The Supreme Court has declared Manila Water Co. and Maynilad Water Services Inc. as public utilities, which effectively bars them from including their corporate income taxes as part of their operating expenses.
“We rule that Manila Water and Maynilad are public utilities,” the Court said in a decision written by Associate Justice Marvic Leonen.
“A public utility is a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service,” the Court said.
The Court resolved the petition filed by former Bayan Muna party-list representatives Neri Colmenares and Carlos Zarate who assailed the inclusion by the Manila Water and Maynilad corporate income taxes in their recoverable operating expenses, a practice that jacked up the price of water through the years.
“In sum, Manila Water and Maynilad may not recover [their] corporate income taxes as operating expenses during the lifetime of the concession agreements considering that they are public utilities. Even assuming that they are not public utilities, they cannot recover income taxes because they are not business taxes under Philippine law,” the Court ruled.
It said “allowing Maynilad to include its corporate income taxes in the rates chargeable to water consumers — taxes which, to repeat, do not inure to the benefit of water consumers — will result not only in unjust but also inequitable rates.”
“A large segment of the water consuming public will be made to pay for something that has no direct benefit to them, while some will enjoy water services without shouldering the same burden. This cannot be allowed,” the Court said.
Maynilad Water Services, Inc. said it has already accepted its status as a public utility when it signed the revised concession agreement, which came with a congressional franchise.
“The ruling merely affirms that our existing tariff does not include past or future income taxes; this principle has already been established in our past rate rebasing exercises. This means that corporate income tax is not part of our operating expenses,” the water company said Tuesday.
“Being a public utility basically means we cannot pass on corporate income tax as an expense, and fact is Manila Water has excluded CIT from its operating expense since 2013,” Manila Water said in a separate statement.