Fundamental Principles of Taxation - CH1

B. Specific

Tax which imposes a specific sum by the head or number or by some standards of weight or measurement and which requires no assessment other than a listing or classification or the objects to be taxed A. Ad-valorem B. Specific C. Excise D. Reveue

A. Ad-valorem

Tax which is a fixed proportion of the amount or value of the property with respect to which the tax is assessed A. Ad-valorem B. Specific C. Excise D. Revenue

B. Indirect

Tax which is demanded from one person in the exception and intention that he shall indemnify himself at the expense of another A. Direct B. Indirect C. Excise D. Income

A. Direct

Tax which is demanded from the persons whom the law intends or desires to pay it A. Direct B. Indirect C. Excise D. Income

D. Assessment of tax liability

Taxation is exercised both by the legislative and executive branch of the government. Which of the following is not the function of the Congress? A. Selecting the kind of tax B. Fixing amount of tax C. Prescribing rules of taxation D. Assess ment of tax liability

A. Non-payment does not necessarily render the business illegal

Tax as distinguished from license fee A. Non-payment does not necessarily render the business illegal B. A regulatory measure C. Imposed in the exercise of police power D. Limited to cover cost of regulation

B. Proportional

Tax based on a fix percentage of the amount of property, income or other basis to be taxed A. Progressive B. Proportional C. Regressive D. Indirect

B. Property

Tax imposed on personal or real property in proportion to its value or some other reasonable method of apportionment A. Personal, poll or capitation tax B. Property C. Excise tax D. Regressive

B. Regulatory tax

Tax levied for particular or specific purpose irrespective of whether revenue is actually raised or not A. Revenue tax B. Regulatory tax C. Specific tax D. Ad-valorem tax

A. Personal, poll or capitation tax

Tax of a fix amount imposed among all persons residing within a specified territory without regard to their property or occupation they may be engage A. Personal, poll or capitation tax B. Property C. Excise tax D. Regressive

C. Regressive

Tax where the rate decreases as the tax base increases A. Progressive B. Proportional C. Regressive D. Indirect

A. Progressive

Tax where the rate increases as the tax base increases A. Progressive B. Proportional C. Regressive D. Indirect

D. I, II and III

"Equality in taxation" means: I. Progressive system of taxation shall be applied II. The tax laws and their application must be fair, just, reasonable and proportionate to one's ability to pay III. The tax laws shall give emphasis on direct rather than indirect taxes or on the ability-to-pay principle of taxation A. I only B. II only C. III only D. I, II and III

D. Exemption of government entities from taxation

"Government agencies performing governmental functions are exempt from tax unless expressly taxed while those performing proprietary functions are subject to tax unless expressly exempted" refers to: A. The tax imposed should be for public purpose B. There should be no improper delegation of the tax power The power to tax is limited to the territorial jurisdiction of the taxing government D. Exemption of government entities from taxation

B. Separate graduated rates are imposed on different types of income

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

C. International comity

A fundamental rule in taxation is that "the property of one country may not be taxed by another country". This is known as A. International law B. Reciprocity C. International comity D. International inhibition

D. None of the choices

A tax classified as a regressive tax A. Excise tax B. Real estate tax C. Value added tax D. None of the choices

D. None of the choices

A tax must be imposed for a public purpose. Which of the following is not a public purpose? A. National defense B. Public education C. Improvement of sugar industry D. None of the choices

B. Indirect tax

A tax on business is A. Direct tax B. Indirect tax C. Property tax D. None of the choices

D. That he will derive no benefit from the tax

A taxpayer gives the following reasons for refusing to pay a tax. Which of his reasons is not acceptable for legally refusing to pay the tax? A. That he has been deprived of due process of law. B. That there is lack of territoriality jurisdiction. C. That the prescriptive period for the tax has lapsed. D. That he will drive no benefit from the tax.

D. Police power and power of taxation

After having been informed that most of the massage parlors in the city are being used as fronts for prostitution, the Sanguniang Panlungsod of Manila passed a tax ordinance subjecting massage parlors within its jurisdiction to such "onerous taxes" that leave them no other alternatives but to stop operating. The passage of the ordinance is a valid exercise of: A. Taxation B. Police power C. Eminent Domain D. Power power and power of taxation

A. Selection of object of tax

All of the following are administrative functions of taxation except A. Selection of object of tax B. Equalization of assessment C. Valuation of property for taxation D. Collection of taxes

B. Valuation of property for taxation

All of the following are legislative aspect of taxation except A. Selection of the object or subject of tax B. Valuation of property of taxation C. Fixing of tax rates D. Prescribing the general rules of taxation

D. Inherent in sovereignty

All of the following, except one, are the basic principles of a sound taxation system: A. Fiscal Adequacy B. Administrative feasibility C. Theoretical justice D. Inherent in sovereignty

A. No. Exemption from taxes is personal in nature and covers only taxes for which the taxpayer-grantee is directly liable. VAT is a tax on the seller who is not exempt from taxes. Since XYZ Inc. is not directly liable for the vat and no tax exemption privilege is ever given to him, its claim that the sale is tax exempt is not tenable.

As an incentive for investors, a law was passed giving newly established companies in certain economic zone exemption from all taxes, duties, fees, imposts and other charges for a period of three years. ABC Corporation was organized and was granted such incentive. In the course of business, ABC purchased mechanical equipment from XYZ Incorporated. The latter, in its ordinary business dealings, is subject to vat. XYZ Inc. claims, however, that since it sold the equipment to ABC Corp. which is tax exempt, it should not be liable to pay the vat. Is this claim tenable? A. No. Exemption from taxes is personal in nature and covers only taxes for which the taxpayer-grantee is directly liable. VAT is a tax on the seller who is not exempt from taxes. Since XYZ Inc. is not directly liable for the vat and no tax exemption privilege is ever given to him, its claim that the sale is tax exempt is not tenable. B. Yes, exemption from tax should not be discriminatory in nature. A seller of goods or service to tax exempt individuals or entities shall be accorded the same exemption provided by law to a buyer. C. Yes, applying uniformity rule. D. None of the above

