WorksheetsFM2c: Econ_Finals
Total questions: 34
Worksheet time: 34mins
Which of the following best defines the concept of Vertical Equity in taxation?
Individual who receive more government benefits should pay more taxes
Taxation should minimize the distortion of economics behavior and resource allocation
Individuals with the same income should pay the same amount of tax
Individuals with a greater ability to pay should contribute a larger proportion of their income in taxes
In the Philippine Tax System, what is the primary government agency responsible for the collection of national internal revenue taxes such as Income Tax and Value Added Tax (VAT)
National Economic and Development Authority (NEDA)
Bureau of Customs (BOC)
Department of Finance (DOF)
Bureau of Internal Revenue (BIR)
Which of the following is the most significant source of revenue of Local Government Units (LGUs) in the Philippines, independent of internal revenue allotments (IRA)?
Tariffs and Customs Duties
Documentary Stamp Tax (DST)
Value Added Tax (VAT)
Real Property Tax (RPT)
When the demand for a taxed commodity is perfectly inelastic, what is the likely outcome for the burden of an excise tax?
The entire tax burden is borne by the producers
There is no deadweight loss, but also no tax revenue
The entire tax burden is borne by the consumers.
The tax burden is split equally between consumers and producers.
What is the economic concept that describes the loss of economic efficiency that can occur when a tax is imposed, specifically the loss of potential gains from trade not realized because of the tax?
Tax Multiplier
Tax Evasion
Tax Incidence
Deadweight Loss (DWL)
A tax is considered progressive if the average tax rate (ATR) _____________as the taxpayer's income increases.
Decreases
Becomes a lump-sum amount
Increases
Stays the same
The Benefit Principle of taxation is most directly applied in the funding of which type of government serive?
Conditional Cash Transfer (CCT) programs for the poor
Tolls on an expressway or user fees for passport processing
National defense
Basic education for all citizens
If the demand for cigarette is relatively inelastic and the government imposes an excise tax, which outcome regarding Tax incidence is most likely?
The tax will be largely absorbed by the government
The burden of the tax will fall disproportionately on the consumers
The tax will generate significant deadweight loss
The burden of the tax will fall disproportionately on the producers
The primary cause of Deadweight Loss (DWL) from a tax is that the tax:
Increases the price by consumers
Drives a wedge between the price consumers pay and the price producers receive
Reduces the total revenue collected by the government
Discourages market participants from producing and consuming the taxed good.
A key trade-off designing an Optimal Tax system is between the goals of:
Revenue generation and government spending
These are components of fiscal policy, not the core conflict in tax design principles
Domestic consumption and foreign investment
Equity and efficiency
Which of the following scenarios best exemplifies a tax promoting Horizontal Equity?
The government imposes a sin tax on alcohol and tobacco products
Two individuals with the same taxable income pay the same amount of tax, regardless of their expenses
The total tax revenue is sufficient to cover the national budget
A millionaire pays a higher tax rate than a minimum wage earner
Under the concept of Tax Shifting, what does it mean if a manufacturer of soft drinks is able to shift the entire burden of an excise tax unto consumers?
The tax is progressive
The supply of soft drinks is perfectly elastic
The demand for soft drinks if perfectly elastic
The manufacturer engages in tax avoidance.
A Pigouvian Tax is a specific type of tax designed to:
Achieve vertical equity by redistributing wealth
Maintain horizontal equity among all taxpayers
Internalize a negative externality by making the private cost equal to the social cost
Generate maximum revenue with minimum administrative cost
If the government decides to replace all income taxes with a single, universal lump-sum tax on all citizens, this system would be considered highly efficient because:
It reduces the total amount of tax revenue collected
It is based on the Benefit Principle
It does not change behavior, thus resulting in zero deadweight loss
It is progressive and promotes vertical equity
Which of the following is considered an Indirect Tax in the Philippine Tax system, meaning the burden can be shifted from the statutory taxpayer to the final consumer?
Value Added Tax (VAT)
Personal Income Tax (PIT)
Donor's Tax
Corporate Income Tax (CIT)
What is the primary role of the Department of Finance (DOF) in relation to the Philippine Tax System?
To adjudicate tax cases and disputes in court
To formulate fiscal policies, supervise revenue operations, and manage public sector debt
To print and mint currency and manage the country's money supply
To implement infrastructure projects funded by tax revenue
Which type of tax structure is generally considered the most detrimental to Vertical Equity?
