Press Release
June 26, 2013

Passing on of income taxes grave disservice to water consumers!

Sen. Ralph G. Recto today deplored reports that water concessionaires Maynilad Water Services and Manila Water Co. were passing on their multi-billion corporate income tax payments to their consumers.

Recto said he would be filing a resolution calling for a Senate inquiry into the perceived consumer abuse by the two private water concessionaires.

"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.

The senator said if this is true, 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," 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.

An advocacy group, Water for People Network (WPN), has bared that both Maynilad and Manila Water tucked in the income tax payments in their 'operating expenses" or OPEX, which amounted to P3.1 billion each per year from 2008 to 2012 for a combined total of P15.3 billion.

Recto said the "discovery" now casts a shadow of illegitimacy on the petition of two water companies for a rate increase.

"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 said.

Recto added regulator Metropolitan Waterworks and Sewerage System (MWSS) must have done something to protect the welfare of the water consumers, but seemed to have generously capitulated to the avarice of the water companies.

The two companies want to implement a "rate rebasing" that would see consumers shouldering the OPEX of the water concessionaires.

Manila Water is seeking a P5.83/cubic-meter increase in its basic charge and Maynilad, P8.58. The increases will be implemented up to 2018.

WPN said a guaranteed rate of return, called appropriate discount rate (ADR), is applied on the pass-on income taxes as part of the OPEX.

From 2008 to 2012, 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.

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

Recto nevertheless 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."

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