C. I, I and III

Assuming Senator Juan Maharlika filled in the Senate a substitute e-vat bill "in anticipation" of its receipt of the bill from the House. The proposal is totally different from the version of the lower house. Which of the following statements justify the filing of a substitute bill by Honorable Senator Maharlika? I. To insist that a revenue statute not only the bill which initiated the legislative process culminating in the enactment of the law - must substantially be the same as the House bill would be to deny the Senate's power not only to "concur with amendments" but also to "propose amendment" II. It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate. Given the power of the Senate to propose amendments, it can propose its own version even with respect to bills which are required by the Constitution to originate in the House. III. Filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House is not prohibited under the Constitution, so long as the action by the Senate as a body is withheld pending receipt of the House bil A. I only B. II only C. I, II and III D. None of the above

D. All of the choices

Being legislative in nature, the power to tax may not be delegated, except: A. To local governments or political subdivisions B. When allowed by the Constitution C. When delegation relates merely to administrative implementation that may call for some degree of discretionary powers under a set of sufficient standards expressed by law or implied from the policy and purpose of the Act D. All of the choices

A. Due process of law

Compliance with procedural requirements must be followed strictly to avoid collision between the State's power to tax and the individual's recognized rights. A. Due process of law B. Equality in taxation C. Non-infringement of religious freedom D. Non-impairment of obligations and contracts

B. May be paid in kind

Debt as distinguished from tax A. Based on law B. May be paid in kind C. Does not draw interest except when delinquent D. Generally not subject to set-off or compensation

B. Tax legislative function

Fixing the tax rate to be imposed is best described as a(an): A. Tax administration aspect B. Tax legislative function C. Aspect of taxation which could be delegated D. Function that could be exercised by the executive branch

D. Answers 1 and 2 are true

How broad is the power of the legislature to impose taxes? Answer 1: The legislature has limited discretion as to the persons, property or occupations to be taxed, where there are no constitutional restrictions, provided the property is within the territorial jurisdiction of the state. Answer 2: The legislature has the right to finally determine the amount or rate of tax, in the absence of any constitutional prohibitions and it may levy a tax of any amount as it sees fit. A. Answers 1 and 2 are false. B. Answer 1 is true but answer 2 is false. C. Answer 1 is false but answer 2 is true. D. Answers 1 and 2 are true.

A. By local legislation

How will the local government units be able to exercise their taxing powers? A. By local legislation B. By authority conferred by the Congress C. By the issuance of the Department of Finance D. By the help of the Bureau of Internal Revenue

B. Liberally in favor of the taxpayer

In case of ambiguity, tax laws imposing a tax shall be interpreted A. Strictly against the taxpayer B. Liberally in favor of the taxpayer C. Liberally in favor of the government D. None of the choices

A. Strictly against the taxpayer

In cases of deductions and exemptions, doubts shall be resolved A. Strictly against the taxpayer B. Strictly against the government C. Liberally in favor of the taxpayer D. None of the choices

B. Situs of taxation

It literally means "place of taxation" the country that has the power and jurisdiction to levy and collect the tax A. Basis of taxation B. Situs of taxation C. Scope of taxation D. Theory of taxation

D. Ad-valorem tax

JJ is a mining operator. The tax he has to pay is based on the actual value of the gross output or mineral products extracted is A. Mining tax B. Royalties C. Rental D. Ad-valorem tax

C. Both answers are correct.

Juan Dela Cruz Memorial Hospital is a 100-bed domestic hospital organized for charitable purposes. However, 100-bed capacity, 40-beds are allotted for paying patients, while the rest are intended for charity patients. The revenues generated from these paying patients, however, are being used to improve the facilities of the hospital. Can said hospital claim exemption from income tax as well as real property tax? Answer 1: Yes, the hospital can claim exemption from real property tax. As a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or receives subsidiaries from the government, so long as the money received is devoted or used altogether to the charitable object which it is intended to achieve; and no money inures to the private benefit of the persons of the person managing or operating the institution Answer 2: The hospital is subject to 10% tax on its net income, subject to compliance with the "predominance test". A. Only the first answer is correct B. Only the second answer is correct C. Both answers are correct D. Both answers are incorrect

B. The legislative branch of the local government only

Levying of local government taxes may be exercised by: A. The local executives only B. The legislative branch of the local government only C. The local executive and the legislative branch of the local government unit D. Neither the local executive nor the legislative branch of the local government can exercise the power

D. I and II only

Mapagbigay School, a non-stock non-profit educational institution, bought from Pedro a resident citizen, his residential house and lot. Pedro will be using the proceeds of the sale to buy his new residential house and lot. On the other hand, the school will use the parcel of land to construct a new building for its dormitory for its medical students. Which of the following statements regarding liability for the payment of capital gains tax is correct? I. Pedro is liable to capital gains tax. However, if what was sold was his principal residence, he may apply for tax exemption, provided that he complies with the requirements laid down in the Tax Code. II. Pedro is not liable to CGT because the sale was made in favor of a non-stock, non-profit education institution and that the property will be used for educationally-related functions. III. Pedro is liable to CGT because the tax is imposed on the seller; thus, notwithstanding any exemption enjoyed by the buyer, the tax shall still be imposed.

B. No, because if the Philippine government would impose the requirement of tax withholding on the salaries of Filipino employees working in the Philippine Embassy in the Philippines, this would in effect require that the American government be constituted as the withholding agent of the the Philippine government insofar as the taxes on the salaries of the Filipino employees are concerned

May the Philippine government require tax withholding on the salaries of Filipino employees working in the American Embassy in the Philippines? A. No, because this will violate the rule on international comity B. No, because if the Philippine government would impose the requirement of tax withholding on the salaries of Filipino employees working in the Philippine Embassy in the Philippines, this would in effect require that the American government be constituted as the withholding agent of the the Philippine government insofar as the taxes on the salaries of the Filipino employees are concerned C. Both "a" and "b" D. None of the above

C. The religious congregation is subject to income tax. The constitutional tax exemptions refer only to real property that are actually, directly and exclusively used for religious, charitable, or educational purposes, and that the only constitutionally recognized exemption from taxation of revenues are those earned by non-profit, non-stock educational institutions which are actually, directly and exclusively used for educational purposes.

