Taxation, 2012 Bar — Question 1

MULTIPLE CHOICE

Bank A deposit money with Bank B which earns interest that is subjected to the 20% final withholding tax. At the same time, Bank A is subjected to the 5% gross receipts tax on its interest income on loan transactions to customers. Which statement below INCORRECTLY describes the transaction? a) There is double taxation because two taxes - income tax and gross receipts tax are imposed on the interest incomes described above and double taxation is prohibited under the 1987 Constitution b) There is no double taxation because the first tax is income tax, while the second tax is business tax; c) There is no double taxation because the income tax is on the interest income of Bank A on its deposits with Bank B (passive income), while the gross receipts tax is on the interest income received by Bank A from loans to its debtor-customers (active income); d) Income tax on interest income of deposits of Bank A is a direct tax, while GRT on interest income on loan transaction is an tax.

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