Tax problem comes at a bad time

WHILE Maynilad and Manila Water are spending hundreds of millions of pesos to cut down water losses, put up new sewerage systems and lay new pipes, their pass-on of their tax payments to the consumers comes at an inappropriate time. At a critical juncture in their capital expenditures, the two water concessionaires have to tackle a perception problem caused by that pass-on.

When Congress convenes next month, the House of Representatives, through Party-list Rep. Neri Javier Colmenares of Bayan Muna, and Liberal Party stalwart Sen. Ralph Recto are calling for inquiries into the state of affairs of the reported pass-on. From their public statements, Maynilad and Manila Water would have to devote their energies to battle the perception problem, and prospects do not look good because of the bad publicity the inquiries will generate.

“In other businesses, they are the ones who pay their taxes, but these water concessionaires are raking in billions by fooling us. They even pass [on] losses to consumers [because of] changes in foreign-exchange [forex] rates [that] are absorbed by the company as part of regular business risks. But, in this case, the concessionaires borrow from foreign creditors without any qualm, knowing that they are insulated from the risk ordinary borrowers take because they’re allowed to pass on their forex losses to their consumers. It is like having their cake and eating it, too,” Colmenares said. That shows a lot about the kind of sentiments percolating in Congress.


Government looks inward

THE government’s decision to source its borrowings locally would undoubtedly benefit the country’s banking system, which is so awash with cash that the extra funds are sometimes parked at the Bangko Sentral ng Pilipinas’s (BSP) special deposit accounts, which are meant to take away excess liquidity from the system.

With the decision to sell at least P30 billion worth of 10-year retail Treasury bonds, the government is signaling that there is enough room for it to tackle the volatility in the financial markets, which was recently roiled by US Federal Reserve Chairman Ben S. Bernanke’s upbeat statement on the US economy and the “Abenomics” of Japan.

Handling the bond float, set for July 13, are BDO Capital, BPI Capital, the Development Bank of the Philippines, the Land Bank of the Philippines, SB Capital and First Metro Investment, the underwriters for the bond issuance. The new debts come in as part of the BSP’s handling of the risks through credit, liquidity or capital, and with the nyet of BSP Governor Amando M. Tetangco Jr. on capital controls, the bond issuance is seen to rise in size with the take-ups from investors.