Mike is the owner of a 5,000 sqm parcel of land located in New Manila, Quezon City. He leased the property for P500,000 a year to a religious congregation for a period of ten (10) years. The religious congregation built on a 1,000 sqm portion a seminary and a chapel which it used in connection with its religious activities. It also constructed a ten (10) story building on the remaining 4,000 sqm which it rented out to various seminaries located throughout the Philippines. These seminaries are organized as non-profit and non-stock educational institutions. Which of the following is the correct tax implication of the foregoing data with respect to payment of income tax? A. The religious congregation is exempt from payment of income taxes on rental receipts because the collections were used to support its various seminaries located throughout the Philippines. B. The religious congregation is exempt from payment of income taxes on rental receipts provided not more than 30% of its receipts were used for administrative purposes. C. The religious congregation is subject to income tax. The constitutional tax exemptions refer only to real property that are actually, directly and exclusively used for religious, charitable, or educational purposes, and that the only constitutionally recognized exemption from taxation of revenues are those earned by non-profit, non-stock educational institutions which are actually, directly and exclusively used for educational purposes. D. None of the above

B. 2/3 vote of all members of Congress

No law granting any tax exemptions shall be passed without the concurrence of - A. Majority of all members of Congress B. 2/3 vote of all members of Congress C. 3/4 vote of all members of Congress D. Unanimous vote of all members of Congress

C. Poll tax

No person shall be imprisoned for non-payment of this. A. Property tax B. Excise tax C. Poll tax D. Income tax

B. No, because the 40% interest rate is violation of due process of law for being excessive and unreasonable.

On January 1, 2017, the Congress enacted a law increasing the corporate income tax from 30% to 40%. The law provides retroactive effect starting January 1, 2010. The Philippine Constitution Chamber of Commerce questions the validity of the law. Is the law constitutional? A. No, because the retroactive effect of the law constitutes deprivation of right to property of corporation without due process of law. B. No, because the 40% interest rate is violation of due process of law for being excessive and unreasonable. C. Yes, because the power of taxation is an inherent power of a sovereign State and it is based on the lifeblood doctrine and necessity theory. D. Yes because the power of taxation is an essentially legislative power within the exclusive prerogative of the Congress that its wisdom is beyond the reach of the Supreme Court.

D. Value-added tax

One is not a direct tax A. Immigration tax B. Transfer tax C. Income tax D. Value-added tax

D. A 20% final withholding tax on interest income on bank deposits and a 5% gross receipts tax on banks is a direct duplicate taxation

One of the following is a false statement about double taxation. Which is it? A. There is not constitutional prohibition on double taxation B. Direct duplicate taxation is a valid defense against a tax measure if it is violative of the equal protection clause C. Absence of any of the elements of direct duplicate taxation makes it indirect duplicate taxation D. A 20% final withholding tax on interest income on bank deposits and a 5% gross receipts tax on banks is a direct duplicate taxation

C. Exemption of the government from taxes

One of the following is not a Constitutional limitation of the power of taxation? A. Exemption from taxes of revenues and assets of educational institutions, including grants. endowments. donations and contributions B. Non-impairment of the jurisdiction of Supreme Court in taxes C. Exemption of the government from taxes D. Non-infringement of religious freedom and worship

B. It is payable in money or in kind

One of the following is not a characteristic or an element of tax A. It is levied by the legislature B. It is payable in money or in kind C. It is proportionate in character D. It is an enforced contribution

D. Shifting - NO; Stipulation - YES

Pedro sold a parcel of land classified as capital assets to Juan. The parties agreed that the CGT shall be shouldered by Juan. Is this a form of shifting? Is the stipulation valid? A. Shifting - YES; Stipulation - YES B. Shifting - NO; Stipulation - NO C. Shifting - YES; Stipulation - NO D. Shifting - NO; Stipulation - YES

B. Tax avoidance

Pedro's income from leasing his property reaches the maximum rate of tax under the law. He donated one-half of his said property to a non-stock, non-profit educational institution whose income and assets are actually, directly, and exclusively used for educational purposes, and therefore qualified for tax exemption under Article XIV, Section 4 (3) of the Constitution and Section 30 (h) of the Tax Code. Having thus transferred a portion of his said asset, Pedro succeeded in paying a lesser tax on the rental income derived from his property under the lower tax bracket. Pedro's action is considered/also known as: A. Tax evasion B. Tax avoidance C. Shifting D. None

C. Both a and b

Rule of "No estoppel against the government" means: A. Rule of law that in the performance of its governmental functions, the state cannot be estopped by the neglect of its agents and officers B. The government is not estopped by the mistakes of errors of its agents; erroneous application and enforcement of law by public officers do not block the subsequent correct application of statutes C. Both a and b D. Neither a and b

C. Yes, because leasing of property is not actually, directly and exclusively related to educational purposes

Saint Mary's University (SMU) is a non-stock, non-profit educational institution registered with Securities and Exchange Commission (SEC) as a corporation. For the year ended December 31, 2018, it reported rental income amounting to P150M from various tenants leasing portions of the said corporation. The Bureau of Internal Revenue (BIR) assessed SMU P45M deficiency income tax for rental income earned. Is the action of the BIR proper? A. No, because a proprietary educational institution shall be subject only to 10% preferential corporate income tax. B. No, because all revenues of non-stock, non-profit educational institution shall be exempt from taxes and duties as long as they are used actually, directly, and exclusively for educational purposes C. Yes, because leasing of property is not actually, directly and exclusively related to educational purposes D. Yes, because taxes are the lifeblood of the government and tax exemptions are construed strictly against the taxpayer and liberally on favor of the government

