventions - Provides incentives - Uses as implement in the exercise of police power to promote general welfare The Life Blood Doctrine Taxes are indispensable to the existence of the state. Without taxation the state cannot raise revenue to support is operations Nature or Characteristics of the Power of Taxation 1. for public purpose 5. exaction payable in money 2. inherently legislative in nature 6. territorial 3. subject to international comity or treaty 4. not absolute being subject to constitutional and inherent limitations How exercised: - Legislation of laws by Congress and tax ordinances by the Local Sangguanian - Tax collection by the administrative branch of the government Scope of the Power of Taxation Taxation is supreme, comprehensive, unlimited and plenary. It includes the power to destroy Discretion of the Taxing Power- this extends to: 1. amount or rate of the tax 5. situs of taxation 2. kinds of tax to be collected 6. method of collection 3. apportionment of the tax 7. purposes for its levy, provided for public purpose 4. the person, property and excises to be taxed, provided within it jurisdiction
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Northern CPAR: Taxation – Fundamental Principles of Taxation Underlying principles behind the power of taxation 1. Principles of Necessity – the existence of the government is a necessity and it cannot continue without means to support itself – this is the Theory of Taxation 2. Benefit Received Theory – the government and the people have the reciprocal and mutual duties of support and protection – this is the Basis of Taxation Legal Basis of the Power of Taxation 1. Benefit-received theory 2. the sovereign power of the state over is people and property 3. the presumption of receipts or enjoyment of benefits and protection by the people 4. to protect new conditions by imposing special duties 5. to uplift social conditions by imposing regulatory taxes or licenses
Objects of Taxation 1. businesses 2. interests 3. transactions 4. rights
5. acts 6. persons 7. properties 8. privileges
Phases of Stages of Taxation Impact of Aspects of a. Levy or Imposition taxation Taxation b. Assessment of tax Incidence of Taxation c. Payment of the tax - these all comprise the taxation system Elements of the tax system a. Tax structure b. Tax administration
c. Public tax consciousness
Principles of a sound tax system a. Fiscal Adequacy – sources of revenue should be sufficient to meet the demand for public expenditure b. Administrative Feasibility- tax laws must be capable of convenient, just and effective administration c. Theoretical Justice- tax must be imposed with equity and certainty and must consider the taxpayers ability to pay and benefits received - Non-observance of the principles does not necessarily render a tax levy unconstitutional. Principal Approaches in the distribution of tax burden a. Benefit Approach – tax payment should be based on benefits received b. Ability to Pay Approach – tax payments should be based relative to the ability of taxpayers to pay Taxation and Economic Efficiency 1. Income Effect – makes people economically efficient (ex: transformation) 2. Substitution Effect – makes people economically inefficient (ex: indirect taxes) The Inherent Powers of the Government 1. Power of Taxation – the power to take property for the support of the government and for public purpose 2. Police Power – the power to enact laws to promote the general welfare of the people. It is wider in application because it is the general power to make laws.
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Northern CPAR: Taxation – Fundamental Principles of Taxation 3. Power of Eminent Domain – the power to take private property for public use upon payment of just compensation
Point of Difference Exercising Authority Necessity of Delegation
Purpose Persons affected
Effect of transfer of property rights
Point of Differences of the Inherent Powers of the State Taxation Police Power Eminent Domain Government Government Government or private entities Delegation is not There must be There must be due necessary since it is delegation before delegation before local inherent local governments government or private could exercised it party may exercise it Revenue and support Property is taken for Property is taken for of the government public use public use Community or class Community or class Operates on the owner of individuals of individuals of the property Money paid as taxes becomes part of the public fund
Amount of Imposition
Unlimited
Importance
Most important of the three Inferior to the “Non-Impairment Clause” of the Constitution
Relationship with the Constitution
Limitation
Constitutionally and inherently restricted
There is no transfer of title, at most there is restraint on the injurious use of property Sufficient to cover the costs of regulation Most superior
There is transfer of right to property whether it be of ownership or lesser right
Superior to the “Non-Impairment Clause” of the Constitution
Superior and may override the “NonImpairment Clause” because the welfare of the state is superior to private contracts Public purpose and just compensation
Public interest and the requirement of due process
No imposition, the owner is paid the fair market value of his property
Similarities of the Three Powers 1. All three powers are necessary attributes of sovereignty, resting upon necessity 2. all are inherent powers of the State 3. All are legislative in nature 4. They are ways in which the State interferes with private rights and property 5. They exist independently with the Constitution although the condition for their exercise may be prescribed or limited by the Constitution 6. They all presuppose an equivalent compensation received by the persons affected by the exercise of the power, whether directly, indirectly or remote. 7. The exercise of these powers by the local government units may be limited by national legislature *Police power can be used to raise revenue for the government (ex: license fee) LIMITATIONS OF TAXATION POWER A. Constitutional Limitation 1. observance of due process of law 2. equal protection of the law
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Northern CPAR: Taxation – Fundamental Principles of Taxation 3. 4. 5. 6. 7. 8. 9. 10.
