2016 (Taxation) Bar Exam Questions: Question 10

[Answer/discuss the question below, or see 2016 bar exam Taxation Instructions; 2016 Taxation Questions:   123456789111213141516171819, and 20; See also 2016 Bar Exam: Information, Discussions, Tips, Questions and Results]


Congress issued a law allowing a 20% discount on the purchases of senior citizens from, among others, recreation centers. This 20% discount can then be used by the sellers as a “tax credit.” At the initiative of BIR, however, Republic Act No. (RA) 9257 was enacted amending the treatment ofthe 20% discount as a “tax deduction.” Equity Cinema filed a petition with the RTC claiming that RA 9257 is unconstitutional as it forcibly deprives sellers a part ofthe price without just compensation.

[a] What is the effect of converting the 20% discount from a “tax credit” to a “tax deduction”? (2.5%)

[b] I f you are the judge, how will you decide the case? Briefly explain your answer. (2.5%)

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