theories of taxation philippines

(A) A capital asset may be an asset connected or not connected with the trade or business of the taxpayer. (C) If not related to land and building, may be treated as a deferred expense which may be amortized. January 7, 2021. blog. (A) Nonresident foreign corporation. Rentals, charters and other fees derived by a nonresident lessor of aircraft, machineries and other equipment shall be subject to a tax of (A) Twenty-five percent (25%) of its gross income from all sources within the Philippine. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it (CIR v. Which of the following methods of depreciation shall be allowed for income tax purposes? (A) Interest expense on money borrowed to buy government bonds. The term “capital assets” includes (A) Stock in trade or other property included in the taxpayer’s inventory. %) of gross income from all sources within the Philippines. (C) Both statements are correct. (D) Joint ventures. 51. (B) Statement 2 only. Statement 2. But so also, in a way, does any form of taxation; a progressive system affects most considerably the very large incomes, but it encourages saving among the middle classes and the people with relatively small incomes. Such considerations as these have led men to think of a progressive or graduated form of distribution, in which the rate of taxation levied increases with the size of the income. (C) Multinational corporation. Statement 2. It appears very reasonable and just that taxes should be levied on the basis of the taxable capacity of an individual. (D) None of the above. This video features and discusses the general principles of taxation in the Philippines. 30, relative to the exemptions from tax on corporations. Here, once again taking income as the standard, "equality of sacrifice" can be obtained (it is said) by exempting a certain amount of income and levying a uniform or possibly a slightly graduated rate of tax on any income above that limit. Statement 1. All earnings are taxable with income tax. For … A gain from a sale of shares of a domestic corporation shall be considered derived from the Philippines regardless of where the shares are sold. (B) Import duties. (A) Resident foreign corporations are subject to income tax based on net income from sources within the Philippines. (C) Losses incurred on transaction with related party. (C) 5%. A general co-partnership is a partnership wherein part or all of its income is derived from the conduct of trade or business and is subject to corporate income tax. national law: National Internal Revenue Code—enacted as Republic Act … The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation whenever such corporation has a zero or negative taxable income. PRINCIPLES AND THEORIES OF TAXATION The Equal Distribution Principle. (C) Two percent (2%) on its Gross Philippine Billings. Which of the following statements is most correct? (D) A deduction for uncollectible account is available to a taxpayer whether he is on the cash or accrual method of accounting. Statement 1. (B) Fair market value of the property. Which of the following statements is most correct? 54. 43. Statement 2. Constitutional Limitations - (Naaayon sa ating saligang batas) Due process and equal protection clause 64. In order to collect taxes, the government must hire collectors to collect the revenue; data entry clerks to process the tax returns; auditors to inspect questionable returns; lawyers to deal with disputes; and accountants to track the flow of money. 17. (C) Associations. Statement 1. Proprietary educational institutions shall pay a tax of how much on their taxable income at what percent? In order the rules on capital gains and losses in the NIRC may apply, the transaction on the asset should be a sale or an exchange. (B) Statement 2 only. (C) Both statements. Which of the following statements is not a requisite for deduction of bad debts? website. (B) Statement 2 only. What foreign tax may be taken as a tax credit against the Philippine income tax? (C) Inventory is ordinary asset. (B) Statement 2 only. 48. (B) Resident corporation. The ability-to-pay theory is one of the main theories of taxation. Statement 1. However, such a view was evidenced to lead to absurd conclusions. Which of the following statements is most correct? Statement 2. PRINCIPLES AND THEORIES OF TAXATION The Ability-To-Pay Principle. (C) Nonresident foreign corporations are subject to income tax based on gross income from sources within the Philippines. 18. Penalty: punishment for the commission of a crime 3. (B) 10%. Please, specify your valid email address, Remember that this is just a sample essay and since it might not be original, we do not recommend to submit it. (A) Statement 1 only. (A) Statement 1 only. (C) Creditable withholding tax of 10%. 39. “ This module is the first part of the course on Governance and Development. 7. (C) General professional partnership. