POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

College of Accountancy and Finance Student Council

CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

1. The process by which the sovereign raises income to defray the expenses of the government is called
(RPCPA) (1 Point)
a) subsidy c) taxation
b) tariff d) tribute
2. In case of conflict between tax laws and generally accepted accounting principles (GAAP) (RPCPA) (1 Point)
a) Both tax laws and GAAP shall be enforced.
b) GAAP shall prevail over tax laws.
c) Tax laws shall prevail over GAAP.
d) The issue shall be resolved by the court
3. One of the following is a primary purpose of taxation (1 Point)
a) Protection of local industries against foreign competition through imposition of high customs duties on
imported goods;
b) Reduction of inequalities in wealth and income by imposing progressively higher tax rates;
c) To secure revenue for the support of the government.
d) Strengthening of anemic enterprises by giving tax exemptions
4. Which of the following is not a secondary purpose of taxation? (1 Point)
a) To serve as key instrument of social control.
b) To affect a more equitable distribution of wealth among peoples
c) To achieve social and economic stability.
d) To raise revenue to defray the necessary expenses of the government.
5. Which is the best answer? A tax reform at any given time underscores the fact that (RPCPA)(1 Point)
a) Taxation is an inherent power of the state.
b) Taxation is essentially a legislative power.
c) Taxation is a power that is very broad.
d) The state can and should adopt progressive taxation
6. All of the following, except one, are canons of a sound tax system (1 Point)
a) fiscal adequacy c) administrative feasibility
b) theoretical justice d) inherent in sovereignty
7. Under this basic principle of sound tax system, the government should not incur a deficit (RPCPA)(1 Point)
a) Theoretical justice c) Fiscal adequacy
b) Administrative feasibility d) None of the above

8. The following, except one, are basic principles of a sound tax system (1 Point)
a) It should be capable of being effectively enforced.
b) It must be progressive.
c) Sources of revenue must be sufficient to meet government expenditures and other public needs.
d) It should be exercised to promote public welfare.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

9. Real property taxes should not disregard increases in the value of real property occurring over a long
period of time. To do otherwise would violate the canon of a sound tax system referred to as (BEQ)
(1Point)
a) theoretical justice c) administrative feasibility
b) fiscal adequacy d) symbiotic relationship
10. Which statement below expresses the lifeblood theory? (1 Point)
a) The assessed taxes must be enforced by the government.
b) The underlying basis of taxation is government necessity, for without taxation, a government can
neither exist nor endure.
c) The power of taxation is an arbitrary method of exaction by those who are in the seat of power
d) The power of taxation is an inherent power of the sovereign to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising revenues
11. The requirement of equality or theoretical justice is complied with if the tax is (1 Point)
a) Progressive c) Regressive
b) Regressive d) Specific
12. The power of taxation can only be exercised by the lawmaking body (1 Point)
a) Subject to constitutional and inherent limitations
b) Equality or theoretical justice
c) Legislative in character
d) Inherent in sovereignty
13. The President of the Philippines and the Prime Minister of Japan entered into an executive agreement in
respect of loan facility to the Philippines from Japan whereby it was stipulated that interest granted by
private Japanese financial institutions in the Philippines shall not be subject to Philippine income taxes.
What basic characteristic of taxation has been violated by this agreement? (1 Point)
A. Inherent limitation C. Legislative in character
B. Theoretical justice D. Administrative feasibility
14. The power of taxation is inherent in sovereignty being essential to the existence of every government.
Hence, even if not mentioned in the Constitution, the state can still exercise the power. It is essentially a
legislative function. Even in the absence of any constitutional provision, taxation power falls to Congress as
part of the general power of lawmaking (RPCPA)(1 Point)
a) False, False c) True, True
b) False, True d) True, False
15. Which of the following statements is not correct? (RPCPA) (1 Point)
a) Taxes may be imposed to raise revenue or to provide disincentives to certain activities within the state.
b) The state can have the power of taxation even if the Constitution does not expressly give it the power
to tax.
c) For the exercise of the power of taxation, the state can tax anything at any time.
d) The powers of taxation in the Philippine Constitution are grants of power and not limitations on taxing
powers.
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