D. Statement 1 and 3 are false; 2 is true

Statement 1: A provision on taxation in the Philippine Constitution is a grant of power Statement 2: The power to tax includes the power to destroy Statement 3: Sumptuary purpose of taxation is to raise funds for the government A. Statement 1, 2, 3 are true B. Statement 1 and 2 are true; 3 is false C. Statement 2 and 3 are true; 1 is false D. Statement 1 and 3 are false; 2 is true

C. Both statements are correct

Statement 1: A revenue regulation must not be contrary to the provision of the law that it implement Statement 2: A revenue regulation cannot expand the provision of the law that it implements by imposing a penalty when the law that authorizes the revenue regulation does not impose a penalty A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

A. Only statement 1 is correct

Statement 1: A tax is deemed to have satisfied the uniformity rule when it operates with the same force and effect in every place where the subject may be found. Statement 2: The equal protection clause of the Constitution forbid classification based on real and substantial differences having a reasonable relation to the subject of the particular legislation. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

C. Only statement 2 is true

Statement 1: Income tax collected from the taxpayers is the main source of revenue of the local government Statement 2: Taxes collected are the main source of revenue of the government A. Statements 1 and 2 are true B. Only statement 1 is true C. Only statement 2 is true D. Statements 1 and 2 are false

C. Both statements are correct

Statement 1: Inherent Limitations are the natural restrictions to safeguard and ensure that the power of taxation shall be exercised by the government only for the betterment of the people whose interest should be served, enhanced and protected. Statement 2: Constitutional limitations are provisions of the fundamental law of the land that restrict the supreme, plenary, unlimited and comprehensive exercise by the State of its inherent power to tax. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

B. Only statement 2 is correct

Statement 1: People pay taxes which their government uses to expand its powers and territorial domination. Statement 2: People demand from their government certain responsibilities and then provide the government with the means to carry them out. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

D. Both statements are incorrect

Statement 1: Police power and the power of taxation are exercised primarily by the legislature but not eminent domain. Statement 2: Taxation and eminent domain interferes with private right and property but not with police power. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

B. Only statement 2 is correct

Statement 1: 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. Statement 2: Compensation under police power is the intangible feeling of contribution to the general welfare of the people. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

D. Both statements are incorrect

Statement 1: Tax avoidance is a scheme used outside of those lawful means to escape tax liability Statement 2: Tax avoidance is a tax saving device within the means sanctioned by law, and, when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

C. Both statements are correct

Statement 1: Taxation and Police Power may be exercised simultaneously Statement 2: In the exercise if taxation, the State can tax anything at anytime and at any amount A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

C. Both statements are correct

Statement 1: The Constitution cannot take away the inherent powers of the State but may only prescribe its limitations Statement 2: No laws are necessary to confer the inherent powers of the State upon any government exercising sovereignty A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

D. Both statements are incorrect

Statement 1: The amount of money raised for the government in the exercise of its power to tax is and police power is based on the needs of the government Statement 2: The amount of money raised for the government in the exercise of its power of eminent domain is based in the cos of processing the transfer of property from private entities and/or individuals to the government. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

B. Only statement 2 is correct

Statement 1: The constitution is the source of the State's taxing power. Statement 2: The police power of the government may be exercised through taxation A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

D. Both statements are incorrect

Statement 1: The power of taxation must first be expressly granted, either by law or by the Constitution, before the State may validly exercise it. Statement 2: The Philippine Government may subject the land where embassies of foreign governments are located to real property taxes. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

D. Both statements are incorrect

Statement 1: The power to tax is supreme, plenary, comprehensive and without any limit because the existence of the government is a necessity. Statement 2: The discretion of Congress in imposing taxes extends to the mode, method and kind of tax, even if the constitution provides otherwise. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

C. Both statements are correct

Statement 1: Uniformity in the imposition and/or collection of taxes means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. This requirement is complied with when the tax operates with the same force and effect in every place where the subject of it is found. Statement 2: Uniformity rule is not violated when different articles are taxed at different amounts provided that the rate is uniform on the same class everywhere with all people at all times. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

A. Statement 1 is correct; Statement 2 is wrong

Statement 1: in case of conflict between a revenue regulation and the provision of the National Internal Revenue Code, the latter shall prevail Statement 2: The revocation of a revenue regulation cannot be made retroactive even if the reason for its revocation is that it is erroneous or contrary to law A. Statement 1 is correct; Statement 2 is wrong B. Both statements are correct C. Statement 1 is wrong; Statement 2 is correct D. Both statements are wrong

B. No, because the it is exercised directly for public purpose and the benefit to a private entity is only incidental.

The 30% corporate income tax is increased to 35% by the Congress for the purpose of raising revenue to be used for national road expansion project near BGC, a private corporation. Is the exercised of the taxing power unconstitutional? A. Yes, because the taxing power must be exercised exclusively for public purpose without any incidental benefit to any private entity. B. No, because the it is exercised directly for public purpose and the benefit to a private entity is only incidental. C. Yes, because the increase in tax rate constitutes deprivation of right to property of corporation without due process of law for being excessive and unreasonable. D. No, because the constitution does not expressly state that the power of taxation must be used only for public purpose, thus, it may be used to benefit a private entity.

C. Enact tax laws and make amendments

The Commissioner of Internal Revenue is granted certain powers under the Tax Code. Which of the following is not a power granted to the Commissioner under the Code? A. Interpret tax laws and decide tax cases B. Issue summons and subpoena C. Enact tax laws and make amendments D. Make assessment and prescribe additional requirements

D. No, because it is not the law but the revenue bill which is required by the constitution to originate exclusively in the House of Representatives and insisting otherwise would violate the coequality of legislative power of the two houses of Congress and in fact would make the House superior to the Senate.

The Congress enacted a new law, known as the Expanded Value Added Tax Law. An association of taxpayers questions the constitutionality of this law on the ground that it did not originate exclusively in the House of Representatives as required by the Constitution, because it s in fact the result of the consolidation of two distinct bills, one from the House of Representatives and the other from the Senate. Is the vat law unconstitutional? A. Yes, because all appropriation, revenue or tariff bills, bills authorizing increase of public debt, bills of local application, and private bills, shall originate exclusively in the House of Representatives. B. Yes, because the Senate has no authority t propose or concur any amendments with the revenue or tax bill proposed by the House of Representatives. C. No, because all appropriation, revenue or tariff bills, bills authorizing the increase of public debt, bills of local application, and private bills, shall be initiated by the Senate. D. No, because it is not the law but the revenue bill which is required by the constitution to originate exclusively in the House of Representatives and insisting otherwise would violate the coequality of legislative power of the two houses of Congress and in fact would make the House superior to the Senate.

