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Scrap business tax provision in water concession deal – senator


By Hannah Torregoza 

Senator Sherwin Gatchalian on Thursday called for a renegotiation of business agreements entered into by the Metropolitan Waterworks and Sewerage System (MWSS) with Manila Water Company, Inc. (Manila Water) and Maynilad Water Services, Inc. (Maynilad), saying the business tax provision under the water concession agreement should be scrapped.

Sen. Sherwin T. Gatchalian (Senate of the Philippines / MANILA BULLETIN)

Sen. Sherwin T. Gatchalian

With the tax provision, water consumers are burdened with pay­ing the tax obligations of Maynilad and Manila Water such as charitable contributions, expenses for basketball games, sports clinics, and other forms of donations, among others.

In an earlier Senate hearing, Gatchalian questioned the inclusion of the business tax provision under the water concession agree­ment that enabled the two water concessionaires to skirt away from paying their tax obligations and passing it on to consumers instead.

Thus, he said MWSS, be­ing a regulatory body, should renegotiate its agreement with the two concessionaires to make it advantageous to water consumers.

“With so many lawyers, you were able to include this business tax provision in the contract…You practically paid nothing. You literally passed on to consumers your capital expenditures, debts, and even corporate income tax,” Gatch­alian told executives of the water concessionaires during the hearing.

“But the chief regulator finally caught you that is why we now have this problem. All I can say is, you violated public trust because in the first place you were just given a privilege to distribute water,” Gatch­alian pointed out.

The senator also berated the water companies for claim­ing they are not a public utility when their business entails them to provide a basic util­ity that is considered a prime commodity.

“Even if you say you are not a public utility, your business is comparable to a public utility. And if you say public utility, that includes public trust,” Gatchalian said.

“You even included in the charges basketball and chari­table events you had. How can we trust these concession­aires? As it turns out, when­ever you tried to wriggle out, you succeeded in wriggling out. But then you were caught in the end,” Gatchalian told representatives of the water concessionaires during the hearing.

The MWSS has already re­voked the extension of conces­sion agreements with both wa­ter concessionaires until 2037, which the water regulator itself approved in a board resolution in 2009. The said revocation, in effect, ends the water firms’ concession in 2022.

This development came despite the decision of Manila Water and Maynilad to waive the arbitral awards granted in a ruling made by the Perma­nent Court of Arbitration in Singapore. In separate arbitral ruling, the government was ordered to pay P7.39 billion to Manila Water, and P3.4 billion to Maynilad. The awards were given after the government denied the two concession­aires application for water rate increase.

As this developed, Malacañang dispelled specu­lations that President Duterte is allegedly seeking to install his own oligarch to run the water distribution operations in Metro Manila and nearby areas.

Presidential Communica­tions Secretary Martin An­danar said the President has railed against the contracts sealed with Maynilad and Ma­nila Water due to the alleged onerous provisions under the concession agreement and not because he wants to pass the business to his ally.

READ MORE: Andanar: Duterte not going to let allies run water operations

“Oh no, definitely not! The main point here is that we should not be entering into onerous contracts,” An­danar said in a television interview.

On rumors that the Villar family, which owns Prime Water Infrastructure Corp., might take over the water operations from Maynilad and Manila Water, Andanar said: “I don’t think so. I think the purpose here is to send the message to both Maynilad and Manila Water that the Presi­dent is not accepting this kind of reasoning and this kind of onerous contract.”

Meanwhile, Justice Under­secretary Emmeline Aglipay-Villar on Thursday denied allegations that her husband’s family has vested interest in the review of the government’s water concession agreements with Manila Water and May­nilad.

“The department conduct­ed a disinterested review of the concession agreements and I don’t want to even dignify further by answering further accusations,” she told report­ers at the sidelines of the 5th Manila International Dialogue on Human Trafficking held at the Manila Hotel.

The undersecretary, who is married to Department of Public Works and Highways (DPWH) Secretary Mark Vil­lar, is part of the team which conducted the review of the concession agreements. The review report, which was submitted to President Du­terte, pointed out the onerous provisions of the contracts. (With reports from Genalyn Kabiling and Jeffrey Damicog)

READ MORE: No vested interest in review of water concession contracts – Usec Villar

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