A hostage to corporate interests

By BENJIE OLIVEROS
Analysis

The revelation made by the Water for the People Network and Ibon Foundation that the two water concessionaires­, Manila Water and Maynilad, make consumers pay for their corporate income taxes, travel expenses, company outings, gifts, flowers, among other irregular exactions shocked the public. And we thought the highly ­disadvantageous contracts the former Ramos administration entered into with independent power producers (IPPs) was bad enough because it made the public pay for power that was supposedly generated by IPPs even if it was not used.

Making consumers pay for travel expenses of the corporate officers, company outings, gifts, and flowers is downright abusive. But making consumers shoulder the corporate income taxes of the two private water concessionaires is a mockery of the country’s taxation system. Even a non­accountant knows that the purpose of income taxes is for individuals and corporations to surrender part of their earnings to help fund the operations and services of the government. And with the introduction of the regressive value added tax, the income tax is the only remaining progressive taxation scheme of the government. (Granting for the purpose of argument that corporations and individuals pay the correct taxes and that taxes are used judiciously and for the right purposes by government.) Making consumers shoulder the corporate income taxes defeats the very purpose of this form of taxation. So essentially, Manila Water and Maynilad do not pay income taxes.

Why is the Aquino government not running after them? Why is the government thinking of more ways to tax the people while looking the other way when big foreign and local corporations do not pay their taxes?

Manila Water is jointly owned by the Ayala corporation and United Utilities, the largest listed water company in England. Maynilad was formerly owned by Benpres Holdings of the Lopez group, and Ondeo Water Services, also of Britain. It is now owned by the Metro Pacific Investment Corporation, DMCI Holdings, and partly by the Lyonnaise Asia Water Limited of Singapore. With the arrangement that they could pass on their income taxes, these corporations were practically given a tax holiday.

When pressed for comment, the representatives of the two water concessionaires said that what they are doing is provided for in the concession agreement.

In the meantime, the Bureau of Internal Revenue is running after small and medium Filipino ­owned corporations and individuals who, the agency thinks, are not paying the correct taxes to be able to achieve its revenue targets. So instead of taxing those with higher incomes such as the two water concessionaires and their major stockholders, the Aquino government has been putting the burden of taxation on middle and low income Filipinos.

Worse, the government does not and would not do anything about the highly­-disadvantageous provisions in the water concessionaire agreement. Malacañang is silent about it but one could almost hear President Aquino saying: “We inherited that problem and we could not do anything about it because it is a legally­ binding contract.”

Senator Juan Ponce­Enrile said, in an interview with Interaksyon.com, “What can Congress do? They can’t pass a law impairing the obligations between contracting parties.”

Rep. Sergio Apostol said . “It’s changing the terms of the contract while it’s being implemented.” Adding that, doing so would scare foreign investors away. The two lawmakers, plus Isabela Rep. Rodito Albano, are blaming MWSS, the government’s supposed regulatory body, while practically absolving Maynilad and Manila Water.

The highly-disadvantageous and oppressive contracts with Maynilad and Manila Water, much like the power contracts with the IPPs, the rapid increases in utility rates, and the mere marginal improvements in services, demonstrate that the privatization of essential government services – whether one calls it a concessionaire agreement, a contract, a Build-­Operate-­Transfer scheme, or a Public­-Private ­Partnership– does not really benefit the Filipino people, but rather makes us hostage to corporate interests and profits. Because in order to attract foreign investors and their local partners to take on government services, the government creates the conditions to guarantee that investors would profit from its ventures.

And the way to do this is to pass on the burden of the costs of doing business to consumers.

So why doesn’t the government just be honest about it and say that all these privatization schemes are being done mainly to attract investors and not to benefit consumers. And that hopefully, with the entry of investors, the economy would improve and the people would benefit from this through the generation of more jobs and income opportunities in the services sector, including tourism. For those who would not benefit from these, they could be given money in the short-­term through the conditional cash transfer scheme. That is inclusive growth, according to neoliberal economics. ()

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