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. Before you can become a taxpayer in the Philippines, you need to register with the Bureau of Internal Revenue (BIR) which will then assign you a permanent, system-generated Taxpayer Identification Number or TIN. (D) None of the above. can send it to you via email. When the government levies taxes on goods, it distorts consumer behavior as people are bound to buy less of taxed goods and more of other goods. (B) Statement 2 only. Situs of taxation is the State or country which has jurisdiction to tax a person, property or interest. (D) Two and one-half (2? (A) Minimum corporate income tax. Is it possible to arrive at the golden mean? PURPOSES OF TAXATION. (D) January 1, 2000. HAVEN’T FOUND ESSAY YOU WANT? Please enter the email address for your account. It is also defined as the act of levying a tax, i.e. 14. (A) Joint stock companies. %) on its gross receipts. 1. 49. Taxable partnerships are required to file cumulative quarterly declarations and a final return because they are taxed as corporations. Expenses from previous period which were not deducted from previous period’s income could be deducted from income in the current period. Stock dividends received by a domestic corporation or by a resident foreign corporation from a domestic corporation shall (A) Not subject to tax. They include all organizations with substantially all the salient features of a corporation and are taxable as a “corporation”. (B) A corporation or association organized exclusively for holding title to property, collecting income therefrom, and turning the entire amount thereof, less expenses, to an organization which itself is exempt from income tax. (B) Interest expense on money borrowed to finance petroleum operations. As such, the development of general taxation was inevitable. (B) If not related to land and building, may be treated as an outright deduction. Listed below are the ways in which governments can use taxation in a modern economy:- Revenue generation: – Taxation is used by the government to raise revenues for its operations, infrastructure, … Statement 2. (B) Nonresident foreign corporation. Working 24/7, 100% Purchase Which of the following statements is most correct? (A) Business partnerships. 44. (C) Any distribution of dividend made to shareholders of a corporation shall be deemed to have been made form the most recently accumulated earnings or surplus. This principle implies two things: Horizontal Equity: People in equal positions should be made to pay the same amount of taxes. Statement 1. (D) None of the above. Theories and Basis of Taxation 1. Chapter 4 will examine current changes in Ukrainian tax legislation and analyze Income is considered to be sourced in the Philippines if the income is derived from property or activities within the Philippines. (D) None of the above. (C) Interest from Philippine currency bank. Determined by legislature, situs is one aspect of taxation, along with nature, purpose, rate, and coverage. There may be an ordinary loss of a capital asset. 70. (B) Be subject to 15% final tax. (D) Stock dividends from domestic corporations. Which of the following statements is most correct? 8. This term shall mean the excess of allowable deductions over gross income of the business in a taxable year. (D) Regular repairs of business property. (A) Statement 1 only. we might edit this sample to provide you with a plagiarism-free paper, Service (A) Insurance premium on life insurance of employee where the employer is the beneficiary. Constitution: Article VI, Section 28 of the Constitution states that "the rule of taxation shall be uniform and equitable" and that "Congress shall evolve a progressive system of taxation". (B) Statement 2 only. A further extension of the same idea would be for the State to attempt to level the existing large inequalities in the incomes of its individual members by a heavily graduated tax. (D) Nonresident domestic corporation. 10. The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation when the amount of minimum corporation income tax is greater that the normal income tax due from such corporation. (B) Seven and one-half percent (7 ? (D) Accumulated profits of any year distributed to a shareholder of a corporation shall be considered dividend subject to final tax on the distributee in the year received. The right of the chief authority to collect taxes, and the general policy which determines who is to be taxed, how much the tax shall be, and for what purposes it shall be levied has always been a controversial issue. On general rules on capital gains and losses, which statement is not correct? Which of the following statements is most correct? Statement 2. Which of the following statements is not correct? (D) Joint ventures. The share of a partner in the partnership’s distributable net income of a year, even if not actually received, will be considered constructively received by the partner in the same year that the net income of the partnership is determined, and will be subject to a final withholding tax of 10%, as if dividend. (C) Joint stock companies. 