Probe sought into Maynilad, Manila Water P15.5B pass-on charges

Sen. Ralph Recto INQUIRER FILE PHOTO

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.