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Speaker hits water deals

Belmonte demands review of contracts INCOMING House Speaker Feliciano Belmonte Jr. on Monday vowed to mount a congressional review of the widely criticized water contracts between the government and two private concessionaires, saying their corporate income tax and expenditures should not be passed on to consumers. “It is not right,” Belmonte said of the pass-on charges that have totaled P15 billion over the last five years. “The income tax should be paid by the concessionaires, not the consumers.” Belmonte said he would not allow consumers to bear the burden of the concessionaires’ 30 percent corporate income tax for another 24 years, when the concession agreement expires. In a news conference, Belmonte said it puzzled him why Manila Water Co. and Maynilad Water Systems were allowed to pass on their income tax to 14.2 million consumers. Belmonte said the contracts gave the firms guaranteed profits at the expense of the consumers. “Why was the income tax included in the contract in the first place? Why was it there? We ought to look into this,” Belmonte said. Belmonte made the pronouncements after the seven-member leftwing bloc Makabayan filed House Resolution 14 directing the committee on government enterprises and privatization to conduct a “comprehensive review” of the Metropolitan Waterworks and Sewerage System’s deals with the two water concessionaires. Pending the completion of the review, Reps. Fernando Hicap of Anakpawis, Neri Javier Colmenares of Bayan Muna, Luzviminda Ilagan and Emmi de Jesus of Gabriela, Antonio Tinio of ACT Teachers and James Mark Terry Ridon of Kabataan) said the higher water rates being sought by the two private companies should be disallowed. The lawmakers also hit “add-on” charges that would raise the increase sought by the two companies, from P8.58 to P11.41 per cubic meter for Maynilad and from P5.83 to P7.81 per cubic meter for Manila Water. These add-on charges – including a higher value added tax and foreign currency adjustments as a result of the higher base rate – would raise the water bills of consumers from P48 to P59.41 per cubic meter for Maynilad and from P38 to P45.81 for Manila Water. In the wake of these revelations, Belmonte said the two concessionaires will have to redefine what their “legitimate expenditures” are. These would be subtracted from the gross income in the computation of their profits, but the two concessionaires must pay their own income taxes, Belmonte said. “Consumers shouldn’t have to pay the companies’ income taxes because they are already paying their own income taxes,” Belmonte said. Belmonte said the House panel that would be tasked to review the contracts would immediately be convened to determine which provisions in the contracts needed to be deleted, redefined or amended. The Water for All Refund Movement led by Rodolfo Javellana and the Water for the People Network headed by Sonny Africa wanted the complete abrogation of the concession agreement, which will expire in 2037. The two groups also wanted the water firms to refund consumers some P15 billion in pass-on income taxes collected in the past five years. Javellana’s group sought the intervention of the Supreme Court and filed a petition for a temporary restraining order on water rate increases being sought by the two concessionaires. The new rates would have been imposed last July 1 but the MWSS Regulatory Office issued an order on June 7 that no income taxes should be passed on to consumers. MWSS-RO acting chief Emmanuel Caparas ruled that the two concessionaires should apply the principle used in the case of the Manila Electric Co., in which the Supreme Court said a public utility should not pass on its income taxes to its customers, and ordered the power firm to refund the amount collected. The concessionaires are opposing Caparas’ order and said they would seek arbitration to settle the dispute, and pass on the costs of the legal process again to their customers. On Monday, Maynilad denied claims that it had collected funds from consumers for projects that had not yet been completed. “We are not collecting what we have not yet spent,” said Randy Estreallado, the company’s chief finance officer. Also on Monday, a former MWSS consultant, Felipe Medalla, said the 1998 concession agreement between government and the two water firms – Maynilad and Manila Water Co. Inc. – had guaranteed the pass-on income tax to consumers. It was the MWSS that allowed such a mechanism, he added. With Rio N. Araja
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