11. 12. 13.
14. 15. 16.
uniformity in taxation progressive scheme of taxation non-imprisonment for non-payment debt or poll tax non-impairment of obligation and contract free worship rule non-appropriation of public funds or property for the benefit of any church, sect or system of religion exemption of religious, charitable or educational entities, non-profit cemeteries, churches and mosque from property taxes. exemption from taxes of the revenues and assets of non-profit, non-stock educational institutions including grants, endowments, donations or contributions for educational purposes concurrence of a majority of all members of Congress for the passage of a law granting tax exemption non-diversification of tax collections non-delegation of the power of taxation Exception: a. power to tax was delegated to the President under the Flexibility Clause of the Tariff and Customs Code b. power to tax was delegated to the local government units under the Local Government Code c. matters involving the expedient and effective administration and implementations of assessment and collection of taxes or certain aspects of taxing process that are not legislative in character non-impairment of the jurisdiction of the Supreme Court to review tax cases appropriations, revenue or tariff bills shall originate exclusively in the House of Representatives but the Senate may propose or concur with amendments each local government unit shall exercise the power to create its own sources of revenue and shall have a just share in the national taxes
B. Inherent Limitation 1. territoriality of taxation 2. subject to international comity or treaty 3. tax exemption of the government 4. tax is for public purpose 5. non-delegation of the power of taxation *The last 2 limitations are also Constitutional limitations SITUS OF TAXATION The place of taxation Factors that determine the situs of taxation 1. nature, kind or classification of the tax 5. sources of income 2. subject matter of the tax 6. place of exercise, business or occupation being taxed 3. citizenship of the taxpayer 7. place where income-producing activity was held or done 4. residence of the taxpayer Applications 1. persons – residence of the taxpayer 2. community development tax – residence or domicile of the taxpayer 3. business taxes – where the business was conducted or place where the transaction took place
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Northern CPAR: Taxation – Fundamental Principles of Taxation
4. privilege or occupation tax – where the privilege is exercised 5. real property tax – where the property is located 6. personal property taxes – a. tangible – where they are physically located b. intangible – domicile of the owner unless the property has acquired a situs elsewhere 7. Income – place where the income is earned or residence or citizenship of the taxpayer 8. Transfer Taxes – residence or citizenship of the taxpayer or location of the property 9. Franchise Taxes – State that grants the franchise 10. Corporate Taxes – depend on the law of incorporation DOUBLE TAXATION Taxing the object or subject within the territorial jurisdiction twice, for the same period, involving the same kind of tax by the same taxing authority Kinds: 1. Direct Double Taxation – this objectionable and prohibited because it violates the constitutional provision on uniformity and equality 2. Indirect Double Taxation – no constitutional violation. Ex: taxing the same property by two different taxing authority International Double Taxation –a double taxation caused by two different taxing authorities, one domestic and one foreign Remedies to Double Taxation 1. provision for tax exemption 2. allowance for tax credit 3. allowance for principle of reciprocity 4. enter into treaties with and agreement with foreign government Forms of Escape from Taxation A. Those that will not result in loss of revenue to the government 1. Shifting –the process of transferring the tax burden from the statutory taxpayer to another without violating the law. 2. Capitalization – the seller is willing to lower the price of the commodity provided the taxes will be shouldered by the buyers 3. Transformation – the manufacturer absorbs the additional taxes imposed by the government without passing it to the buyers for fear of lost of his market. Instead, it increases quantity of production, thereby turning their units of production at a lower cost resulting to the transformation of the tax into a gain through the medium of productions. B. Those that will result to loss of revenue to the government 1. Tax Evasion – tax dodging – resorting to acts and devices that illegally reduces or totally escape the payment of taxes that are due to the taxpayer. They are prohibited and are therefore are not subject to penalties. 2. Tax Avoidance –tax minimization scheme – the reduction or totally escaping payment of taxes through legally permissible means, that are not prohibited and therefore are not subject to penalties. 3. Tax Exemption- an immunity, privilege or freedom from payment of a charge or burden to which others are obliged to pay. Kinds of Exemptions: 1. Express- granted by the constitution, statute, treaties, ordinance, contracts or franchise a. constitutional
