August 6, 2013

A call for the review of the taxes and expenses
passed-on to consumers by Maynilad and Manila Water[1]

By: Sen. Antonio "Sonny" F. Trillanes IV

Mr. President, Distinguished Colleagues, Friends, Ladies & Gentlemen:

I rise on a matter of utmost importance for all of us, and in particularly, for our poor countrymen who struggle each day to try to budget their meager salaries to pay for basic necessities.

I refer, Mr. President, to the reported practice of our largest water concessionaires, Manila Water Company, Inc. ("Manila Water") and Maynilad Water Service, Inc. ("Maynilad"), of passing their corporate income taxes and other expenses unto consumers.

Mr. President, during the first week of June, we were greeted by banner headlines reporting to the effect that consumers have been shouldering about P1.5 Billion and P1.6 Billion in taxes for Manila Water and Maynilad, respectively, annually over the past five (5) years. This means that consumers have, thus far, shouldered a total of some PhP 15.3 Billion of Manila Water's and Maynilad's corporate income taxes.

No less than MWSS Administrator Gerardo Esquivel confirmed this report, which in fact was originally sounded off by the consumer advocacy group - Water for People Network (WPN).

Apart from their annual corporate income taxes, Manila Water and Maynilad have purportedly passed on other charges to consumers, including their travel and entertainment expenses, advertisements, donations, training expenses[2] and even expenses for flowers and purportedly even their expenses related to their corporate social responsibility (CSR) activities.

Moreover, Mr. President, Administrator Esquivel also admitted that both Manila-based water concessionaires were granted income tax holidays in 2009. Despite this, they reportedly persisted in making consumers pay for their supposed corporate taxes[3].

The practice of allowing water utilities to charge their corporate income taxes and other expenses to consumers can be traced from the earlier action of the Metropolitan Waterworks and Sewerage System (MWSS) Regulatory Office when it issued Resolution No. 04-006-CA in July 2004, allowing the Maynilad and Manila Water to recover corporate income tax expenses, among other expenses, by passing these on to their customers. Mr. President, distinguished colleagues, the practice of privatized utility corporations of passing on the tax burden to consumers in not new. In fact, this practice has been ruled as illegal by the Supreme Court when it demanded for income tax reimbursements in favor of consumers from Meralco in the amount of some P29 Billion in 2004. The High Court expressly declared that: "income tax should not be included in the computation of operating expenses of a public utility" in the case entitled Republic of the Philippines, represented by the Energy Regulatory Board vs. Manila Electric Company[4].

In the same decision of Republic vs. Meralco, the Highest Tribunal of the land opined that allowing the indiscriminate inclusion of income tax payments as operating expenses may create an undesirable precedent and serve as a blanket authority for public utilities to charge their income tax payments to operating expenses and unjustly shift the tax burden to the customer[5].

Mr. President, it appears that the previous action of the MWSS Regulatory Office of issuing Resolution No. 04-006-CA in July 2004 effectively runs in direct contravention of, and diametrically opposed to, the Supreme Court's landmark decision that the burden of paying corporate income taxes should not be unjustly borne by consumers but by the party maintaining the facility.

It is submitted that there is an urgent and imperative need to conduct an investigation into this very important matter, affecting as it does millions of Filipino consumers, not only in order to enact remedial legislation but also to once and for all clarify whether or not the two (2) water concessionaires are acting within the bounds of the law and their respective concession agreements with the MWSS.

Like most of our constituents here in Metro Manila, we too are consumers and clients of Maynila and Manila Water and for my part, I would like to know and be clarified whether or not the water concessionaires' act of passing on to us the subject expenses is legal, reasonable and/or proper.

Indeed, Mr. President, when I went around these past few weeks, this was one of the issues frequently raised by the people I talked to together with the supposed 10-Billion pork barrel scam and the problem at the Bureau of Customs. As the elected representatives of the people in this august chamber, I believe it is our duty to inquire, investigate and look into this legitimate concern. Mr. President, the investigation is made more imperative because of the fact that the MWSS has reportedly rescinded the subject nine-year old resolution allowing these water utilities to pass-on their corporate income taxes to consumers (i.e. Resolution No. 04-006-CA in July 2004) and has issued a new resolution superseding the former, which is currently pending approval and confirmation of the MWSS Board of Trustees.

It is our hope, Mr. President, that in the course of the investigation, we will be able to conclusively ascertain whether or not the expenses being passed on to us by Maynila and Manila Water are legitimate expenses which they could reasonably charge against their consumers and whether or not there is a need to enact remedial legislation to protect the interest of the public.

It is for this reason that I filed Proposed Senate Resolution No. 33 and it is my fervent hope that said resolution, together with this privilege speech, will be immediately referred to the Committee on Public Services and/or other appropriate committee or committees of the Senate for the conduct of the proper Senate investigation.

Thank you, Mr. President.


[1] Privilege Speech to be delivered at the Senate Plemary session on 06 August 2013.

[2] Water companies passed on additional charges to consumers - report. Information retrieved from on 7/5/2013.

[3] MWSS admits consumers paying Maynilad, Manila Water taxes. Information retrieved from on 7/5/2013.

[4] Republic vs. Meralco, G.R. No. 141314 promulgated on November 15, 2002.

[5] Ibid.

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