Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

256

HOUSE BILL No.

Introduced by
BAYAN MUNA Party-List Representatives EUFEMIA C. CULLAMAT,
CARLOS ISAGANI T. ZARATE, and FERDINAND R. GAITE

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 seeks to exempt water services from value-added tax (VAT), 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/cubic 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/cubic 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.


‘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, as clearly shown in the first quarter of 2019
when residents under the Manila Water concession area suffered not only longer water interruption
services but, worse, there was no water at all for several days.

Exempting water services from VAT 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 immediate 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.

It was first filed by Bayan Muna Party-List during the 15 Congress and was refiled in the
succeeding Congresses.

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

Approved,

oat

REP. EUFEMIA C. CULLAMAT
BAYAN MUNA Party-List

ra '
\

REP. CARLOS Doar T. ZARATE ~ FERDINAND R. GAITE
BAYAN MUNA Party-List BAYAN MUNA Party-List


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No.

Introduced by
BAYAN MUNA Party-List Representatives EUFEMIA C. CULLAMAT,
CARLOS ISAGANI T. ZARATE, and FERDINAND R. GAITE

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 a

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 Congress
assembled:

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

“SEC. 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
UTILITIES;


“(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
nconstitutional, 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 either in the Official Gazette or in a newspaper of general circulation in the
Philippines.

Approved,