SC rules MWSS is exempt from real property taxes


By Rey Panaligan

The Supreme Court (SC) has barred the Quezon City government from selling the real properties and facilities of the Metropolitan Waterworks and Sewerage System (MWSS) for non-payment of P237.1 million in real property taxes.

“All the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the local government of Quezon City on the real properties of the Metropolitan Waterworks and Sewerage System located in Quezon City are declared void, except for the portions that are alleged and proven to have been leased to private parties,” the SC ruled.

The properties of MWSS such as pipelines, reservoirs, and aqueducts would have been auctioned off by the Quezon City government on Sept. 27, 2007 but the sale did not push through when the Court of Appeals (CA) issued a temporary restraining order (TRO).

When the CA ruled against the MWSS, the water agency elevated the case before the SC which issued a TRO in 2011 that stopped the enforcement of the CA decision.

In a decision written by Associate Justice Marvic Mario Victor F. Leonen, the SC reversed the 2010 CA ruling which held that MWSS was not performing a purely governmental function and, thus, it cannot invoke immunity from the payment of real property taxes.

The CA also ruled that the properties of MWSS subject to tax are not part of public dominion and were even placed in concession agreements with its privatization in 1997.

Thus, the CA said that since the properties were held by MWSS as part of its proprietary function, they are subject to real property taxes.

In reversing the CA, the SC noted the acts of both the Executive and Legislative branches of government which had declared the MWSS not as a government owned and controlled corporation but as a government instrumentality with corporate powers.

It cited Executive Order No. 596 issued by then President Gloria Macapagal Arroyo as a result of the SC’s decision in the case of the Manila International Airport Authority (MIAA) vs. the Paranaque City government.

In the MIAA case, the SC had declared the airport authority exempt from real property taxes being a government instrumentality vested with corporate powers to perform governmental functions.

The SC said EO 596 recognized the categorization of government instrumentalities vested with corporate powers, one of them the MWSS.

It also pointed out that in 2011, Republic Act No. 10149, the Government Owned and Controlled Corporations Governance Act of 2011, was passed. RA 10149, it said, listed MWSS as one of several government agencies exempt from the payment of real property taxes.

Thus, MWSS is not liable to pay real property taxes unless the beneficial use of its properties has been extended to a taxable person or entity, the SC stressed.