RECEIVED
pave: 0 3 AUG 2016
TINE: TOD &

BY:

Pre'STaATION UNIT.
BILLS AND INGIX SERVICE

Republic of the Philippines
HOUSE OF REPRESENTATIVES|
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

2392

HOUSE BILL No.

Introduced by BAYAN MUNA
Rep. CARLOS ISAGANI T. ZARATE

AN ACT

CLASSIFYING THE SERVICES OF FRANCHISE GRANTEES OF WATER
UTILITIES, AND SALE OR IMPORTATION OF MACHINERY AND EQUIPMENT

DIRECTLY USED IN OPERATING, MAINTAINING, IMPROVING AND
EXPANDING DISTRIBUTION OF POTABLE WATER BY WATER UTILITIES AS.

VALUE-ADDED TAX EXEMPT TRANSACTIONS, AMENDING FOR THE PURPOSE
SECTION 109 (1) OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED BY REPUBLIC ACT NO. 933, AND FOR OTHER PURPOSES

EXPLANATORY NOTE

‘This bill secks to exempt water services from value-added tax (VA‘T), amending the National Internal
Revenue Code of 1997, as amended by Republic Act No. 9337,

Since the commencement of the Concession Agreement between the Metropolitan Waterworks and
Sewerage System (MWSS) and Manila Water and Maynilad in 1997 and up until 2011, water rates have
dramatically increased by 833.2% in the East concession areas and by 520% in West concession areas.
‘At the onset of the agreement, the Maynilad water rate was only P7.21 per cubic meter, while Manila
‘Water was only P4,02 per cubic meter. At present, the basic water cost for Maynilad is P47.83/cubie
meter, while the Manila Water is P36.42/cubic meter. Meanwhile, according to the Local Water
Utilities Administration, the average basic rate of water districts is P18/cubic meter from P6.75/cubie
‘meter in 1996.

Not contented with these exorbitant water rates, the Government is now even acceding to pay for the
corporate income taxes of these water firms in the form of sovereign guarantees. For example, the
MWSS, a government regulatory body, disallowed Manila Water and Maynilad from recovering their
corporate income taxes by hiking their water rates. Both concessionaires ran to the International
Chamber of Commerce and sought arbitration on whether the two (2) firms are public utilities and
whether corporate income taxes are recoverable expenses.

HOUSE OF REPRESENTATIVES:


‘The privatization of our water resources, supposedly touted by the Government as cost-efficient,
ironically proved more costly to the public, and the Government is apparently doing nothing against
it

‘As consumers are weighed down by the rising cost of water services, amid access to water being an
international human right, government doubly burdens the public by imposing value-added tax on
water services and other basic utilities, From the introduction of the 10% VAT to its hike to 12%
through the Expanded VAT (E-VAT) law, basic services and utilities have been unjustly taxed, raising
the cost of water services.

‘The exemption of water services from VAT will provide not only relief, but could be one of the
measures the Filipino people could rightfully demand to stem the effects of damages brought upon
by the failure of the privatization of water distribution. It is one of the most viable options for
Congress to immediately act on. Small revenue losses may easily be offset by the increased purchasing
power of households and cheaper production costs, as well as increased efforts in the collection of
other taxes.

‘This measure will give economic relief to the Filipino people and allow them to invest in food,
education and health which will ensure a healthy population and labor force, as well as a progressive
nation.

In view of the foregoing, approval of this bill s earnestly sought.

Approved,

Bayan Muna Party-list


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

2392

HOUSE BILL No.

Introduced by BAYAN MUNA
Rep. CARLOS ISAGANI T. ZARATE

AN ACT

CLASSIFYING THE SERVICES OF FRANCHISE GRANTEES OF WATER
UTILITIES, AND SALE OR IMPORTATION OF MACHINERY AND EQUIPMENT

DIRECTLY USED IN OPERATING, MAINTAINING, IMPROVING AND
EXPANDING DISTRIBUTION OF POTABLE WATER BY WATER UTILITIES AS

‘VALUE-ADDED TAX EXEMPT TRANSACTIONS, AMENDING FOR THE PURPOSE
SECTION 109 (1) OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED BY REPUBLIC ACT NO. 933, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congrss assembled:

SECTION 1, Section 109 (1) of the National Internal Revenue Code, as amended by
Republic Act No. 9337, is hereby further amended to tead as follows:

. 109, Exempt Transactions. - (1) Subject to the provisions of subsection (2)
hereof, the following transactions shall be exempt from the value-added tax:

(A) xxx
“B) xxx
“Xxx

“(U) xxx

“(V) SALES OF WATER UTILITIES;

“(W) SERVICES OF FRANCHISE GRANTEES OF WATER
UTILITH

“(X) SALE OR IMPORTATION OF MACHINERIES AND EQUIPMENT,
INCLUDING SPARE PARTS, TO BE DIRECTLY USED BY THE BUYER


OR IMPORTER HIMSELF IN THE OPERATING, MAINTAINING, IMPROVING
AND EXPANDING DISTRIBUTION OF POTABLE WATER BY WATER
UTILITIES.

SECTION 2. Repealing Clause, — All laws, presidential decrees, executive orders, presidential
proclamations, rules and regulations or parts thereof inconsistent with this Act are hereby repealed
or modified accordingly,

SECTION 3. Separability Clause. - If any provision of this Act is subsequently declared
unconstitutional, the validity of the remaining provisions hereof shall remain in full force and effect.

SECTION 4, Effectivity Clause. ~'This Act shall take effect immediately after its complete
publication cither in the Official Gazette or in a newspaper of general circulation in the Philippines.

Approve,