B. II and III only

The Congress, after much public hearing and consultations with various sectors of society, came to the conclusion that it will be good for the country to have only one system of taxation by centralizing the imposition and collection of all taxes in the national government. Accordingly, passed law that would abolish the taxing power of all local government units. Would such law be valid under the the present Constitution? I. Yes, the law centralizing the imposition and collection of all taxes in the national government would not contravene the Constitution as long as a new law is enacted for the common good of the people. II. No because under the present Constitution, each local government unit shall have the power to create their own sources of revenue and to levy taxes, fee, and charges subject to such guidelines and limitations as Congress may provide consistent with the basic policy of local autonomy. III. No. It is clear that Congress can only give the guidelines and limitations on the exercise by the local governments of the power to tax but what was granted by the fundamental law cannot be withdrawn by Congress. A. I only B. II and III only C. I, II and III D. None of the above

C. Both I and II

The Constitution requires that all revenue bills shall originate "exclusively" from the House of Representatives. Assume that in 2018, Congressman Pedro Dela Cruz proposed an expansion of the coverage of the VAT to be known as E-VAT law. The proposed bill was approved by the House of Representatives later that year. However, the EVAT version of the Senate became the EVAT law. Which of the following statements will justify the enacted EVAT law? I. The Constitution simply means that the initiative for filing revenue, tariff o tax bills must come from the House of Representatives on the theory that, elected as they are from the districts, the Members of the House can be expected to be more sensitive to the local needs and problems. II. It is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives because the bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole, and a distinct bill may be produced. A. I only B. II only C. Both I and II D. Neither I nor II

C. Indirect rather than direct system

The Philippine income tax system has the following features, except A. Comprehensive tax situs by using the nationality, residence and source rules B. The individual income tax system is mainly progressive in nature C. indirect rather than direct system D. Semi-global and semi-schedular system

C. Indirect rather than direct system

The Philippine income tax system has the following features, except A. Comprehensive tax situs by using the nationality, residence, and source rules B. The individual income tax system is mainly progressive in nature C. Indirect rather than direct system D. Semi-global and semi-schedular system

D. None of the above

The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, issued a Revenue Regulation using gross income as the tax base for corporations doing business in the Philippines. The revenue regulation is: A. Valid. Corporations are already taxable under our existing tax laws. Hence, the action of the Secretary constitutes administrative action only which is within his powers B. Valid if the tax is limited to gross income without deductions. Such action is not tantamount to changing the amount of the tax as said amount ultimately depends on the taxable base. C. Not valid because the action of the Secretary constitutes legislation which is exclusively within the powers of the legislative branch of the government D. None of the above

C. Both statements are correct

The State, having sovereignty can enforce contributions (tax) upon its citizens even without a specific provision in the Constitution authorizing it. Statement 1: It is so because the State has the supreme power to command and enforce obedience to its will from the people within its jurisdiction. Statement 2: Any provision in the Constitution regarding taxation does not create rights for the sovereignty to have the power to tax but it merely constitutes limitations upon the supremacy of tax power. A. Only statement 1 is correct B. Only statement 2 is correct C. Both statements are correct D. Both statements are incorrect

C. Tax avoidance

The exploitation by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income, in order to reduce tax liability. It is otherwise known as tax minimization A. Tax exemption B. Tax evasion C. Tax avoidance D. Transformation

C. Theoretical justice

The basic principle of a sound taxation system, where, "Taxes must be based on the taxpayer's ability to pay" is called: A. Equality in taxation B. Ability to pay theory C. Theoretical justice D. Equity in Taxation

A. Use of the real property

The basis or test of exemption of real properties owned by religious, or charitable entities from real property taxes is: A. Use of the real property B. Ownership of the real property C. Location of the real property D. Ownership or location real property at the option of the government

D. The ordinance is a valid exercise of the council's power to enact tax ordinance to raise revenue under the Local Government Code.

The city council passed a tax ordinance imposing an occupation tax or profession or occupation of an "industrial engineer". GJ is the only person with such an occupation in the city. Which of the following is correct? A. GJ can successfully challenge the validity of the ordinance being discriminatory since he is the only one adversely affected. B. The ordinance violates the constitutional rule of equality in taxation. C. The ordinance is a "class legislation" since it does not subject to occupation tax the other industrial engineers. D. The ordinance is a valid exercise of the council's power to enact tax ordinance to raise revenue under the Local Government Code.

C. One in which there is generally no limit on the amount that may be imposed

The distinction of a tax permit or license fee is that a tax is A. Imposed for regulation B. One which involves exercise of police power C. One in which there is generally no limit on the amount that may be imposed D. Answer not given

D. Theory of Taxation

The existence of the government is a necessity and that the state has the right to compel all individuals and property within its limits to contribute A. Basis of taxation B. Situs of taxation C. Scope of taxation D. Theory of taxation

B. I and II only

The following are the aspect of taxation I - Levying or imposition of the tax on persons, property or exercises II - Collection of taxes already levied III - Sufficiency of government sources to satisfy expenditures A. I, II, III B. I and II only C. I and III only D. II and III only

A. Only Congress can exercise the power of taxation

The following are the constitutional limitations on the power of taxation, except A. Only Congress can exercise the power of taxation B. Non-impairment of the obligation of contracts C. Taxes are not subject to set-off or compensation D. The rule of taxation shall be uniform

D. T: Attribute of sovereignty ED: Fundamental Power

The following are the differences between the power of taxation and the power of eminent domain, except: A. T: Enforced proportionate contribution. ED: Property to be taken is for public use B. T: Government has no obligation to pay ED: Go't is a debtor of the property taken C. T: It operates in a community. ED: It operates on an individual D. T: Attribute of sovereignty ED: Fundamental Power

A. They can be abolished by the Constitution

The following are the similarities among the Fundamental Powers of the State, except A. They can be abolished by the Constitution. B. They constitute the three methods by which the State interferes with private property rights. C. Each presupposes an equivalent compensation to the inhabitants. D. The emergence of the State carries with it these fundamental powers.