16. Those who have more income should pay more income tax, while minimum wage earners should be
exempt (1 Point)
a) Uniformity of taxation;
b) Equality of taxation
c) Due process of law
d) Non-delegation of legislative power
17. Which of the following statements is not correct? (RPCPA) (1 Point)
a) An inherent limitation of taxation may be disregarded by the application of a constitutional limitation
b) The property of an educational institution operated by a religious order is exempt from property tax,
but its income is subject to income tax.
c) The prohibition of delegation by the state of the power of taxation will still allow the Bureau of Internal
Revenue to modify the rules on time for filing of returns and payment of taxes.
d) The power of taxation is shared by the legislative and executive departments of government.
18. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the (RPCPA) (1 Point)
a) Office of the President c) Senate
b) House of Representatives d) Supreme Court
19. Which statement is wrong? Tax laws (RPCPA)(1 Point)
a) Must originate from the House of Representatives and on which same bill the Senate may propose
amendments.
b) May originate from the Senate and on which same bill the House of Representatives may propose
amendments.
c) May have a House version and Senate version approved separately
d) May be recommended by the President to Congress
20. No law granting any tax exemption shall be passed without the concurrence of (RPCPA)(1 Point)
a) Majority of all members of the Congress.
b) 2/3 vote of all members of the Congress.
c) 3 votes of all members of the Congress
d) Unanimous vote of all members of the Congress
21. One of the characteristics of a tax is that (RPCPA) (1 Point)
a) It is generally based on contract. c) It is generally assignable.
b) It is generally payable in money. d) Optional
22. Which is not an essential characteristic of tax? (RPCPA) (1 Point)
a) Unlimited as to amount c) Proportionate in character
b) Payable in money d) Regular in payment
23. No person shall be imprisoned for non-payment of (RPCPA) (1 Point)
a) property tax c) poll tax
b) excise tax d) income tax
24. An example of a property tax is (1 Point)
a) additional community tax on income of real properties
b) real estate tax on real properties
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

c) estate tax on inherited personal as well as real properties

d) donor's tax on donation of property
25. Which of the following is not an example of excise tax? (1 Point)
a) Transfer tax c) Real property tax
b) Sales tax d) Income tax
26. Sharon, a CPA has just obtained her CPA license. Before she can lawfully pursue her occupation, she should
pay (RPCPA) (1 Point)
a) Professional Tax c) CPA's income tax
b) Percentage tax d) Value-added tax
27. One is not a direct tax (RPCPA) (1 Point)
a) Immigration tax c) Income tax
b) Transfer tax d) Contractor's tax/VAT
28. Form’s part of the purchase price of the commodity or service and passed on to customers (1 Point)
a) Direct tax c) Excise tax
b) Indirect tax d) Poll tax
29. Tax that is imposed solely to raise revenue for government expenditures (1 Point)
a) Revenue tax c) Specific tax
b) Regulatory tax d) Ad valorem tax
30. Tax imposed by the national government and is effective within the entire jurisdiction thereof (1 Point)
a) national tax c) proportional tax
b) local tax d) general tax
31. There can be classification of the subject matter being required to shoulder the burden. Which is the
exception? (RPCPA) (1 Point)
a) tax c) toll
b) license fee d) Eminent domain
32. The power of the state to enact such laws in relation to parsons and property as may promote public
health, public morals, public safety and the general welfare of the people (1 Point)
a) power of eminent domain c) power of taxation
b) police power d) people power
33. The following are similarities of the inherent power of taxation, eminent domain and police power except
one (RPCPA) (1 Point)
a) Are necessary attributes of sovereignty
b) Interferes with private rights and property
c) Affect all persons or the public
d) Are legislative in their implementation
34. Which statement refers to police power as distinguished from taxation? (RPCPA) (1 Point)
a) It can only be imposed on specific property or properties.
b) The amount imposed depends on whether the activity is useful or not.
c) It involves the taking of property by the government.
d) The amount imposed has no limit
35. Which of the following may not raise money for the government? (RPCPA) (1 Point)
a) power of taxation
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

