Tolentino blasts water firms for becoming ‘tax havens’

MANILA, Philippines — Senator Francis Tolentino on Monday criticized Manila Water and Maynilad for supposedly becoming “tax havens” for passing on its corporate income tax obligations to consumers.

“Yo’n pa lang corporate income tax ay pinapasa sa mga consumers bilang consumption tax. In effect, exempt po sila sa pagbabayad ng corporate income tax,” Tolentino said in a privilege speech.

(Turns out that they are passing on its corporate income tax to its consumers as a consumption tax. In effect, they are exempted from paying corporate income tax).

“These concessionaires have become tax havens,” he further said.

Citing the 2018 financial statements of the two water firms, Tolentino said Maynilad and Manila Water have passed on to its consumers around P2.8 billion and P2 billion of corporate income tax, respectively.

“In addition to the P20 billion (Maynilad: P9.642 billion and Manila Water: P10.731 billion) expenditures annually being charged to its consumers, the corporate income tax of Maynilad at around P 2.8 Billion and the corporate income tax of Manila Water at around 2 Billion has been passed on to consumers,” he said.

“In effect, it is as if these concessionaires are charging their consumers consumption tax which is defined as a tax levied on consumption, spending of goods and services or a percentage tax which is generally considered as regressive and contrary to Section 28 Article 6 of the 1987 Constitution which provides that the system of taxation shall be progressive,” he said.

Tolentino said that the P4.8 billion income tax supposedly charged to consumers would be enough to construct 4,800 classrooms or 12,000 socialized housing units.

It could have also funded the conditional cash transfers of more than 300,000 families under the Pantawid Pamilyang Pilipino Program (4Ps), he added.

“In the normal course of business, the income that is distributed to the stockholders is supposed to be taxed twice before it is distributed,” he said.

But under the concession agreements, Tolentino said, Maynilad and Manila Water “are not ultimately burdened by the 30 percent corporate income tax.”

“Even though they are paying for it, the taxes paid are still being shifted to the poor consumers by including it in their bills,” he said.

Tolentino also pointed out that the two concessionaires earn more than the local government units (LGUs) that they serve.

The two concessionaires distribute water in Metro Manila and parts of Cavite and Rizal provinces under agreements signed with the Metropolitan Waterworks and Sewerage System (MWSS) during the Ramos administration in 1997.

“For 2018, Maynilad reported income before tax of P10.3  billion, while the LGUs they serve, Caloocan and Pasay city, earned only P2.2 billion and P2.1B respectively.  Parañaque earned P877 million, Muntinlupa, P1.6 billion and Bacoor just P732 million, all-inclusive already of their shares from the Internal Revenue Allotment,” he said.

“On the other hand, Manila Water reported income before tax of P8.6 billion, while the LGUS they serve, Pasig earned P6.9 billion, Taguig P5.5 billion, and Antipolo, P1.4 billion. While earning so much already, these concessionaires are still allowed to shift the burden of their expenses to their consumers. This is a disturbing truth,” he added.