Firms’ corporate income tax included in water deal review: DOJ

FILE: Senior Deputy Executive Secretary Menardo Guevarra announces during a press briefing in Malacañang. TOTO LOZANO/PRESIDENTIAL PHOTO

MANILA — Justice Secretary Menardo Guevarra on Monday said the review of the 1997 agreements with water concessionaires Maynilad and Manila Water Inc. will take up the issue of how the firms’ corporate income tax is passed on to consumers.

“The team will surely consider the issue of passing on the Corporate Income Tax (CIT) to the consumers,” Guevarra said to newsmen. The contested issue of whether the water companies may pass on the cost of paying the taxes to consumers had been cited by the president as among the lopsided conditions in the deals.

Guevarra, however, said there is still no schedule for a meeting between the government and representatives of the concessionaires.

“It will still be up for discussion in the next meeting of the Cabinet in early January,” he said.

He added that any new talks with the concessionaires will be a “renegotiation” and not a continuation of arbitration proceedings. Generally, UNCITRAL (United National Commission on International Trade Law) rules on arbitration require confidentiality.

Manila Water is a subsidiary of the Ayala Corp., while businessman Manuel V. Pangilinan’s Metro Pacific Investments Corp. owns a controlling stake in Maynilad.

The two private companies distribute water in Metro Manila and other parts of the country under agreements signed with state regulator Metropolitan Waterworks and Sewerage System (MWSS) in 1997.

In March, supply interruptions started in various areas supplied by Maynilad and Manila Water due to increased demand and reduced water levels of dams amid a scorching dry season in the country.

President Rodrigo Duterte lashed out at the water concessionaires after a review conducted by the DOJ showed the water contracts were “onerous and disadvantageous to the people, relative the terms or periods, government non-interference, as well as concessionaire indemnification for losses.”

Due to the two provisions, the government was ordered by the Singapore arbitration court to pay about PHP3.6 billion to Maynilad and recently, PHP7.4 billion to Manila Water as compensation for losses and damages.

Guevarra said another onerous provision is the extension of these contracts to 2037, considering that the extension was granted 12 years to 13 years before the original expiration of the 25-year concession agreements in 2022.