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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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
5. acts
2. interests
6. persons
3. transactions
7. properties
4. rights
8. privileges
Phases of Stages of Taxation
Impact of
a. Levy or Imposition
Aspects of
b. Assessment of tax
taxation
Taxation
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
Money paid as
There is no
There is transfer of
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
Amount of
Imposition
Unlimited
Importance
Most important of
the three
Inferior to the
Non-Impairment
Clause of the
Constitution
Relationship with
the Constitution
Limitation
transfer of title, at
most there is
restraint on the
injurious use of
property
Sufficient to cover
the costs of
regulation
right to property
whether it be of
ownership or lesser
right
No imposition, the
owner is paid the fair
market value of his
property
Most superior
Superior to the
Non-Impairment
Clause of the
Constitution
Constitutionally
Public interest and
and inherently
the requirement of
restricted
due process
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
3. uniformity in taxation
4. progressive scheme of taxation
5. non-imprisonment for non-payment debt or poll tax
6. non-impairment of obligation and contract
7. free worship rule
8. non-appropriation of public funds or property for the benefit of any church, sect or
system of religion
9. exemption of religious, charitable or educational entities, non-profit cemeteries,
churches and mosque from property taxes.
10.exemption from taxes of the revenues and assets of non-profit, non-stock
educational institutions including grants, endowments, donations or contributions
for educational purposes
11.concurrence of a majority of all members of Congress for the passage of a law
granting tax exemption
12.non-diversification of tax collections
13.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
14.non-impairment of the jurisdiction of the Supreme Court to review tax cases
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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
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.
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
Tax Amnesty
Connotes condonation from payment of
existing tax liability
The grantee pays a portion
Not always available
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.
4.
5.
That tax laws should be certain and consider the taxpayers ability to pay denotes
a. Fiscal adequacy
c. Theoretical justice
b. Administrative feasibility
d. Compatibility with economic objectives
6.
d. necessity
d. reciprocal duties of support and protection
7.
8.
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
9.
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
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
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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
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
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
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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.
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
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, cant 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.
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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.
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
d. Debt, debt
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01
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.
--- End of Handouts ---
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NCPARdriven for real excellence! TAX by Rex B. Banggawan, CPA, MBA TAX
6th Batch HQ01