Press Release
May 4, 2015

Senate oks bills for condonation of unpaid taxes due from water districts, Armed Forces of the Filipino People's Week

A bill removing the conditions for the condonation of unpaid taxes due from local water districts has been approved by the Senate on third and final reading today.

Senator Sonny Angara, chairman of the Senate Committee on Ways and Means and sponsor of Senate Bill No. 2518, said the proposed legislation seeks to facilitate the growth and expansion of local water districts (LWDs) by removing the conditions imposed by the Bureau of National Revenue on the condonation of unpaid taxes due from the LWDs.

Senate President Franklin M. Drilon said that the bill primarily intends "to help local water districts reach and provide service to more and more Filipinos around the country, by unburdening them of needlessly laborious bureaucratic requirements." SBN 2518 replaced House Bill No. 3675 authored by Representatives Romero Federico Federico "Miro" Quimbo, Christopher Co, Emi Calixto-Rubiano and Rodel Batocabe, taking into consideration Senate Bill No. 612, authored by Senate President Pro Tempore Ralph Recto, Angara and Senator Cynthia Villar.

Angara said LWDs were created when Presidential Decree No. 18, known as the "Provincial Water Utilities Act of 1973," was enacted into law on May 25, 1973 to ensure that Filipinos in the countryside had access to safe and potable water.

To date, the country has a total of 514 local water districts, serving 19 million residents across the country.

"The unique role of water districts has long been recognized by Congress. From being classified as quasi-corporations, local water districts are now considered as government owned and controlled corporations (GOCCs)," Angara said in his sponsorship speech.

Like any other public utilities of similar nature such as the Metropolitan Waterworks and Sewerage System (MWSS) and the National Power Corporation (NAPOCOR), Angara said, LWDs were exempted from paying taxes when Republic Act No. 10026, known as "an Act Granting Income Tax Exemptions to Local Water Districts," was signed into law in March 2010.

Republic Act 10026, Angara clarified, did not merely provide an income tax exemption but also for the condonation of all unpaid income taxes of water districts from August 13, 1996 up to the effectivity of this law subject to certain conditions: first,that the Bureau of Internal Revenue (BIR) establishes the financial incapacity of the concerned local water district to meet such obligations for the period stated therein; and second, that the water district availing of such condonation shall submit to congress a program of internal reforms.

"It is most unfortunate that the noble intention of RA 10026 is being defeated by the non-issuance of the requisite revenue regulations by the Bureau of Internal Revenue (BIR). Even though the law was passed in March 2010, or almost five years ago, the BIR has yet to issue the revenue regulations to implement RA 10026," Angara said.

Instead of issuing the required revenue regulations, the BIR issued Revenue Memorandum Circular (RMC) 68-2012, which outlined the procedure, and the documentary requirements for the application for condonation.

Angara noted that even though concerned water districts diligently complied with the RMC, the committee found out that not a single application for condonation of the 78 LWDs, amounting to around P842 million of unpaid taxes, has been acted upon by the BIR due to the absence of a revenue regulation.

For his part, Recto called the proposed measure "an excellent piece of legislation, because taxes foregone will be returned to consumers, by making services better, broader and bigger."

He explained that the foregone taxes can be also used to "finance improvements, like new wells and fresh sources, new pipes and modern meters to end leaks, and even computers to plug leakages of the monetary kind."

"The main intent of the proposed measure in removing the condonation requirements is to help water districts consolidate their scarce resources and channel them into capital development, expansion of water coverage, and provision of high quality yet affordable potable water. This automatic condonation will benefit not only those who are unable to pay said tax liabilities, but all local water districts since the legislative intent behind the enactment of RA 10026 will finally be given due course," Angara concluded.

Meanwhile, the Senate has passed on third and final reading a bill which seeks to declare the last full week of august as the Armed Forces of the Filipino People Week. House Bill No. 947, known as the Armed Forces of the Filipino People Week, was introduced by Representatives Francisco Ashley Acedillo and Gary Alejano.

Senator Antonio "Sonny" Trillanes IV, chair of the Senate Committee of National Defense and Security and sponsor of HBN 947, said the nation shall "honor, remember and recognize the military personnel - the men and women who have served our nation throughout our country's history and particularly those who are on "active duty" in all branches of the military service, as well as our retirees, vetarans and their families" during Armed Forces Week.

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