Senate to probe water firms on taxes

Senator Ralph Recto. INQUIRER FILE PHOTO

MANILA, Philippines—The Senate intends to summon to a congressional probe officials from the Metropolitan Waterworks and Sewerage System (MWSS) and the two private water concessionaires on reports that the state regulator had allowed the Maynilad Water Services and Manila Water Co. to pass on to their 14 million consumers an estimated P15.5 billion in corporate income taxes.

Sen. Ralph Recto will seek a Senate inquiry into the claim made by the Water for People Network (WPN) that Maynilad and Manila Water had inserted their income taxes, estimated at P3.1 billion per year, into their operating expenses.

The WPN said the MWSS had allowed this practice from 2008 to 2012, which means that consumers were burdened with an additional P15.3 billion on their water bills during the period.

“This should not be the practice. 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,” said Recto, who chairs the Senate committee on ways and means and is senior vice chairman of the panel on public services.

This “abuse” of consumers was “immoral and unethical and does not reflect the corporate principles of the businessmen or entities behind the two private water concessionaires,” he said.

Maynilad is majority-owned by Metro Pacific Investments Corp. and DMCI Holdings while Manila Water’s biggest shareholder is the Ayala Corp.

The senator said the two concessionaires should refund their consumers just like the power distribution utility, the Manila Electric Co., which was forced to pay back P28 billion to its consumers after the Supreme Court ruled in 2003 that it could not pass on its income tax obligations to its consumers.

The MWSS regulatory chief, Emmanuel Caparas, did not reply to the Inquirer’s questions on Wednesday. His staff claimed that he was tied up in meetings.

Recto said the WPN’s findings cast doubt on the legitimacy of the two water companies’ petition for a rate increase.

Manila Water is reportedly seeking a P5.83-per-cubic-meter increase in its basic charge while Maynilad is asking for an P8.58 hike.

“What’s now the compelling justification for approving a rate increase?  If they are practically not paying income taxes and at the same time receiving some tax perks from government, what’s the happiness in granting them a rate hike?” Recto said.

The senator questioned why the state regulator, the MWSS, “seemed to have generously capitulated to the avarice of the water companies.”

Critics of MWSS have noted the apparently cozy relationship that the state regulator has with its two concessionaires, especially during the latter part of the Arroyo administration.

During this period, the MWSS relaxed its monitoring of Maynilad and Manila Water’s obligations to expand their services and improve sewerage facilities.

The two concessionaires were allowed to collect advance fees from their customers for projects that they had yet to build and were awarded a 15-year extension of their concessions without any bidding (their 25-year agreements will end in 2022).

During this same period, the MWSS adopted generous bonus and compensation schemes for its officers and employees using funds from the concession fees.

Originally posted at 07:12 pm | Wednesday, June 26, 2013