A. Both taxes are imposed in the same amount

The following constitute double taxation, except one 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

B. Eminent domain does not require constitutional grant but taxation being formidable, does in order to limit its exercise by the legislature.

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 does not require constitutional grant but taxation being formidable, does in order to limit its exercise by the legislature. C. Police power and taxation is exercise only by the government but eminent domain may be exercised by private entities. D. Police power regulates both property and liberty while eminent domain and taxation affects only property rights.

B. The State can exercise the power of taxation only if it is expressly mentioned in the Constitution

The following statements correctly described the power of the State to tax, except A. It is a power inherent in every sovereign state to imposed a charge or burden upon persons, properties, or rights to raise revenues for the use and support of the government and to enable it to discharge its functions. B. The state can exercise the power of taxation only if it is expressly mentioned in the Constitution. C. It passes a legislative undertaking through the enactment of laws by the Congress which will be implemented by the Executive Branch of the government through its Bureau of Internal Revenue to raise revenue for the inhabitants in order to pay the necessary expenses of the government. D. It is a way of collecting and apportioning the cost of government among those who are privileged to enjoy its benefits.

C. Revenue regulations

The least source of tax laws: A. Statues B. Presidential decrees C. Revenue regulations D. Tax treaties or conventions

C. Both I and II

The legislative body enact laws to raise revenues in the absence of a constitutional provision granting said body the power to tax. Which of the following statements will justify the enactment of such law? I. The legislative body may enact tax laws even in the absence of a constitutional provision because the power to tax is inherent in the government and not a constitutional grant. II. The power of taxation is an essential and inherent attribute of sovereignty belonging as a matter of right to every independent government without being expressly granted by the people. A. I only B. II only C.I and II only D. Neither I nor II

B. Aspects of taxation

The levying and imposition of tax and the collection of tax are processes which constitute the taxation system A. Basis of taxation B. Aspects of taxation C. Nature of taxation D. Theory of taxation

A. Assessment

The official action of an officer authorized by law in ascertaining the amount of tax due under the law from a taxpayer is A. Assessment B. Deliquency C. Deficiency D. Distraint

C. Power of eminent doman

The power to acquire private property upon payment of just compensation for public purpose A. Power of taxation B. Police Power C. Power of eminent domain D. Power of recall

A. Power of taxation

The power to demand proportionate contribution from persons and property to defray the necessary expenses of the government A. Power of taxation B. Police Power C. Power of eminent domain D. Power of recall

B. Police Power

The power to regulate liberty and property to promote the general welfare A. Power of taxation B. Police Power C. Power of eminent domain D. Power of recall

D. To raise revenue for governmental needs

The principal purpose of taxation is: A. To encourage the growth of home industries through the proper use of tax incentives B. To implement the police power of the state C. To reduce excessive inequalities of wealth D. To raise revenue for governmental needs

A. Basis of taxation

The reciprocal duties of support and protection between the people and the government A. Basis of taxation B. Situs of taxation C. Scope of taxation D. Theory of taxation

A. Power of Taxation

The strongest of all inherent powers of the government is A. Power of taxation B. Police Power C. Power of eminent domain D. Power of recall

C. Administrative feasibility

The tax law must be capable of convenient, just and effective administration A. Theoretical justice B. Fiscal adequacy C. Administrative feasibility D. Rule of apportionment

D. Evasion

The use of illegal or fraudulent means to avoid or defeat the payment of tax A. Exemption B. Shifting C. Avoidance D. Evasion

D. All of the above

The usual mode(s) of avoiding occurrence of double taxation is/are: A. Reciprocal exemption, either by law or treaty B. Tax credit of foreign taxes paid C. Deduction for foreign taxes paid D. All of the above

B. Constitutional limitations

There are restrictions imposed by the Constitution A. Inherent limitations B. Constitutional limitations C. Basic principles of sound tax system D. None of the choices

D. Power of recall

They exist independent of the constitution being fundamental power of the state, except A. Power of taxation B. Police Power C. Power of eminent domain D. Power of recall

B. Uniformity

This requires that all subjects or objects of taxation, similarly situated are to be treated alike of put on equal footing both in privileges and liabilities A. Due process B. Uniformity C. Progressive taxation D. None of the choices

C. The power to tax is limited to the territorial jurisdiction of the taxing government

This stems from the principle that we pay taxes for the protection and services provided outside the territorial boundaries of the taxing state. A. The tax imposed should be for public purpose B. There should be no improper delegation of the taxing power C. The power to tax is limited to the territorial jurisdiction of the taxing government D. Exemption of government entities from taxation

B. Ad-valorem tax - TRUE; Specific tax - FALSE

This type of tax requires an assessment of the value of the subject of tax A. Ad-valorem tax - TRUE; Specific tax - TRUE B. Ad-valorem tax - TRUE; Specific tax - FALSE C. Ad-valorem tax - FALSE; Specific tax - TRUE D. Ad-valorem tax - FALSE; Specific tax - FALSE

C. Amount is based on the cost of construction of public improvement used

Toll as distinguished from tax A. Demand of sovereignty B. Imposed by government only C. Amount is based on the cost of construction of public improvement used D. Paid for the support of the government

A. Shifting

Transfer of the tax burden by one whom the tax is assessed to another A. Shifting B. Capitalization C. Transformation D. Tax exemption

B. The recipient of the income is no longer required to file an income tax return as prescribed under the Tax Code

Under the Creditable Withholding Tax system, which of the following statements is incorrect? A. Taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income B. The recipient of the income is no longer required to file an income tax return as prescribed under the Tax Code C. The payee is required to report the income and pay the difference between the tax withheld and the tax due thereon D. Taxes withheld under this system are creditable in nature