b) police power
c) power of eminent domain
d) privatization of government's capital assets
36. The distinction of a tax from permit or license fee is that a tax is (RPCPA)(1 Point)
a) Imposed for regulation.
b) which involves exercise of police
c) One in which there is generally no limit on the amount that may be imposed
d) Answer not given.
37. Which of the following terms describes this statement that the state has complete discretion on the
amount to be imposed after distinguishing between a useful and non-useful activity?"(RPCPA) (1 Point)
a) tax c) toll
b) license fee d) customs duty
38. This is a demand of ownership (RPCPA) (1 Point)
a) license fees c) toll
b) tax d) franchise
39. It comprises all kinds of funds including taxes (RPCPA) (1 Point)
a) License fees c) Customs duty
b) Income d) Revenue
40. The following constitute double taxation except one (RPCPA) (1 Point)
a) Both taxes are imposed in the same amount.
b) Both taxes are levied for the same purpose.
c) Both taxes are imposed by the same taxing authority.
d) Both taxes are imposed upon the same person.
41. Double taxation in its general sense means taxing the same subject twice during the same taxing period. In
this sense, double taxation (BEQ) (1 Point)
a) violates substantive due process.
b) does not violate substantive due process
c) violates the right to equal protection
d) does not violate the right to equal protection.
42. Transfer of the tax burden by one on whom the tax is assessed to another (1 Point)
a) Shifting c) Transformation
b) Capitalization d) Tax exemption
43. The reduction in the selling price of income-producing property by an amount equal to the capitalized
value of future taxes that may be paid by the purchaser (1 Point)
a) Shifting c) Transformation
b) Capitalization d) Tax exemption
44. The method by which the manufacturer or producer upon whom the tax is imposed pays the tax and
strives to recover such expense through lower production cost without sacrificing the quality of his product
(1 Point)
a) A Shifting c) C Transformation
b) B. Capitalization d) Tax exemption
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

45. The grant of immunity particular persons or corporation or to persons or corporations of a particular class
from a tax which persons and corporations generally within the same taxing district is obliged to pay (1
Point)
a) Tax exemption c) Tax avoidance
b) Tax evasion d) Tax amnesty
46. It is otherwise known as tax minimization
(1 Point)
a) Tax exemption c) Tax avoidance
b) Tax evasion d) Transformation
47. Which of the following facts pertain/s to tax avoidance?
i. After studying his tax problems, Alicante decided to withdraw his bank deposits and to buy tax exempt
securities.
ii. B who wishes to avoid the payment of taxes assessable on the transaction made it appear on the deed
of sale that the selling price was only P200, 000 although it was actually P300, 000.
iii. Refraining from engaging in activities subject to tax.
iv. Clavillas Corporation sold its vacant lot to Royal Match, Inc. when the real intention was to donate it to
the latter. (1 Point)
a) I only c) I and IV
b) I and III d) I, Ill and IV
48. In case of ambiguity, tax laws shall be interpreted (1 Point)
a) Strictly against the taxpayer.
b) Liberally against the government.
c) Liberally in favor of the taxpayer.
d) Liberally in favor of the government.
49. In cases of deductions and exemptions on income tax returns, doubts shall be resolved (RPCPA) (1 Point)
a) Strictly against the taxpayer.
b) Strictly against the government
c) Liberally in favor of the taxpayer
d) Liberally against the government
50. All of the following, except one, are sources of tax laws (1 Point)
a) Legislations, tax treaties and tax ordinances c) Opinions of authors
b) Judicial decisions d) Administrative rules and regulations
51. The least source of our tax laws is (1 Point)
a) Statutes c) Constitution
b) Court decisions d) BIR rulings
52. Which among the following concepts of taxation is the basis of the situs of Income taxation? (BEQ) (1 Point)
a) Lifeblood doctrine of taxation c) Compensatory purpose of taxation
b) Symbiotic relation in taxation d) Sumptuary purpose of taxation
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20133: Income Taxation
(Midterm Examination)

ANSWER KEY
1) C 34) B
2) C 35) B
3) C 36) C
4) D 37) B
5) C 38) C
6) D 39) D
7) C 40) A
8) D 41) C
9) B 42) A
10) B 43) B
11) A 44) C
12) C 45) A
13) C 46) C
14) C 47) B
15) D 48) C
16) B 49) A
17) B 50) C
18) B 51) D
19) B 52) B
20) A
21) B
22) B
23) C
24) B
25) C
26) A
27) D
28) B
29) A
30) A
31) D
32) B
33) C