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Northern CPAR: Taxation – Fundamental Principles of Taxation b. statutory c. contractual 2. Implied – exempted by accidental or intentional omission 3. Total-exemption from all taxes (OFWs) 4. Partial –exemption from certain taxes, partially or totally Grounds for Exemption 1. It may be based on a contract 2. It may be based on grounds of public policy - ex: granting of exemptions to rural banks, and sweepstakes or lotto winnings 3. It may be based on some grounds to foster charitable and other benevolent institutions 4. It may be created under a treaty on grounds of reciprocity 5. It may be created to lessen the rigors of international double or multiple taxation Distinction between tax evasion and tax avoidance Tax Evasion Tax Avoidance It is a scheme used outside of those lawful It is a tax saving device within the means means and when availed of, it usually sanctioned by law subjects the taxpayer to penalties It is accomplished by breaking the law Accomplished by legal procedures and do not violate the law It connotes fraud, deceit and malice No fraud is involved
Tax Exemptions: is not automatic is non-transferable is revocable by the government (except when granted under a valid contract or by the Constitution) rule shall be uniform does not contravene the LifeBlood Doctrine is always disfavored is allowed only under a clear and unequivocal provision of the law on real property tax will be based on the Doctrine of Usage and not Doctrine of Ownership, except for real properties owned by the government which is absolutely exempt form taxation on real property tax cannot be granted by local governments but can condone real property tax liabilities in special cases on local taxes can be granted by local governments but they cannot condone existing liabilities on local taxes Fundamental Doctrine in Taxation 1. No court may enjoin the collection of taxes 2. Claim for exemptions shall be interpreted strictly against the taxpayer 3. A law that permit deduction from the tax base is strictly construed against the taxpayer 4. Tax assessment are presumed to be correct and done in good faith 5. Tax laws are generally prospective in application 6. Tax are not subject to compensation or set-off 7. Refund of taxes do not earn interest because interest do not run against the government Distinction between Tax Amnesty and Tax Condonation Tax Amnesty – a general pardon or intentional overlooking by the state of its authority to impose penalties on persons otherwise guilty of tax evasion or violation of tax laws. The purpose is to give the erring taxpayer a chance to reform and become part of the society with a clean slate.
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Northern CPAR: Taxation – Fundamental Principles of Taxation Tax Condonation – means to remit or to desist or refrain form exacting or imposing a tax. It cannot extend to refund of taxes already paid when obtaining condonation. Tax Exemption There is no tax liability at all The grantee need not pay anything Can be availed of by any qualified taxpayer
Tax Amnesty Connotes condonation from payment of existing tax liability The grantee pays a portion Not always available
Exam Drill Problems: 1. The primary purpose of taxation is: a. To enforce contribution from its subject for private purpose b. To raise revenue for the government c. To achieve economic and social stability d. To regulate the conduct of business or profession 2.
This theory underscores that taxes are indispensable to the existence of the state. a. Doctrine of equitable recoupment c. The benefit received theory b. The lifeblood doctrine d. The Holmes Doctrine
3.
Select the correct statement. a. The benefit received theory explains that the government is obliged to serve the people since it is benefiting from the tax collection from its subjects b. The lifeblood theory underscores that taxation is the most superior power of the state c. The police power of the state is superior to the non-impairment clause of the Constitution . d. The power of taxation is superior to the non-impairment clause of the Constitution
4.
The income effect of taxation is exhibited in a. Forward shifting of tax c. Percentage taxes b. Value added tax d. Transformation
5.
That tax laws should be certain and consider the taxpayer’s ability to pay denotes a. Fiscal adequacy c. Theoretical justice b. Administrative feasibility d. Compatibility with economic objectives
6.
What is the theory of taxation? a. Necessity b. Constitutionality
c. reciprocal duties of support and protection d. public purpose
7.
What is the basis of taxation? a. Constitutionality b. public purpose
d. necessity d. reciprocal duties of support and protection
8.
Which of the following inappropriately describe the nature of taxation? a. inherent in sovereignty c. subject to inherent and limitation b. essentially a legislative function d. generally for public purpose
9.