B. The liability for payment of the tax rests primarily on the payee as a recipient of income

Under the Final Withholding Tax system, which of the following statements is not correct? A. Income tax withheld by the withholding agent constituted as a full and final payment of the income tax due from the payee on the said income B. The liability for payment of the tax rests primarily on the payee as a recipient of income C. In case of failure to withhold the tax, the deficiency tax shall be collected from the withholding agent D. The payee is no longer required to file an income tax return for the particular income

C. Fiscal adequacy

Under the basic principle of a sound taxation system, the government should not incur a deficit: A. Theoretical justice B. Administrative feasibility C. Fiscal adequacy D. None of the above

C. The local executive and the legislative branch of the local government can exercise the power

When the power to tax is delegated to the local government A. Only the local executive can exercise the power B. Only the legislative branch of the local government can exercise the power C. The local executive and legislative branch of the local government can exercise the power D. Neither the local executive not the legislative branch of the local government can exercise the power

D. Equitable recoupment

When the refund of a tax supposedly due to the taxpayer has already been barred by prescription, and the said taxpayer is assessed with a tax at present, the two taxes may be set-off with each other. This doctrine is called A. Set-off doctrine B. Doctrine of reciprocity C. Tax sparring doctrine D. Equitable recoupment

A. Constitutional grant

Where does taxing power of the provinces, municipalities and cities precede from? A. Constitutional grant B. Legislative Enactment C. Presidential decree of Executive act D. Local legislation

B. Symbiotic relation in taxation

Which among the following concepts of taxation is the basis for the situs of income taxation? A. Lifeblood doctrine of taxation B. Symbiotic relation in taxation C. Compensatory purpose of taxation D. Sumptuary purpose of taxation

C. Power of eminent domain

Which of the following may not raise money for the government? A. Power of taxation B. Police power C. Power of eminent domain D. Privitization of government's capital assets

D. All of the above

Which is not a double taxation? A. A lessor of property pays a real estate tax and income tax on the same property B. Imposition of tax on the finished products and the raw materials used in the production of the said finished products C. Imposition of tax on corporate income and shareholder's dividends from the same corporation D. All of the above

D. For public purposes

Which limitation on the power of taxation inherently implied that the State's primary concern is for the common good of the people? A. Equality in taxation B. Equal protection of the law C. Due process of law D. For public purposes

C. I, III, and IV only

Which of the following entities, in some circumstances, may exercise the power of eminent domain? I. Electric Cooperatives II. Lending Cooperatives III. Water Cooperatives IV. Telecommunication Companies A. I and III only B. I, II and III only C. I, III and IV only D. All of the above

D. Nonresident alien not engaged in trade

Which of the following individual taxpayers is not covered by progressive tax? A. Resident citizen B. Resident Alien C. Nonresident alien engaged in trade D. Nonresident alien not engaged in trade

B. IV only

Which of the following is a constitutional limitation on the power of taxation? I. Territoriality of taxes II. Public purpose III. Legislative in character IV. Non-appropriation for religious purpose A. II only B. IV only C. II and IV only D. III and IV only

D. All of the above

Which of the following is correct regarding the purpose(s) of revenue regulations issued by the Department of Finance through the Bureau of Internal Revenue? A. To properly enforce and execute the laws B. To clarify and explain the law C. To carry into effect the law's general provisions by providing details of administration and procedure D. All of the above

D. Assessment of tax liability (legislative:N; Administrative:Y)

Which of the following is correct? A. Fixing of tax rates (legislative:Y; Administrative:Y) B. Valuation of object of tax (legislative:Y; Administrative:N) C. Collection of tax (legislative:Y; Administrative:N) D. Assessment of tax liability (legislative:N; Administrative:Y)

C. Supreme and absolute power of the State

Which of the following is incorrect description of tax? A. Legislative and inherent for the existence of the government B. Necessary and for public purpose C. Supreme and absolute power of the State D. The strongest of all inherent powers of the State

D. None of the above

Which of the following is incorrect? A. Taxes may be imposed retroactively by law but, unless so expressed by such law, these taxes must only be imposed prospectively. B. Tax laws are neither political or penal in nature. C. The "ex post facto" rule is not applicable in taxation. D. None of the above

A. Where doubts exist in determining the intent of legislature, the doubt must be resolved strictly against the taxpayer and liberally in favor of the taxing authority

Which of the following is incorrect? A. Where doubts exist in determining the intent of legislature, the doubt must be resolved strictly against the taxpayer and liberally in favor of the taxing authority B. The exemption contained in the tax statutes must be strictly construed against the one claiming the exemption C. Tax cannot be imposed without clear and express words for that purpose D. All of the above

B. Payable only in money

Which of the following is not a characteristic of debt? A. Generally arises from contract B. Payable only in money C. Assignable D. Imprisonment is not a sanction for non-payment

C. II and VI only

Which of the following is not a source of our tax laws? I. Supreme Court Judicial Decisions II. SEC Regulations and Rulings III. Bureau of Customs Memorandum Orders IV. Administrative rules and regulations V. Legislations, tax treaties and tax ordinances VI. Opinion of authors A. II, III and VI only B. II, III and IV only C. II and VI only D. None of the above

C. Real property tax

Which of the following is not example of excise tax? A. Transfer tax B. Sales tax C. Real property tax D. Income tax

C. Both I and II

Which of the following is required for validity of rules and regulations? I. They must not be contrary to law and the Constitution II. They must be published in the Official Gazette or a newspaper of general circulation A. I only B. II only C. Both I and II D. Neither I or II

B. The court should construe a law granting a municipal corporation the power to tax most strictly

Which of the following propositions may be untenable? A. The court should construe a law granting tax exemption strictly against the taxpayer B. The court should construe a law granting a municipal corporation the power to tax most strictly C. The Supreme Court has jurisdiction to review of the Court of Tax Appeals D. None of the above

C. III only

Which of the following requires public improvement? I. Taxation II. Police Power III. Eminent Domain A. I only B. I and III only C. III only D. II and III only

