MWSS to review taxes passed on by water concessionaires to consumers

MANILA, Philippines - The corporate income taxes being passed on by concessionaires Maynilad Water Services Inc. and Manila Water Co. to consumers will be subjected to review, an official of the Metropolitan Waterworks and Sewerage System (MWSS) said yesterday.

Vincent Pepito Yambao, MWSS deputy administrator for customer service regulation, explained the corporate income taxes are part of the operating expenses of both Maynilad and Manila Water.

He said it so happened that this is just the framework of billing of the two concessionaires.

Advocacy group Water for the People Network (WPN) said consumers have been shouldering the costs of the corporate income taxes of Manila Water and Maynilad at an estimated P3.1 billion a year from 2008 to 2012.

Of the amount, Manila Water accounts for about P1.5 billion annually and Maynilad, around P1.6 billion.

The figures are based on documents obtained by research group IBON, one of WPN’s convenors.

The WPN added that income taxes make up a significant portion of the two firms’ proposed rates for the next five years through the rate rebasing exercise that they again wanted to pass on to consumers as operating expense.

Manila Water is seeking a P5.83 per cubic meter increase in its basic charge and Maynilad, P8.58 for 2013-2018.

The MWSS-Regulatory Office has allowed the two concessionaires to include in their operating expenses the cost of corporate income taxes, which they could recover from consumers through monthly water bills.

This is on top of the system loss or cost of water pilfered that is also passed on to consumers.

The MWSS said Maynilad and Manila Water have been very transparent with the customers. The payment of corporate taxes is reflected in the consumers’ billing records.

Yambao said they will look into this issue.

Sen. Ralph Recto also said he would call for a Senate inquiry into this practice, which he said is being viewed as consumer abuse by several sectors.

Recto called the move by the water concessionaires to pass on their income tax payments to the consumers as a great disservice to their customers.

“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, vice chairman of the Senate committee on public services.

Recto said passing on income tax payments to consumers is 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,” Recto 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,” he added.

If the said practice is true, Recto said the petition of the two concessionaires for a rate increase should be subjected to close scrutiny by the MWSS.

He called on the MWSS to be more proactive in protecting the welfare of the consumers as the government regulator.

“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,” Recto said.

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.”

No estafa

On the other hand, the Quezon City Prosecutor’s Office junked the syndicated estafa case filed against officials of Maynilad and Manila Water over the collection of some P6 billion that was supposed to finance water supply projects but were never implemented.

In a nine-page resolution released this week, Assistant City Prosecutor Gibson Araula Jr. dismissed the case filed by consumer group Water for All Refund Movement (WARM) for lack of probable cause.

Araula said the water concessionaires could not be charged with estafa since the “alleged advance tariff were not obtained by Manila Water  and Maynilad through fraud or mistake, neither were they obtained without any right to demand it.”

The case stemmed from the 2012 complaint filed by WARM led by its president Rodolfo Javellana Jr., who accused Manila Water and Maynilad officials of “conspiring, confederating and mutually helping one another in hoodwinking its customers by demanding payment for multi-billion peso water and sewerage projects whose implementation were either delayed or abandoned.”

The group filed the case after the water concessionaires allegedly ignored their demands to refund at least P6 billion collected from consumers to finance the Laiban dam project and the Angat Dam Reliability or Angat Dam Irrigation Replacement Project.

The complainants argued the implementation of the two projects has reportedly been cancelled.

The group said they filed the estafa case because the companies failed to issue any refund to consumers, an act that allegedly violated Presidential Decree 1689 in relation to Article 315 of the Revised Penal Code.

WARM said Maynilad and Manila Water failed to comply with the 2010 recommendation for refund of the regulatory office of MWSS.

Araula, however, noted that “the order to return the advance tariff was held in abeyance by the MWSS by way of resolution.” – With Marvin Sy, Janvic Mateo