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Saturday, February 04, 2006
MCWD to pass franchise tax to consumers
Taxes will cause water rates in Metro Cebu to rise starting this month, even as the country’s top bishop urged the government to rethink the Reformed Value-Added Tax (R-VAT) Law and spare consumers an added burden.
“At face value, it is really putting more obligations on the part of the citizens,” said Catholic Bishops Conference of the Philippines (CBCP) president Angel Lagdameo. He urged lawmakers to reevaluate the pros and cons of the R-VAT, with the majority’s welfare in mind.
While R-VAT per se was not discussed during the first CBCP meeting for 2006, poverty was among the issues highlighted in the CBCP pastoral letter released last Jan. 29.
“Poverty remains the heaviest burden our people bear,” read the pastoral letter. It added: “We witness the anguish of poor farmers affected by rising prices of farm inputs and decreasing prices of their products.”
Cebu Archbishop Ricardo Cardinal Vidal was among those who asked for the repeal of the R-VAT law. “Basic goods will become expensive and I pity those who do not have money,” the cardinal earlier said.
Obligations
“I agree with Cardinal Vidal that this rule or legislation should really be examined and evaluated. If it puts great obligations on the citizens, then it should be probably be changed,” Archbishop Lagdameo said yesterday.
The prices of cooking gas and fuel went up last Wednesday, the first day of a two percent increase in the VAT rate. When the law first took effect last year, it expanded VAT’s coverage to include petroleum products, power and medical fees.
Finance Secretary Margarito Teves has said the administration needs to reduce the fiscal deficit to P125 billion this year, from the programmed P180 billion last year, hence the need for the 12 percent VAT rate, instead of 10 percent.
A different type of tax will cause water rates to go up.
The Metropolitan Cebu Water District (MCWD) will pass on to its consumers a two percent franchise tax, and the bills for January will already reflect this, an MCWD press release stated.
To compute for the tax, consumers will have to add their gross water fee and the power cost adjustment (PCA) charge, and multiply the sum by two percent.
Demand
The Bureau of Internal Revenue (BIR) issued a demand and assessment letter to the water district, citing the Tax Reform Act of 1997.
Section 119 states that water utilities are subject to pay a two percent franchise tax to the National Government, based on the gross receipts derived from the business.
“In this regard, the management of MCWD, through its board of directors, decided to implement the BIR regulation imposing the two percent franchise tax,” the press release read.
Terry Andaya, MCWD public information officer, said the water district board decided to also tax the PCA, apart from the gross water consumption of their customers.
Edgar Donoso, MCWD’s officer-in-charge for finance, said the law states that the water district can base the tax due on the gross receipts, but the board decided to limit charges to the gross fees and the PCA.
“We feel it’s reasonable and fair to our consumers,” he said yesterday.
Late charges and other penalties reflected on the water bill are excluded from the tax.
Lower rate
The PCA charge was unbundled from gross fees on account of fluctuations in the power rates of the Visayan Electric Co., Donoso explained.
Once the power rate goes up, the PCA charge imposed on MCWD also rises.
Donoso said they hope to source power directly from the National Power Corp. and get it at a much lower rate, so the PCA charge to MCWD consumers will also go down.
MCWD, a government-owned and -controlled corporation, will remit the franchise taxes collected from consumers to the BIR.
As per BIR’s assessment, MCWD still has franchise tax dues from 1996 to 2005. However, the water district’s management is negotiating with the BIR to pay the liability on installment. (CYR/JGA)
For Bisaya stories from Cebu. Click here. (February 4, 2006 issue)
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