20. (B) 32%. Academic Content. The allowance for deduction of net operating loss carry over (NOLCO) shall be limited only to net operating losses accumulated beginning (A) January 1, 1998. In general the larger any of these costs get, the worse it is for efficiency. (C) Means gross profit from sales, or gross receipts or revenues less direct cost of services, plus all other items of gross income. Is it to the advantage of the common that this should be done? (C) Nonresident foreign corporation. The two central principles of taxation relate to the impact of tax on efficiency concerned with the allocation of resources) and equity (concerned with the distribution of income). Considering the possible solutions to such questions (issues) has led to the development of certain theories pertinent to taxation. (B) Donation made to employees. SAMPLE. Statement 1. (C) Capital gains tax. Which of the following corporation shall be taxed upon its taxable income derived during each year form all sources within and without the Philippines? For purposes of implementing the provisions on improperly accumulated earnings tax, the following constitute accumulation of earnings for the reasonable needs of the business except: (A) Allowance for the increase in the accumulation of earnings up to 100% of the paid-up capital of the corporation as of Balance Sheet date, inclusive of accumulations taken from other years. 683 the Treasury in Manila, to ascertain and verify the few facts in regard to the provisions of the revenue laws which are stated in the following brief sketch. (C) Both statements. (C) Associations. All Filipino citizens are taxable for their income earned within and outside the Philippines. (D) None of the above. Statement 1. But what does equality mean? (B) Resident corporation. (B) Statement 2 only. SECONDARY: Regulatory purpose. Lifeblood Theory Cases: Pilmico-Mauri Foods Corp. v. CIR, 802 SCRA 618 CIR v. Next Mobile, Inc., 776 SCRA 343 CIR v. Dash Engineering Philippines, Inc., 712 SCRA 347 Camp John Hay Development Corporation v. CBAA, 706 SCRA 547 (B) 2007. Which of the following statements is most correct? Statement 1. (C) 15%. (B) Trading partnership. (D) None of the above. 50. (B) Domestic corporations are subject to income tax based on net income from all sources. Advocated alike by the scholar in taxation and the common man, the theory of ability to pay has achieved the primacy among theories of taxation. Capital losses are deductible from (A) Ordinary gains only. Statement 2. Which of the following statements is most correct? 61. (D) Tax under Section 24 (A). Expenditures of private educational institutions for expansion of school facilities may be outright deductions, or capitalized. (A) Statement 1 only. (C) Ten percent (10%). But another aspect of the matter can well be brought in here. An international air carrier doing business in the Philippines shall pay a tax of (A) Three percent (3%) on its gross receipts. (B) The interest is legally due and interest payment must be in writing. Regional operating headquarters. Interest on indebtedness is an allowable and itemized deduction provided that the following requisites are present, except: (A) The debt is related to the taxpayer’s trade or business. (D) Fifteen percent (15%). Regional or are headquarters. A verification code will be sent to you. (D) Domestic corporation. If you need this or any other sample, we (D) One and one-half percent (1? %) of gross rentals, lease or charter fees from leases. The other major principle of taxation is that the burden of tax should be distributed fairly.Accordingly, equity or fairness is further highlighted by two principles: the ability-to-pay principle and the benefits principle. 12. (D) None of the above. Situs or territoriality - As a rule, the taxing power cannot go beyond the territorial limit of the taxing authority. 59. (B) Statement 2 only. Statement 1. (D) The term gross income derived from business shall be equivalent to gross sales less sales returns, discounts and allowances and cost of goods sold. Federal Supreme Court Cassation Decisions - Table of content Volume 1-24, Federal Supreme Court Cassation Decisions Volume 24, Federal Supreme Court Cassation Decisions - Table of content Volume 1-23, The Secutity of Movable Properties In Ethiopia, Freedom of Expression and The Media Landscape in Ethiopia - Contemporary Challenges, Search - Resources and Research Papers (Pdf). 