Senators on Monday approved on third and final reading Senate Bill 2518, which seeks the condonation of P842 million in unpaid taxes due from the 78 out of the country’s 514 local water districts, serving 19 million Filipino residents.
Senator Juan Edgardo Angara, chairman of the Senate committee on ways and means and sponsor of the bill, said the measure will facilitate the expansion of LWDs by removing the conditions on condonation of unpaid taxes.
Taxes on the LWDs were imposed by the Bureau of Internal Revenue.
SB 2518 replaced House Bill No. 3675 authored by Representatives Romero Federico Federico “Miro” Quimbo, Christopher Co, Emi Calixto-Rubiano and Rodel Batocabe, taking into consideration Senate Bill No. 612, authored by Senate President Pro Tempore Ralph Recto, Angara and Senator Cynthia Villar.
Angara said LWDs were created when Presidential Decree No. 18, known as the “Provincial Water Utilities Act of 1973,” was enacted into law on May 25, 1973 to ensure that Filipinos in the countryside had access to safe and potable water.
In his sponsorship speech, Angara said the unique role of water districts has long been recognized by Congress. From being classified as quasi-corporations, local water districts are now considered as government owned and controlled corporations (GOCCs).
Like any other public utilities of similar nature such as the Metropolitan Waterworks and Sewerage System and the National Power Corporation, LWDs were exempted from paying taxes when Republic Act No. 10026, known as “an Act Granting Income Tax Exemptions to Local Water Districts,” was signed into law in March 2010, Angara said.
He clarified that RA 10026 did not merely provide an income tax exemption but also for the condonation of all unpaid income taxes of water districts from August 13, 1996 up to the effectivity of the 2010 law.
Angara said this is subject to the following conditions: the BIR establishes the financial incapacity of the concerned local water district to meet such obligations for the period stated therein; and the water district availing of such condonation shall submit to congress a program of internal reforms.
Even though the law was passed in March 2010, the BIR has yet to issue the revenue regulations to enforce RA 10026, Angara said.
Instead of issuing the required revenue regulations, the BIR issued Revenue Memorandum Circular (RMC) 68-2012, which outlined the procedure, and the documentary requirements for the application for condonation.
Although concerned water districts diligently complied with the RMC, he said the committee found out that not a single application for condonation of the 78 LWDs, amounting to around P842 million of unpaid taxes, has been acted upon by the BIR due to the absence of a revenue regulation.
Senate President Franklin M. Drilon said that the bill primarily intends “to help local water districts reach and provide service to more and more Filipinos around the country, by unburdening them of needlessly laborious bureaucratic requirements.”
Senate President Pro Tempore Ralph Recto called the proposed measure “an excellent piece of legislation, because taxes foregone will be returned to consumers, by making services better, broader and bigger.”
He explained that the foregone taxes can be also used to “finance improvements, like new wells and fresh sources, new pipes and modern meters to end leaks, and even computers to plug leakages of the monetary kind.”