EVAT and Tax Exemption of Manila Water for Another Year

February 13, 2006 at 12:57 am Leave a comment

An email

When Manila Water was awarded its concession 6 years ago, it was also given a tax holiday for 6 years, exempting it from paying income taxes.

The tax exemption period ended last Dec. 2005 and Manila Water promptly asked for an extention up to 2006. The BOI also promptly granted the request, losing for the government an income of P1 billion for the year.

Manila Water earned P1.33 billion in 2004 and P2.01 billion in 2005.

Ordinary workers and employees earned less in 2004 and even lesser in 2005 due to lower purchasing power of the peso.

But they nevertheless were compelled to shore up the government by paying 12% EVAT, which in essence is forcing them to part with their hard-earned money to keep the government going (and upgrade its ratings with  Fitch, Standard & Poor and Moody’s so the country can borrow more).

So why is the profit-taking Manila Water granted its request not to pay again an income tax in 2006 while the ordinary workers and employees are burdened with more taxes to bankroll the government?

What is wrong with the equation?

1st comment from a civil engineer water consultant of an international lending agency

Mon,

The condition is to use the additional tax holiday granted to expand to other areas like in the Eastern part of Rizal. Its like government helping fund the expansion of services to other areas.

It’s a win=win for consumers (more will be served and connections accelerated rather than paying for water from aguadores at much higher cost), the government (using tax money for services through a private group who can do it better – no money for politicians if this was done through DPWH and the like) and Manila Water (to expand their revenue base – more revenues to expand to other areas and include subdivisions with house connections and not bulk supply).

That’s how I would look at it.

Regards,

2nd comment from a retired MWSS consultant, now focusing on apostolic work (because he has several apos already)

Mon,

To add insult to injury as they say . Manila Water declared cash dividends of Php 0.10 per share.

There must be somethimngs wrong really with the equation.

My reply

Can other utilities also use the same argument to provide more services to its other clients? For example, electric coops who are not registered with the CDA, have to pay income taxes. Can they also ask the government to exempt them from paying income taxes so they can have more money to expand their services?

There is no such thing of course in the power industry. IN fact, we donate via the missionary charges in our bill to pay for the expansion of services in remote areas.

There is a fundamental flaw in the rule about exempting a private company from paying income taxes just so it can expand its services. On the other hand, the government collects additional EVAT from us to shore up its finances which could ahve been of lesser gap if it collects form utilities like Manila Water. An income tax of P1 billion is a lot of money.

Nang pinaliwanag ko ito sa isang community, siempre, agitated ang mga tao roon dahil alam nila na dagdag bawas sa butas na nilang bulsa ang VAT sa kuryente, commodities, etc. habang alam nila na ang mga mayayamang Ayalas ang may-ari ng Manila Water na pwede naman umutang sa sarili niyang bangko ang other institutions para sa kanyang expansion.

They look at it that way dahil gipit sila at hirap na ngang kumita at makaraos ang araw. Siguro yong mga hindi gipit, they look at it the same way that you do. Sometimes you have to look at it from the viewpoints of the more numerous in the community to understand why people do not look kindly at these things.

There has been a proposal to exempt workers/employees from income taxes if their income is below a certain level. Congress has sat on it for a long time, and GMA has not endorsed it. Nagpupursigi lang yong mga partylist congressmen and some progressive mainstream party congressmen.

Mon

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