I. Forward Shifting will result in increase prices II. Tax evasion is also known as tax dodging
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constitutional
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Northern CPAR: Taxation – Fundamental Principles of Taxation a. I is correct b. II is correct
c. I and II are correct d. I and II are not correct
10. When tax is recovered by the manufacturer or producer by finding out means of improvement in production so as savings would compensate for taxes, this is known as? a. Capitalization c. backward shifting b. onward shifting d. transformation 11. The point in which tax is levied is called? a. Impact of taxation c. Incidence of taxation b. Situs of taxation d. Assessment 12. When the impact and incidence of taxation are merged into the statutory taxpayer, the tax is called? a. personal tax c. indirect tax b. direct tax d. national tax 13. The following are inherent limitation on the power to tax. Which is the exception? a. Territoriality of taxes c. Public purpose b. Legislative in character d. Non-appropriation for religious purpose 14. Which of the following is an administrative act in taxation? a. Collection of taxes c. Determination of the subject of the tax b. Fixing the rate of the tax d. Determination of the purpose of the tax 15. Select the correct statement. a. The substitution effect makes people economically efficient since the impact of the tax is spread forward to the consumers. b. Only taxation and eminent domain presupposes a form compensation when exercised by the government since police power merely involves confiscation. c. Any tax laws which violate the principles of a sound tax system renders itself unconstitutional. d. Taxation means the apportionment of the costs of the government among those who are benefited from its existence. 16. Select the correct statement. A. Since taxation presupposes an equivalent form of compensation, there should be a direct and proximate advantage received by any taxpayer before he could be required to pay tax. B. Compensation under police power is the intangible feeling of contribution to the general welfare of the people. a. A c. Both A and B b. B d. Neither A nor B 17. Public improvement is a requisite to the exercise of which power of the state? a. Police power c. Eminent domain b. Taxation d. Eminent domain and taxation 18. Public utility entities may in some circumstance exercise the power of eminent domain. Which of the following is not a public utility? a. Electric cooperatives c. Telecommunication business b. Water cooperatives d. Manufacturing business
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Northern CPAR: Taxation – Fundamental Principles of Taxation 19. I. Police power and the power of taxation are exercised primarily by the legislature but not eminent domain II. Taxation and eminent domain interferes with private right and property but not with police power a. I is true c. I and II are true b. II is true d. I and II are not true
20. Select the incorrect statement. a. the power of eminent domain may be exercised by private entities b. by police power, the property taken is destroyed c. by eminent domain, the property taken is destroyed d. eminent domain and taxation affects only property rights 21. The inherent powers of the state are similar in the following respect, except? a. inherent to the existence of the state b. exercisable without the need for an express constitutional grant c. all affects property rights d. exercised primarily by the legislature 22. The following statement correctly states the differences among the inherent powers of the state, except? a. the property taken under eminent domain and taxation are preserved but that of police power is destroyed b. eminent domain do not require constitutional grant but taxation being formidable does in order to limit its exercise by the legislature c. police power and taxation is exercised only by the government but eminent domain may be exercised by private entities d. Police power regulates both property and liberty; eminent domain and taxation affects only property rights 23. Select the incorrect Statement. a. since just compensation is involved, eminent domain raises money for the government b. once a government is established, taxation is exercisable c. the most important of the power is taxation d. police power is more superior than the non-impairment clause of the Constitution 24. Select the correct statement a. the provision on taxation in the Philippine Constitution are grant of power b. the power to tax includes the power to destroy c. when taxation is used as a tool for general and economic welfare this is called fiscal purpose d. sumptuary purpose of taxation is to raise funds for the government 25. Which is not a legislative act? a. Assessment of the tax b. setting the amount of the tax
c. determination of the subject of the tax d. determining the purpose of the tax
26. Which of the following is not an inherent limitation of the power to tax? a. tax should be levied for public purpose b. taxation is limited to its territorial jurisdiction c. tax laws shall be uniform and equitable
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Northern CPAR: Taxation – Fundamental Principles of Taxation d. exemption of government agencies and instrumentalities 27. Which of the following is not a constitutional limitation of the power to tax? a. non-impairment of obligation or contracts b. due process and equal protection of the law c. non-appropriation for religious purposes d. non-delegation of the taxing power 28. Agreement among nation to lessen tax burden of their respective subject is called: a. Reciprocity c. territoriality b. international comity d. tax minimization 29. I. No one shall be imprisoned for non-payment of tax. II. Double taxation is not prohibited by the Constitution. a. I is true c. I and II are true b. II is true d. I and II are not true 30. The constitutional exemption of religious or charitable institution refers only to: a. real property tax c. real property tax and income tax b. income tax d. business tax 31. When a legislative body taxes persons and property, rights and privilege under the same taxable category at the same rate, this is referred to as compliance with the constitutional limitation of: a. Equity c. due process b. Uniformity d. equal protection clause 32. When a certain tax imposed base tax burden on the ability of the subject to pay the tax, this is construed as complying with the inherent limitation of taxation which is: a. Equity c. due process b. Uniformity d. none 33. The constitutional requirement for non-provision of any tax-exempt legislation without the concurrence of the majority of all the members of Congress is intended to prevent: a. legislation of burdensome or oppressive tax laws b. to ensure that the government will no incur a deficit c. ensure approval of all tax bills prior to becoming tax laws d. unethical lobbying in the lawmaking body 34. I. Taxation is the rule; exemption is the exception. II. Taxation may be used to implement the police power of the state. a. I is true c. I and II are true b. II is true d. I and II are not true 35.