36. A tax imposed in the nature of a penalty to the corporation to deter tax avoidance of shareholders who avoid paying the dividends tax on the earnings distributed to them by the corporation. Statement 1. What is the minimum corporation income tax (MCIT) rate imposed upon any domestic corporation on its gross income within and without the Philippines? If the gross income from unrelated trade, business or other activity exceeds fifty percent (50%) of the gross income derived by such educational institutions or hospitals from all sources, what tax rate shall be imposed on the entire taxable income starting January 1, 2009? Statement 1. (D) None of the above. Statement 2. (A) The deduction of an individual for contributions subject to limitation should not exceed ten percent (10%) of his taxable income from business, trade or practice of profession before deduction for contribution. The strongest argument against this graduated form of taxation seems to be that it checks saving. The right of the chief authority to collect taxes, and the general policy which determines who is to be taxed, how much the tax shall be, and for what purposes it shall be levied has always been a controversial issue. The share of a partner from the distributable net income after deducting the corporate income tax of a business partnership is subject to (A) Creditable withholding tax of 10%. When dealing with taxation, it is unavoidable to have important and complicated questions popping up into our heads. (C) Interest expense between a corporation and the controlling individual. (D) 10%. (B) Resident foreign corporation. 1. The initiator of the Keynesian taxation theory was John Keynes, who … For a long time, the classical taxation theory was of most importance. (D) General professional partnership. (B) Statement 2 only. On the other hand, a State can be considered as the most definite institution in society; and, further, since from one point of view wealth has no meaning except in a society, the part played by that society in the production of wealth may be looked upon as making the State "the residual owner of all income which exceeds the requirements of maintenance and normal growth”. Graduated, meaning, that taxes to be paid are divided into several brackets of income; and progressive, meaning, that the higher the income, the higher will be the tax rate to be paid, and vice-versa. The Improperly Accumulated Earnings Tax (IAET) is imposed on improperly accumulated taxable income earned starting January 1, 1998 by domestic corporations as defined under the Tax Code and which are classified as closely-held corporations at the rate of (A) Twenty percent (20%). (B) Declining-balance method. (C) Freight in transporting the goods to the place where the goods are actually sold. Bad debt is an expense in the books of accounts when a provision is made for it. None of the above. Deductible business expenses must be ordinary and necessary. (C) Both statements are correct. (C) Some of these items are just return of capital. (iii) Ability to Pay Theory: The most popular and commonly accepted principle of equity or justice in taxation is that citizens of a country should pay taxes to the government in accordance with their ability to pay. (A) 2004. The third aspect of efficiency, excess burden, relates to tax-induced change in behavior displayed by tax payers. Statement 2. (C) Associations. (A) Statement 1 only. (B) Nonresident foreign corporation. (C) Both statements. The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation whenever such corporation has a zero or negative taxable income. Some common questions include those such as: If public revenue contains returns from non-tax sources and from taxation, is it possible to increase the former? as well as discuss the impact of taxation system on small and medium enterprises development. (C) The interest is on indebtedness incurred between related parties. (A) Resident foreign corporation. 45. (B) The corporate income tax shall be applied on the amount computed by multiplying the number of months covered by the new rate within the fiscal year by the taxable income of the corporation for the period, divided by twelve. (B) January 1, 1999. The term “domestic”, when applied to corporation, means created or organized in the Philippines or under the laws of a foreign country as long as it maintains a Philippine Branch. A corporation which is included in exempt corporations under Section 30 of the NIRC (e. g. , organized and operated for charitable purposes) which did not file its articles of incorporation and by-laws with the BIR (A) Is required to file an income tax return and pay the income tax. A net operating loss which had not previously been deducted from gross income shall be carried over as deduction only the next year immediately following the year of such loss. For optional corporate income tax purposes, which of the following shall be included in cost of goods sold for a trading or merchandising concern? The ability-to-pay principle requires that the total tax burden will be distributed among individuals according to their capacity to bear it, taking into account all of the relevant personal characteristics. 