Maynilad clarifies income tax payments

This is in response to Neal Cruz’s column titled “Consumers paying for water firms’ income taxes” (Opinion, 1/9/15).

In the interest of accuracy and fairness, we are issuing the following clarifications so that the public may be properly informed on the issue pertaining to the water tariff.

1. On the question of why consumers pay for income taxes of the water concessionaires. In any business, the pricing of goods and services always includes taxes. The price consumers pay for products—whether it’s a hamburger or a movie ticket or a bottled beverage—always includes an amount for taxes. It is always the buyer who ultimately pays the taxes because the tax component is factored into the price.

But as a regulated monopoly, Maynilad cannot set its own price for the product and service it sells; it is the Metropolitan Waterworks and Sewerage System (MWSS) that decides on the price.

In the last 17 years since the privatization of MWSS’ operations, the interpretation of the Concession Agreement between the MWSS and the concessionaires is that the tariff is determined after tax. But the new set of regulators upended 17 years of unbroken practice and understanding, and decided that tariff should be determined before tax.

That is the crux of the dispute that led us to bring this issue to arbitration. The Appeals Panel upheld our position in a decision

dated Dec. 29, 2014.

2. On the claim that the concessionaires collect payments for the Laiban Dam project. The Concession Agreement is a reimbursement contract. We do not collect payments for projects that have not yet been implemented. We only collect for expenditures that have been prudently and efficiently incurred.

The Concession Agreement

being a reimbursement contract, the concessionaires first spend on water and wastewater infrastructure projects, for which they are reimbursed at a later time and are allowed to earn a controlled profit from these investments.

3. On the claim that the concessionaires charge sewerage fees even for houses that do not have sewerage connections. This is incorrect. First, we do not levy a sewerage charge to our domestic customers. We have stopped doing so beginning 2012 in our

effort to ease its effect on the tariff for domestic customers. Second, we only levy a sewerage charge to our nondomestic customers that are located in sewered areas.

We thank the Inquirer for this opportunity to explain our side and to share the information we provided with its readers so they can take an informed stand

regarding these issues.

—JENNIFER C. RUFO, head, Stakeholder Communications, Corporate Communications, Maynilad