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Palace: We can’t stop pass-on tax

THE Palace on Wednesday refused to stop two private water concessionaires from passing on their income taxes and other expenses to consumers, even though government regulators ruled that the charges were “grossly unjust.” “The contract stands. We have to honor it,” said Budget Secretary Florencio Abad, referring to the concession agreement between the two companies and the state-owned Metropolitan Waterworks and Sewerage System (MWSS). “The contract provides guaranteed profit for the water firms in exchange for better and improved services,” Abad added. Businessman Manuel V. Pangilinan, whose First Pacific controls Maynilad Water Services, welcomed Abad’s pronouncement and said some P500 million had been released for a project to lay more pipes. Two consumer groups who want the contract cancelled – Water for All Reform Movement headed by Rodolfo Javellana and Water for the People Network led by Sonny Africa – said they were not surprised by the Palace position because President Benigno Aquino III had been silent all throughout the controversy. Javellana and Africa vowed to continue exposing the “onerous” provisions of the concession agreement and urge the public to reject the contract, which will be in effect until 2037. Maynilad and Manila Water have passed on P15 billion in income tax expenses to their customers over the last five years and collected billions more for projects that were not yet even built, yet the President has said nothing, Javellana said. He said the President appeared to be deferring to his two Cabinet officials, Public Works and Highways Secretary Rogelio Singson and Cabinet Secretary Jose Almendras, who were presidents of Maynilad and Manila Water, respectively, before they joined the Aquino administration. Africa added: “We are not surprised because the President has never spoken to take the side of the public on this issue. Even his SONA was ominous in hyping PPPs (public-private partnerships) in general, while on the issue of Manila water rates and services, he chose only to defend his personal friend rather than uphold the public interest, especially for the poorest consumers.” He said the deadline for deciding the new water rates had lapsed, and that the President’s “calculated silence” indicated that “the 15-year trend of high and rising water rates will continue.” Africa said well-off households may not mind the high rates, but millions of poor Metro Manila residents would have to carry a greater burden on their already strained budgets. Abad, who was in the House to turn over the proposed P2.268-trillion national budget for 2014, said the contract provides a “guaranteed profit” for the water firms. Asked about the MWSS order for the two companies to stop passing on their tax to consumers, Abad said: “But it is in the contract.” Abad would not categorically say the Palace would allow the two companies to continue passing on their income taxes to consumers, but said: “Whatever is in the contract holds. Whether or not that is income tax, for as long as the water firms meet their guaranteed profits, it holds.” With the Palace unwilling to stop the contract, Javellana said his group would ask the Supreme Court to nullify the concession agreement and order a refund of the pass-on charges. “We will not stop bringing the issue to the public and we are prepared for a long and exhaustive legal battle,” Javellana said. He said they also bank on the promise made by House Speaker Feliciano Belmonte and Senator Ramon Revilla Jr. to have the water contracts reviewed. Belmonte said “it is not right” that the income taxes of any private corporation be passed on to consumers. He added that a congressional review was in order. Senator Ralph Recto said the Senate would continue with its inquiry into the pass-on charges despite Abad’s statement. “We will conduct Senate investigations in August,” said Recto, who filed a resolution directing the public services committee to look into the pass-on charges. Recto argued that income taxes were not included in the “Philippine business taxes” that the concession agreement allowed the private companies to pass on to their customers. With Macon Ramos-Araneta
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