B. The BIR has the authority to prescribe additional procedural/documentary requirements for taxpayers

Which of the following statement is correct? A. The BIR Commissioner has the power to interpret the provision of the Tax Code without a need of review by the DOF Secretary B. The BIR has the authority to prescribe additional procedural/documentary requirements for taxpayers C. The BIR shall have commissioners and a deputy commissioner D. The BIR Commissioner can delegate the power to abate tax liabilities

D. I, II, and III

Which of the following statements correctly describe "Equal protection" clause of the Constitution regarding the government's power to tax? I. All persons subject to legislation shall be treated alike under similar circumstances and conditions,both in the privileges conferred and liabilities imposed. II. The purpose is to protect persons belonging to the same class against intentional and arbitrary discrimination. III. There is denial of equal protection of laws if there is discrimination in the implementation of tax laws. A. I and II only B. I and III only C. II and III only D. I, II and III

D. Interpretation of Tax Laws is done by the Legislative branch of government

Which of the following statements is correct? A. Only the national government exercises the inherent power of taxation B. Local government units could exercise the power of taxation through legislated delegation C. National legislation is exercise by Congress D. Interpretation of Tax Laws is done by the Legislative branch of government

B. The revenue regulations which are in conflict with law(s) are null and void

Which of the following statements is correct? A. Revenue regulations have the force and effect of law and a memorandum order of the Commissioner of Internal Revenue, approved by the Secretary of Finance, has the same force and effect as revenue regulations B. The revenue regulations which are in conflict with law(s) are null and void C. The interpretations of the former Secretary of Finance do not necessarily bind their successors D. All of the above

D. All of the above

Which of the following statements is correct? A. Withholding tax liability may arise only when the agent has possession, custody or control of the funds withheld B. The withholding tax system was devised to provide the taxpayer a convenient manner to meet his probable income tax liability and to ensure collection of the income tax which could otherwise be lost or substantially reduced through failure to file the corresponding returns C. Withholding tax system is designed to improve the government's cash flow D. All of the above

A. I and II only

Which of the following statements is correct? I. A tax cannot be imposed without clear and express words for that purpose. II. The provisions of a taxing act are not to extended by implication. III. If the law is repealed, taxes assessed before repeal of the law may no longer be collected. A. I and II only B. II and III only C. All of the above D. None of the above

C. I and II

Which of the following statements is correct? I. Shifting will result in increase prices II. Tax evasion is also known as tax dodging A. I only B. II only C. I and II D. Neither I nor II

C. I and II only

Which of the following statements is correct? I. Taxes are pecuniary in nature II. It co-exist with the existence of the State III. Imposed on persons and property beyond the territorial jurisdiction of the State A. I only B. II only C. I and II only D. I, II, III

C. Indirect double taxation is legal as long as there is no violation of equal protection and uniformity of the Constitution

Which of the following statements is incorrect? A. Indirect double taxation violates the Constitutional provision of uniformity and equal protection B. There is direct double taxation in taxing the income of the corporation and again subject the portion of the income declared as dividend to final tax C. Indirect double taxation is legal as long as there is no violation of equal protection and uniformity of the Constitution D. All of the above

D. The power of the taxation in the Philippine Constitution are grants of power and not limitations on taxing power

Which of the following statements is not correct? A. Taxes maybe 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. In the exercise of the power of taxation, the State can tax anything at anytime. D. The power of the taxation in the Philippine Constitution are grants of power and not limitations on taxing power.

B. The government can enforce contribution upon its citizens only when the Constitution grants it

Which of the following statements is not correct? A. The government automatically possesses the power to collect taxes from its inhabitants. B. The government can enforce contribution upon its citizens only when the Constitution grants it. C. Taxation power exist inseparably with the State. D. The State has the supreme power to command and enforce contribution from the people within its jurisdiction.

D. The exercise of the power of eminent domain and police power can be expressly delegated to the local government units by the law making body

Which of the following statements is true? A. The power of taxation and eminent domain are both exercisable only by the government and its political subdivision. B. In police power, the property taken is preserved for public use. C. The power of eminent domain is created by the constitution. D. The exercise of the power of eminent domain and police power can be expressly delegated to the local government units by the law making body.

D. A taxpayer is relieved from the obligation of paying a tax because of his belief that it is being misappropriated by certain officials

Which of the following statements regarding "Taxpayer's Suit" is incorrect? A. It is one brought or filed by a taxpayer arguing the validity of a tax statute and its enactment or the constitutionality of its alleged public purpose B. It is a case where the act complained of directly involves the illegal disbursement of public funds derived from taxation C. Taxpayers have "locus standi" to question the validity of tax measures or illegal expenditures of public money D. A taxpayer is relieved from the obligation of paying a tax because of his belief that it is being misappropriated by certain officials

A. Value added tax

Which of the following taxes is always proportional? A. Value added tax B. Income tax C. Estate tax D. Donor's tax

B. License fee

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?" A. Tax B. License fee C. Toll D. Customs duty

C. Eminent Domain

Which of the inherent powers maybe exercised even by public utility companies? A. Taxation B. Police Power C. Eminent Domain D. A and C

C. A special assessment is a tax

Which statement is wrong? A. A tax is a demand of sovereignty B. A toll is a demand of ownership C. A special assessment is a tax D. Customs duty is a tax

A. The power of taxation may be exercised by the government, its political subdivisions, and public utilities

Which statement is wrong? A. The power of taxation may be exercised by the government, its political subdivisions, and public utilities. B. Generally, there is no limit on the amount of tax that may be imposed. C. The money contributed as tax becomes part of the public funds. D. The power of tax is subject to inherent and constitutional limitations

B. The underlying basis of taxation is government necessity, for without taxation, a government can't either exist not endure

Which statements below expresses the lifeblood theory? 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't either exist nor endure C. Taxation is an arbitrary method of exaction by those who are in 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

C. transformation

____________________ is finding out means of improvement in production so as savings would compensate for taxes paid by manufacturers or producers A. shifting B. capitalization C. transformation D. tax dodging