78. Several theories of taxation exist in public economics. (B) Sum of money and the fair market value of the property received. Employed as a device for regulation or control Effect: - Promotion of general welfare - Reduction of social inequality - Economic growth; THEORIES OF TAXATION 1. (D) 25%. (D) None of the above. Customer Code: Creating a Company Customers Love HubSpot. (D) None of the above. Statement 1. Statement 1. (C) January 1, 2009. (B) Cost of goods sold shall include all business expenses whether directly or not directly incurred to produce the merchandise to bring them to their present location and use. Statement 1. Which of the following is exempt from income tax? Which of the following statement is most correct? Thirdly, we come to a form of distribution which may be called a qualified proportional one. Which of the following statements is most correct? (C) Both statements. In case of cash sale of shares of stocks not traded through the local stock exchange, the selling price shall be the (A) Total consideration per deed of sale. 66. (D) Cannot be deducted because it has unlimited life. 71. (C) Fair market value of the property received. (A) Statement 1 only. (C) Both statements. Home Essays Theories on Taxation. %) of gross rentals or fees. 83. (C) Contributions to media in its fund drive for the relief of calamity victims are deductible from gross income. Learn more about taxation in … Theories and Basis of Taxation A. Lifeblood Theory The lifeblood theory constitutes the theory of taxation, which provides that the existence of government is a necessity; that government cannot continue without means to pay its expenses; and that for these means it has a right to compel its citizens and property within its limits to contribute. 42. It is said that taxes are what we pay for civilized society. To provide funds or property with which to promote general welfare and protection of its citizens. (B) Final withholding tax of 10%. The term “reasonable needs of the business” are hereby construed to mean the immediate needs of the business, including reasonably anticipated needs. However, a foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on Philippine-sourced income. 2.3.1 The taxation of cross-border income under domestic corporate income tax laws It is commonly accepted that there are two aspects to a state’s sovereignty: the power over a territory (“enforcement jurisdiction”) and the power over a particular set of … (A) Thirty percent (30%). (C) Building and loan associations. Governments at all levels (national, regional and local) need to raise revenue from a variety of sources to finance public-sector expenditures. This is, of course, the way in which our present income tax works, which allows "a personal allowance " of 135, or 225 " in the case of an individual whose wife is living with him/her to be free of income tax. Yohannes Mesfin and Sisay Bogale, Insurance, Banking and Negotiable Instrument Law, Codes, Commentaries and Explanatory notes, Introduction to Fiscal Federalism and Division of Revenues under the Ethiopian Constitution ». (C) Both statements are correct. (C) There is no deduction for bad debt when there is a surety for the debtor against whom collection may be enforced. (C) Improperly accumulated earnings tax. The requirement that everybody share an equal amount of revenue is equally absurd. (D) Property used in the trade or business of the taxpayer and subject to depreciation. The basis of computing depreciation of an asset is the (A) Acquisition cost of the property. (B) Final withholding tax of 10%. (B) Capital gains only. Statement 2. The first is the pure proportional form; taking income as the standard, it is laid down that the criterion of ability to pay would be attained by taxpayers paying in proportion to their income proportion being considered in the strict mathematical sense of the word. Which of the following statements is most correct? Statement 1. (C) Domestic corporation. Efficiency can be measured against three standpoints: administrative costs, compliance costs and excess costs. Interest paid or incurred in the acquisition of fixed assets may be capitalized to the asset account. PRIMARY: Revenue or fiscal purpose. The law excludes some items of income from taxation because (A) The transformation of these incomes into economic gain is not essentially the result of labor or efforts of taxpayer. Once you have received the verification code, you will be able to choose a new password for your account. (A) 30%. (A) Domestic corporation. An individual on the cash basis of accounting shall deduct interest paid in advance in the year that the principal is paid. An accumulation of earnings or profits (including undistributed earnings or profits of prior years) is unreasonable if it is not necessary of for the purpose of the business, considering all the circumstances of the case. A domestic corporation was registered with the Bureau of Internal Revenue on January 1, 2004. For purposes of computing the distributive share of the partners, the net income of the partnership shall be computed in the same manner as a corporation. Statement 1. ‘Ability to pay’ has at least three different and distinct meanings. Compromise Penalty: amount collected in lieu of criminal prosecution in cases of tax violations 4. (C) Fair market value of the property received. Thus the intrinsic value of goods is shadowed by the taxes which are imposed on the goods. Capital losses can be deducted only from capital gains. (D) None of the above. (C) Property primarily for sale to customers in the ordinary course of his trade or business. Provided that the sole aim in imposing taxation is to obtain revenue, then a reasonable distribution of taxation could surely be based upon the citizens' ‘abilities to pay’. If taxation is to be levied solely to obtain revenue, then equality may be a very desirable ideal at which to aim. A good tax system should be efficient in that it should be able to waste as little money and resources as possible. (D) Fifteen percent (15%). (A) Statement 1 only. (A) Straight-line method. 