Regressive Tax
Proportional Tax
Lump-sum Tax
Progressive Tax
The concept of Tax incidence is an economic term that refers to:
The legal requirement to pay a tax to the government (the statutory tax burden)
The individual or group that ultimately bears the economic burden of the tax
The reduction in government spending due to insufficient tax collection
The government agency legally mandated to collect a specific
The Ramsey Rule in optimal taxation theory suggests that to minimize the deadweight loss of commodity taxes, the government should tax goods with relatively:
Proportional to their production cost
Elastic demand at a high rate
Inelastic demand at a low rate
Inelastic demand at a high rate
The imposition of an import tariff on foreign rice by the government, which results in local consumers paying a higher price for ice, is an example of Tax Shifting known as:
Tax Evasion
Backward Shifting
Capitalization
Forward Shifting
In the Philippine context, a tax applied to a necessity good like rice or sugar, which forms a larger percentage of a poor family's budget than a rich family's budget, is generally classified as a:
Lump-sum Tax
Regressive Tax
Progressive Tax
Proportional Tax
When an LGU imposes a tax on business activity within its jurisdiction, the principle of Horizontal Equity requires that:
Two businesses with the same annual gross sales of profits pay the same local business tax
All businesses pay a fixed, lump-sum amount regardless of size
A small sari-sari store pays a lower tax rate than a large department store
The local tax should not distort the decision of where a business chooses to operate
In the context of When Taxation Can Improve Efficiency, which economic scenario justifies the use of a tax to move the market closer to the social optimum?
A public good provided for free by the government
The market for a luxury good where demand is highly elastic
A market where production generates a negative externality, such as pollution
A competitive market with no externalities
Why is the tax on the returns to savings sometimes criticized as being economically ineffiecient?
It is a regressive tax, violating the principle of vertical equity
It is considered a proportional tax in the Philippines
It is difficult to administer and leads to tax evasion
It distorts the individual's decision to save versus consume, which can lead to a double taxation of income
The concept of Fiscal Adequacy in taxation primarily ensures that the government can:
Avoid deadweight loss in all forms of taxation
Generate sufficient revenue to finance its planned public expenditures
Simplify the tax code for easy understanding by the general public
Achieve a perfectly progressive tax systems
If the supply of labor in the Philippines is relatively inelastic, and the government increases the contribution rate to the Social Security System (SSS), the majority of the economic burden will likely fall on the:
Foreign investor in the labor market
Employers
Government
Workers
What is the economic concept used to measure the loss of efficiency when a tax is imposed on a good whose demand and supply are highly elastic?
Deadweight Loss
Tax Multiplier
Gini Coeffiecient
Laffer Effect
A tax on cigarettes, justified in part because smoking imposes external costs on society, align primarily with which of the following principles?
Horizontal Equity
Efficiency Improvement
Regressive Taxation
Benefit Principle
Which statement accurately describes the tax classification of the Value Added Tax (VAT) in the Philippine System?
It is a local levied on real property by LGUs
It is an indirect tax, often considered regressive in its impact on income distribution
It is a progressive tax designed to achieve vertical equity
It is a direct progressive tax levied on a firm's profits.
If the Philippine government introduces a substantial Wealth Tax aimed at the richest 1% of the population ,this policy would primarily be an attempt to improve:
Economic Efficiency, by increasing total market activity
Horizontal Equity, by ensuring all wealth is taxed equally
Vertical Equity, by making the overall tax system more progressive
Fiscal Adequacy, by simplifying tax compliance
What is the significance of the Internal Revenue Allotment (IRA), now known as the National Tax Allotment (NTA), for the fiscal position of Local Government Unit (LGUs)?
It is the amount LGUs collect from tariffs and customs duties
It is the primary source of locally generated revenue (LGR) for all LGUs
It represents the LGU's share of national taxes and is often the largest component of their total budget
It is a special purpose fund used only for infrastructure projects
A tax is imposed on a luxury imported yacht in the Philippines. The demand for this yacht is extremely elastic. In this scenario, the Deadweight Loss (DWL) from the tax will be:
Minimal, because the tax revenue generated will be maximized
Zero, because the tax is only on a luxury good
Maximal, because the quantity demanded will change significantly
Entirely born by the importer of the yacht
The primary economic rationale for taxing Personal Income in the Philippines is the principle of:
Ability-to-Pay Principle, supporting a progressive tax structure
Tax Neutrality, minimizing the distortion on economic decisions
Benefit Principle, as higher earners use more public goods
Fiscal Simplicity, as it is the easiest tax to administer
In the Philippines, the tax that is levied on the privilege of engaging in trade or business within the jurisdiction of a local government unit is known as the:
Community Tax (Cedula)
Local Business Tax
Franchise Tax
Value Added Tax (VAT)
