MANILA, Philippines – The Department of Finance (DoF) is asking Congress to repeal the law that grants exemption of the local water districts (LWDs) from income tax and condoning their deficiency income tax assessments.

In an obtained document, the finance department said LWDs, as government-owned and controlled corporations, should operate just like private enterprises whose viability is not dependent on government subsidy like the grant of tax exemptions.

“It is already enough that LWDs have enjoyed tax and duty exemption privileges in the past under Presidential Decree 198 and again, under Republic Act 7109,” the DoF said.

“If, as they claim, they are experiencing financial difficulties now, the provisions of the Tax Code on net operating loss carry-over and compromise of tax warranted by one's financial position are deemed sufficient to address their problem,” the agency added.

The finance department has estimated that the government's potential revenue from the repeal of the law would amount to P830 million.

The DoF also said that the condonation of all unpaid taxes of LWDs to the national government weakens the government's policy in instilling financial discipline in GOCCs and deprives government of a legitimate source of revenue.

Based on Bureau of Internal Revenue data, the total assessed taxes from various LWDs for the years 2006, 2007 and January to August, 2008 amounted to P321.6 million of which P224.28 million account for income tax.

Senate Bill 3392 and House Bill 5210 lapsed into law on March 11, 2010 as republic act and amended the tax code by providing the exemption of LWDs from income tax and condoning their past year's deficiency income tax assessments.