Sen. Ralph Recto INQUIRER FILE PHOTO
MANILA, Philippines – Senator Ralph Recto is seeking a Senate inquiry into the alleged “consumer abuse” by two private water concessionaires, Maynilad Water Services and Manila Water Co.
Recto said he would file a resolution calling for a Senate inquiry following reports that the two concessionaries have been passing on to their consumers in the last six years all taxes they incurred, including income tax.
“By its very essence, corporate income taxes are shouldered by the companies, which made the income and should not be passed on to their clients,” Recto, senior vice-chair of the Senate committee on public services, said in a statement on Wednesday.
Consumer group Water for the People Network (WPN) claimed that the income tax payments that were tucked in the operating expenses (OPEX) of the two concessionaires amounted to P3.1 billion a year or a total of P15.3 billion from 2008 to 2012.
If the reports were true, Recto said, such practice was “immoral” and “unethical” and does not reflect the corporate principles of the businessmen or entities behind the two private water concessionaires.
“Corporate responsibilities such as tax payments could not be relegated to a proxy, especially when the designated and unsuspecting proxy is the water consumer,” he said.
“More so, when the state concession was granted to deliver a precious commodity like water, it did not include the authority to also bilk dry their clients,” the senator added.
Recto said this revelation now cast a “shadow of illegitimacy” on the petition of two water companies for a rate increase.
Manila Water is seeking a P5.83/cubic-meter increase in its basic charge while Maynilad is seeking a P8.58 raise. The proposed increases will be implemented up to 2018.
“What’s now the compelling justification for approving a rate increase? If they are not practically paying income taxes and at the same time, receiving some tax perks from government, what’s the happiness in granting them a rate hike?” the senator asked.
Recto said regulator Metropolitan Waterworks and Sewerage System (MWSS) must have done something to protect the welfare of the water consumers but said it “seemed to have generously capitulated to the avarice of the water companies.”
WPN likewise claimed that a guaranteed rate of return called “appropriate discount rate” (ADR) was also being applied on the pass-on income taxes as part of the OPEX.
From 2008 to 2012, WPN said, Manila Water and Maynilad were given an ADR or discount rate of 9.3 percent. It was also in 2008 that Maynilad was given a tax holiday.
The MWSS-Regulatory Office has allowed the private concessionaires to include in their OPEX the cost of corporate income taxes that Manila Water and Maynilad could recover from consumers through monthly water bills on top of the “system loss” or cost of water pilfered that was also being passed on to consumers.
But Recto said MWSS “should rescind this authority before losses and other company expenses such as travel and entertainment expense are also passed on to the hapless water consumers.”