(D) Domestic corporation. (C) Both statements are correct. Statement 1. (D) Five percent (5%). Which of the following statements is most correct? Statement 2. 46. Theories and Basis of Taxation 1. This video features and discusses the general principles of taxation in the Philippines. In general the larger any of these costs get, the worse it is for efficiency. (A) Statement 1 only. If this be the case, we reach the faculty or ability theory of taxation. (D) Regular repairs of business property. Home Essays Theories on Taxation. (D) Any foreign national tax. 79. All foreign corporations are taxable only for income earned within the Philippines. (C) Both statements. 81. According to the theory, taxes should be based upon the amount of money people earn. (B) Statement 2 only. (B) Gross income tax. 15. They include all organizations with substantially all the salient features of a corporation and are taxable as a “corporation”. (A) Expanded withholding income tax. (C) Needs to file only an information return and will not be required to pay the income tax. Constitutional Limitations - (Naaayon sa ating saligang batas) Due process and equal protection clause 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. (C) The election of the gross income tax option by the corporation shall be irrevocable for three (3) consecutive taxable years during which the corporation is qualified under the scheme. Which of the following statements is most correct? Theories of Taxation Classical Taxation Theory. Statement 1. as well as discuss the impact of taxation system on small and medium enterprises development. The tremendous increases in public spending accompanying recent depressions and war periods have brought the question of taxation to the mind of each and every citizen. All joint ventures regardless of the purpose these are created are exempt from income taxation. 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. A good tax system should be efficient in that it should be able to waste as little money and resources as possible. 67. (C) Both statements. 8. However, Which of the following statement is most correct? (B) Sum of money and the fair market value of the property received. Statement 2. Statement 2. Statement 1. 80. (C) Ten percent (10%). (C) Both statements. (C) Both statements are correct. (C) Four and one-half percent (4 ? (B) Statement 2 only. (C) Adjusted basis for computing the loss on the sale of property. The rival theories, cost-of-service and benefit-of-service, though recognized as of some usefulness, are now mentioned chiefly for their defects as in-clusive principles. 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, … 84. (C) Some of these items are just return of capital. On general rules on capital gains and losses, which statement is not correct? The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation whenever such corporation has a zero or negative taxable income. Is it possible to arrive at the golden mean? PRINCIPLES AND THEORIES OF TAXATION The Ability-To-Pay Principle. 42. (A) Nonresident foreign corporation. (A) Thirty percent (30%). Which of the following statements is not correct? (D) None of the above. %) of gross rentals or fees. The policy of taxation in the Philippines is governed chiefly by the Constitution of the Philippines and three Republic Acts. 1. 30, relative to the exemptions from tax on corporations. If you need this or any other sample, we (C) Interest from Philippine currency bank. (D) All costs of production of finished goods. (D) None of the above. This is perhaps the view of Adam Smith, but surely it must be repudiated by common sense, as a single example will show. (D) All of the above. It is said that taxes are what we pay for civilized society. Obviously everybody should not pay an equal share of taxation, and there are three important possible forms of distribution which have been suggested from time to time; each is intended to secure equity and each supposed to be based on the ‘ability to pay’. (D) All of the above. (B) Statement 2 only. This principle implies two things: Horizontal Equity: People in equal positions should be made to pay the same amount of taxes. (A) The tax imposed by law on corporations is not imposed only upon such corporations as are organized and operated for profit. Statement 2. 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”. (D) None of the above. 49. Which of the following statements is most correct? When we take the revenue obtained by taxation, how ought the burden to be distributed? (B) Statement 2 only. 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. 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. (A) Statement 1 only. (B) 10%. (C) Contributions to media in its fund drive for the relief of calamity victims are deductible from gross income. (B) Statement 2 only. But another aspect of the matter can well be brought in here. (C) Capital gains tax. (C) Both statements. Determined by legislature, situs is one aspect of taxation, along with nature, purpose, rate, and coverage. 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. (C) The interest is on indebtedness incurred between related parties. 47. (C) A corporation is not exempt simply and only because it is primarily not organized and operated for profit. Definition of Taxation B. (B) Capital gains only. 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? (C) Interest expense between a corporation and the controlling individual. (C) Both ordinary and capital gains. (D) 2%. (A) Statement 1 only. Income is considered to be sourced in the Philippines if the income is derived from property or activities within the Philippines. 4. As the major principles of taxation in any system, it is worth taking an in-depth look at “efficiency” and “equity (fairness)”. 2. Research and development costs may be outright deduction or deferred expense. Which of the following shall pay a tax of ten percent (10%) of their taxable income? A net operating loss is the excess of allowable deductions over the gross income from business or practice of profession for a taxable year. 1. 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. (A) Statement 1 only. (D) Withholding income tax on compensation income. 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. (B) The net capital loss of one year can be carried over to the succeeding year. The ability-to-pay theory is one of the main theories of taxation. Salaries received by a partner from a business partnership are considered gross compensation income. (A) Foreign income tax. (B) Statement 2 only. (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. (A) Minimum corporate income tax. (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. How to Get Taxpayer Identification Number (TIN). (B) Statement 2 only. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it (CIR v. 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. %) of gross rentals, lease or charter fees from leases. (C) Both statements are correct. 38. Which of the following expenses of the business would be allowed as deduction from its business income? Which of the following methods of depreciation shall be allowed for income tax purposes? (B) Statement 2 only. Bad debt is a deduction from the gross income when the account is written off. Taxation Basics: BIR Registration and Getting Your TIN Card. Which of the following can not avail of the Net Operating Loss Carry-Over (NOLCO)? Toll: amount charged for the cost and maintenance of the property used 2. (D) General professional partnership. 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. %) of gross income from all sources within the Philippines. 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. (C) Both statements are correct. (D) Contributions of canned goods to student organizations during the Christmas season for distribution to Baguio City Jail inmates are deductible from gross income. 34. (A) Joint stock companies. 66. (A) Statement 1 only. 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. 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. (A) Thirty percent (30%). The Improperly Accumulated Earnings Tax (IAET) shall not apply to which of the following corporations? Statement 1. The term applies to a foreign corporation engaged in trade or business within the Philippines. (B) Fair market value of the property. In tax parlance, situs refers to the place of taxation. 3. Statement 2. 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