Select the incorrect statement. a. the power to tax includes the power to exempt b. exemption are construed against the taxpayer and in favor of the government c. tax statutes are construed against the government in case of doubt d. taxes should be collected only for public improvement
36. This refer to the privilege or immunity from a tax burden of which others are subjected to: a. Exclusion c. tax holiday b. Deduction d. reciprocity
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Northern CPAR: Taxation – Fundamental Principles of Taxation 37. Mr. Sorotski, is a professional practitioner as a management adviser. In addition, he held various properties and currently engaged in diverse business operations. As a result, he has P1,895,000.00 in personal tax aside from his basic tax of P5.00. If Mr. Sorotski intentionally disregard to pay his total personal tax, which of the following is correct? a. Mr. Sorotski can be imprisoned for non-payment of the P5.00 personal tax. b. Mr. Sorotski cannot be imprisoned for non-payment of the personal tax because he is a professional wherein his imprisonment could cause economic loss to the country. c. If Mr. Sorotski pays only the P5.00 personal tax, he cannot be imprisoned. d. Non-payment of the additional tax could cause imprisonment. 38. DEF Shipping Lines operates a fleet of sheep from Metro Manila to Zambonga. DEF was exempted from payments of the franchise tax but in return it has to transport government mails and other government correspondence to and from Metro Manila and Zamboanga. Subsequently, a new law was passed removing such exemptions and requiring DEF to pay the franchise tax. Which of the following is correct? a. The tax law is valid since the power of taxation is broad. b. The new law is invalid being unconstitutional. c. The new law is invalid since exemption, once given, can’t be revoke if it prejudice the taxpayer. d. The new law is valid since tax is dictated by the needs of the government. 39. Wolf has many tax evasion cases. For most, he was found guilty by the courts. Which of the following can be his sanctions? A. Capital punishment B. Imprisonment C. Confiscation of his properties a. A,B; C c. B; C b. A; C d. C only 40. Owl has a P5,000,000.00 tax evasion case with the BIR. BIR rendered him an assessment but his appeal failed to meet the deadline due to his undue hesitation to answer for the notice of assessment. As a result, the assessment became final and demandable. Which of the following is correct? a. Owl should be allowed an extension since the amount of the tax is highly material so as his right for equal protection of the law will not be denied b. Due process is not violated so long as the consideration is to be given by the BIR. c. Due process is not violated. d. Owl should demand for compromise so as he will be overburdened. 41. The tax imposed upon the performance of an act, the enjoyment of a privilege or engaging in a profession is known as? a. Income tax c. Excise tax b. License d. Transfer tax 42. When the determination of the amount of the tax requires an assessment of the value of the subject of tax, this type of tax is known as? a. proportional tax c. ad valorem tax b. specific tax d. progressive tax 43. Tax as to graduation or rate include the following, except? a. Progressive c. pro-rata b. Proportional d. regressive 44.
