‘Passing income tax to consumers illegal’


SEN. Edgardo Angara on Thursday called on the two private water concessionaires Manila Water Co. Inc. and Maynilad Water Service Inc. to do a full refund of some P15 billion in corporate tax payments that they passed on to consumers.

Citing a Supreme Court (SC) ruling on a similar case involving power distribution firm Manila Electric Co. back in 2002, Angara said the practice of passing income tax to consumers is “illegal.”

Although the practice has been stipulated on the concession agreement between the Metropolitan Waterworks and Sewerage System (MWSS) and the two water concessionaires, Angara said that this practice is definitely against the law.

He was referring to the resolution issued by the MWSS Regulatory Office in 2004 that allows Manila Water and Maynilad to recover income tax expenses through customer fees.

Legal mistake
“They are giving the concessionaires the right or the privilege to pass on their income tax to consumers and it is a legal mistake,” Angara told the weekly news forum at the Senate.

In articulating his position, Angara said the High Court had ruled that Manila Electric Co. (Meralco) could not pass on its income tax obligations to consumers thus, nullifying the rate adjustments it implemented from 1994 to 2002.

With the SC’s decision, Meralco returned some P30 billion to consumers.

The SC in its ruling then said the regulator correctly ruled that “income tax should not be included in the computation of operating expenses of a public utility.”

He said the water concessionaires’ practice is similar with that of Meralco and they should also follow what the latter did.

“If you are going to take on the principle of Meralco case, they [water concessionaires]are not authorized to pass on their own income tax burden to the consumer. Meralco was required to repay P28 billion. They were required to refund,” Angara stressed.

The consumer advocacy group, Water for the People Network (WPN), claimed that Manila Water and Maynilad passed on corporate income taxes to consumers a total of P15.3 billion in taxes from 2008 to 2012.

Above board
In a related development, MWSS Administrator Gerardo Esquivel also on Thursday maintained no wrongdoing in the hiring of 21 University of the Philippines (UP) Diliman students under the agency’s Special Program for Employment of Students (SPES) last year.

He issued the statement in response to the new graft charges filed by the MWSS Labor Association (MLA) before the Office of the Ombudsman on the alleged anomalous hiring and overpayment of the UP Diliman students by the MWSS.

Esquivel dismissed the charges as another form of harassment hurled by the disgruntled MWSS employees who allegedly used to enjoy excessive benefits from the previous MWSS leadership.

He added that in the latest case against him, the disgruntled MWSS employees claimed that the student-interns were paid at the rate of 75 percent of the daily minimum wage instead of 60 percent authorized under SPES.

Esquivel insisted that the hiring of the students was done in support of the national government’s short-term employment programs including SPES which aims to provide short-term employment opportunities to poor but deserving students, and Government Internship Program (GIP) which introduces public service to students and young professionals to entice them to pursue careers in government through internships in various government agencies.

He clarified that procedural lapses have been addressed and corrected in the enforcement of the MWSS GIP Program after the Commission on Audit (COA) in its audit observations called the attention of the MWSS.

‘’We really want to encourage students from top schools to join the government, to recognize that there is value and honor in public service,’’ Esquivel said.

He deplored the continuous and baseless criticism being thrown at him and his administration particularly by disgruntled members of the MLA.

However, Esquivel said that he perfectly understands the unhappiness felt by the concerned MWSS employees as they used to enjoy at least 32 months in bonuses before he was appointed by President Benigno Aquino 3rd into office in February 2011.

Among the 32 month-bonuses that MWSS employees used to enjoy from 2008 to 2010 were quarterly grocery allowances (P15,526 per quarter), mid-year financial assistance (one month gross salary plus P20,000), enhanced mid-year assistance (one month gross salary), Family Day Allowance, Family Week Allowance, Traditional Corporate Christmas bonus of P30,000, Traditional Christmas Bonus (one month gross salary), Traditional Christmas Incentive Package (one month gross), Productivity Incentive Bonus in February (one month gross), Productivity Incentive Bonus (two months gross), Enhanced Productivity Incentive Bonus (one month gross), Efficiency Incentive Benefit (P30,000).

There were also the Performance Bonus (one month gross), the Performance Enhancement Incentive (one month gross), educational assistance (one half month gross), scholarship allowance (first tranche, one month gross), scholarship allowance (second tranche, one month gross), enhanced scholarship allowance (one month gross), calamity economic assistance (one month gross), calamity financial assistance (one month gross).

In 2012, MWSS removed the cost of living allowance and amelioration allowance (COLA/AA), which amounts to 50 percent of an employee’s basic pay as per Standardization Law, when the Board of Trustees found that there was no legal basis for its continuing grant and that COLA/AA was actually integrated into the employees’ standardized pay.

Esquivel added the remaining benefits or allowances that the COA sees in its audit are being carefully studied to ensure that the provisions of the general appropriations act on the minimum take-home pay of the employees is not violated.

Bonuses are now limited to 13th month pay (one month basic salary), cash gift of P5,000, and such other performance based bonuses that may be authorized by the Office of the President or by the Governance Commission for GOCCs.


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