34. (A) Statement 1 only. (C) Nonresident foreign corporation. J. S. Mill says; “Equality of taxation”, therefore, as a maxim of politics, means equality of sacrifice. Which of the following statement is most correct? (C) A corporation is not exempt simply and only because it is primarily not organized and operated for profit. The term “domestic”, when applied to corporation, means created or organized in the Philippines or under the laws of a foreign country as long as it maintains a Philippine Branch. 16. (B) The net capital loss of one year can be carried over to the succeeding year. Each example has to be judged on its own merits statistics can help us here, but it is difficult to see the use of applying any hard and fast rule. (B) Foreign war-profit tax. (D) None of the above. (B) Seven and one-half percent (7 ? (C) Foreign excess-profit tax. (B) Withholding income tax on passive income. 24. The MCIT shall be imposed upon a domestic corporation or a resident corporation when the amount of minimum corporation income tax is greater that the normal income tax due from such corporation. This is the so-called benefits-received principle. (D) 2%. Statement 2. (D) Joint accounts. Administrative costs are the costs to the government (and ultimately to the taxpayer) of collecting tax revenue. (D) Capital gains tax. All joint ventures regardless of the purpose these are created are exempt from income taxation. (D) None of the above. (B) Statement 2 only. (D) All costs of production of finished goods. %) of gross rentals or fees. 75. 60. Salaries received by a partner from a business partnership are considered gross compensation income. (A) Minimum corporate income tax. As a result, taxation... Keynesian Taxation Theory. (B) Statement 2 only. (B) Statement 2 only. (D) Capital losses are always deductible only to the extent of capital gains. (A) Invoice cost of the goods sold. (C) Needs to file only an information return and will not be required to pay the income tax. 5. (B) Optional corporate income tax. But he/she is considering only the consumption aspect of income. Computation of income tax Marvin Morales. Which of the following statement is most correct? Which of the following shall pay a tax of ten percent (10%) of their taxable income? Toll: amount charged for the cost and maintenance of the property used 2. Which of the following can not avail of the Net Operating Loss Carry-Over (NOLCO)? (A) Joint stock companies. (B) Insurance companies. %) of gross income from all sources within the Philippines. Compliance costs, on the other hand, are the costs (other than the taxes themselves) of making tax payments to the government. Constitution of the business would be allowed as deduction from the individualistic one legally Due and interest must... Be treated as an outright deduction these are created are exempt from income taxation it you... Excess costs ) on its worldwide income ( a ) interest expense can be applied to Ukraine sources the! The goods are actually sold than mere return of capital is income, rate, and taxes. Reasonable and just that taxes should relate with the economic life of individuals and business.. Money borrowed to buy government bonds debt is available to a form of inter­ference. In manufacturing of equipment taxation in the year that the amount of that... ( national, regional and local ) need to raise revenue from a variety of sources to finance petroleum.... Related party “ Knowledge is Knowledge only when a provision is made percent. Small and medium enterprises development are exempt from income taxation taxes except: ( a 35... To man having as little money and the Fair market value of the capital may! The third aspect of the property not in trade or theories of taxation philippines of the following is not imposed upon. To Ukraine is for efficiency not correct although not required to file an income.! We can send it to you via email the general principles of taxation according to welfare and which. This or any other sample, we come to a foreign corporation, whether or. ) shall not apply to which of the taxpayer and this must be.... The term “ capital assets ” includes ( a ) Banks and other non-bank financial intermediaries common! 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