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NEWS UPDATES 30 July 2009

EU takes Philippines to WTO on ‘discriminatory’taxes

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The European Union (EU) formally lodged on Wednesday a complaint against the Philippines before the World Trade Organization (WTO) for imposing “discriminatory” excise taxes on distilled spirits, reported

The European Commission in Manila said in a statement that the EU requested consultations with the Philippines at the WTO, allegedly because the excise taxes in the country violate international trade rules.

“Imported spirits, including Spanish brandy and Scotch whisky, can face taxes 10 to 50 times higher than those on domestic products, and exports to the Philippines have fallen significantly as a result,” the statement said.

The EU has raised the issue repeatedly in recent years without success, and now hopes to use the WTO consultation process to arrive at a mutually satisfactory solution.

“This long-running problem has prevented EU exporters from competing fairly in the Philippine market and has led to a sharp decrease in imports of European spirits. I hope that we can still find an amicable solution to this issue through the consultation process,” EU Trade Commissioner Catherine Ashton said.

The EU is claiming that spirits produced from certain raw materials typically used domestically in the Philippines are taxed at a specific flat rate while other spirits, including most imported products, face a much higher tax.

Because of this, while sales of local spirits have grown by over 8 percent since 2005, overall sales of imported spirits have actually declined during the same period.

From 2004 to 2007, EU exports of spirits to the Philippines fell from around 37 million euro to 18 million euro.

“This taxation regime has prevented EU exporters from fully participating in the Philippine market for alcoholic beverages, which has seen steady growth in recent years,” the EU added.

Bilateral consultations give WTO members the opportunity to discuss the matter and find a satisfactory solution without resorting to litigation. If these consultations fail to reach a satisfactory solution within 60 days after the receipt of the request for consultations, the complaining party may request the establishment of a WTO panel.

Republic Act 8240 adopted by the Philippines in November 1996 placed a lower flat rate of excise tax on spirits produced from various sources, including the sap of palms such as nipa, coconut and buri, or the juice, sugar or syrup of cane. These are raw materials typically used domestically in the Philippines.

Other spirits, which include most imported alcoholic products, are subject to a system of price bands at substantially higher taxes.

In 2004, the Philippines introduced further legislation which established an increase of the excise tax rates by 30 percent for primarily locally produced spirits and  by 50 percent for most types of imported spirits.


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