MANILA, Philippines—Senator Ralph Recto has sought a Senate inquiry into the alleged pass-on charges of billions of pesos in income tax payments to consumers by Maynilad Water Services Inc. and Manila Water Company Inc.
Recto filed House Resolution No. 4, directing the Senate committee on public services to investigate the “onerous provisions” in the concession deals and review the “regulatory powers of the Metropolitan Waterworks and Sewerage System (MWSS) and ensuring that customer rights and welfare are protected.”
“An inquiry must be conducted to correct the onerous provisions in the CA’s (concession agreements), review and strengthen the regulatory powers of MWSS and protect the welfare of the consumers ,” said the resolution .
The filing of the resolution was prompted by a revelation of consumer advocacy group Water for the People Network (WPN) that Maynilad and Manila Water had allegedly passed on their income taxes to water consumers, which had reached P15.5 billion from 2008 to 2012 or P3.1 billion a year.
But the inclusion of the taxes as pass-on charges, the resolution noted, was approved by the previous MWSS administration.
In 2008, the resolution said, the MWSS-Regulatory Office allowed the private concessionaires to include in their operation expense the cost of corporate income taxes that would be recovered from consumers through monthly water bills.
“Based on their approved business plans in the previous rate rebasing as well as the extension of their Concession Agreements (CAs) with the MWSS, the total cost of the corporate income taxes that Manila Water consumers will shoulder could reach P64.1 billion and for Maynilad, P68.7 billion, covering the period 2008 to 2037, the expiration year of the CAs,” it said.
“Under the rate rebasing model, the concessionaires are permitted to project all their expenses until the end of their CAs and charge them to consumers,” it further said.
The WPN also said that a guaranteed rate of return called appropriate discount rate (ADR) is also applied on the pass-on income taxes as part of the operation expenses, which means that Manila Water and Maynilad, aside from not paying their tax obligations, would also allegedly profit from it.
From 2008 to 2012, the two concessionaires were allegedly given an ADR or discount of 9.3 perccent.
“Maynilad enjoys an income-tax holiday but still included incorporate income tax in its [opearion expenses],” the resolution added.