SC: Water concessionaires can’t pass corporate income tax to customers

MANILA, Philippines — Maynilad Water Services, Inc. and the Manila Water Co., Inc. are public utilities that are barred from passing on to consumers their corporate income taxes as operating expenses, the Supreme Court said in a ruling made public on Monday.


“Considering that Manila Water and Maynilad operate the waterworks and sewerage system, they are public utilities which are expressly prohibited from passing on to consumers their corporate income taxes as operating expenses,” the Supreme Court said in a 102-page ruling penned by Senior Associate Justice Marvic Leonen.

Citing a 2002 SC decision Republic of the Philippines vs. Meralco, it said that to charge consumers for expenses incurred by a public utility that is not related to the service or benefit of the public is “unjustified and inequitable.”

The SC added that the water concessionaires are bound by the 12 percent rate of net return limit.

The 12 percent rate of return limit is under Republic Act 6234 or the law establishing the Metropolitan Water and Sewerage System (MWSS).

The SC, however, said the income taxes passed on to consumers by Manila Water and Maynilad may no longer be recovered as the right to refund “had long been prescribed.”

The SC explained that contesting water rates must be raised before the National Water Resources Board (NWRB) within 30 days from its effectivity.

But no case was brought before the NWRB, not like the case of Meralco, where a refund was granted because the rates were first contested before the Energy Regulatory Board.

“No such administrative recourse was made here since the parties involved this Court’s jurisdiction on the first instance without contesting the rates before the NWRB. This Court, therefore, has no jurisdiction to order an adjustment of the rates changed after the past rate rebasing exercises,” it added.

Petitioners, which include Bayan Muna chairman Neri J. Colmenares and its executive vice president Carlos Isagani T. Zarate expressed mixed emotions over the Supreme Court’s decision.

In a statement, they said: “The decision of the Supreme Court that declared Maynilad and Manila Water public utilities and therefore prohibited from charging consumers their income tax and from exceeding the 12% cap on their rate of return is a victory of the people…Bayan Muna, however, is dismayed that the refund of charges paid for the concessionaires’ income tax and a rate hike is not allowed in the decision.”=


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