A tax base and tax rate of an imposition is shown as follows: Income Tax Rate
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Northern CPAR: Taxation – Fundamental Principles of Taxation P 1,000,000.00 20% 800,000.00 30% 600,000.00 40% This taxation scheme makes use of a? a. progressive rate c. digressive rate b. proportional rate d. regressive rate 45. Which of the following is a local tax? a. value added tax c. other percentage taxes b. documentary stamp tax d. real property tax 46. I. As a rule, taxes are not assignable. II. Debt earns interest only when stipulated or when there is legal delay. a. I is true c. I and II are true b. II is true d. I and II are not true 47. Select the incorrect statement. a. Tax may be unlimited in amount. b. License make the business illegal when not paid while taxes do not. c. Special assessment is not the liability of the person owning the property. d. Special assessment can be imposed on building and other real right attaching pertaining to land. 48. I. One of the essential characteristic of tax is its being unlimited in amount. II. The State has complete discretion on the amount of license to be imposed after distinguishing between useful and non-useful activity. a. I is true c. I and II are true b. II is true d. I and II are not true 49. Which of the following is correct regarding the tax table for individual taxable income for residents and citizens? a. the table shows purely progressive tax rates b. the tax table is a combination of proportional and progressive tax rates c. low income earners are subject to proportional rate while high income earners are subject to both proportional and progressive tax rates d. none of the above 50. Which of the following is not a local tax? a. Community tax c. Tax on banks and other financial institutions b. Documentary stamp tax d. Business taxes, fees and charges 51. A license that is imposed for revenue purposes is known as? a. A license tax c. Professional tax b. Sin tax d. Mixed tax 52. Select the incorrect statement. A. Tax is a demand of sovereignty just as toll is a demand of ownership B. No one shall be imprisoned for non-payment of debt or poll tax a. A c. A and B are true b. B d. Neither A nor B 53. Distinguishing between tax and debt, which is assignable? Which cannot be set-off? a. Tax; debt c. Tax, tax
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Northern CPAR: Taxation – Fundamental Principles of Taxation b. Debt; tax
d. Debt, debt
54. Select the correct statement. a. The doctrine of estoppel operates against the taxpayer, not against the government. b. Non-compensation or set-off violates the principle of administrative feasibility. c. Taxes are always imprescriptible. d. The principle of strictissimi juris simply states that exemption is the rule, taxation is the exemption.
55. Which of the following is a power of the Commissioner of Internal Revenue? a. Assessment and collection of taxes b. Enforcement of all forfeitures, penalties and fines c. Interpretation of the provisions of the NIRC d. Giving effects to and administering the supervisory and police powers conferred by the NIRC and other laws 56. Which of the following powers of the Commissioner of Internal Revenue cannot be delegated? a. The examination of tax return and tax due thereon b. To refund or credit tax liabilities in certain cases c. The power to compromise or abate any tax liability involving basic deficiency tax of P500,000 and minor criminal violations d. The power to reverse a ruling of first impression 57. The following are the limitation on the taxing power of the state. Which of the following inherent limitation of taxation is also categorized as a constitutional limitation? A. Territoriality of taxation B. Exemption of the government C. Public purpose of taxation D. Non-impairment of contracts E. Non-delegation of the power to tax a. A and B c. C and E b. B and C d. D and E 58. Which of the following forms of escapes to taxation will more likely to result in direct loss of revenue to the government? a. Shifting c. transformation b. Capitalization d. tax exemption 59. When exemption from a tax imposition is silent or not clearly stated, which statement is true? a. Taxation applies since exemptions are construed against the government. b. Exemption still applies since this is exemption by omission. c. Taxation applies since exemptions are to be construed against the taxpayer. d. Exemption applies since obligation arising from law cannot be presumed and hence construed against the government. 60. When the provisions of tax laws are silent as to the taxability of an item, which is true? a. Taxation applies since taxation is the rule, exemption is the exception. b. Exemption applies since vague tax laws are construed against the government. c. Taxation applies in accordance with the Lifeblood doctrine.
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Northern CPAR: Taxation – Fundamental Principles of Taxation d. Exemption applies since obligation arising from law is presumed; ignorance of the law is not an excuse. 61. Which statement is correct? A. Tax assessment are presumed to be correct and done in good faith. B. Tax laws should not operate retrospectively. C. Refund of taxes should earn interest since as a principle, no one shall be enriched at the expense of another; the state should be the model of good faith among its constituents. a. A, B and C c. A only b. A and B d. B and C 62. Select the incorrect statement regarding tax amnesty and condonation. a. In tax amnesty, violators are required to pay a portion of the tax assessed. b. When the remaining unpaid portion of the tax is condoned, the taxpayer cannot ask for refund for the balance already paid. c. Tax amnesty operates as a general pardon and is always not available. d. Tax condonation operates on the whole balance of the assessed tax and not only to the unpaid portion.
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