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NEWS UPDATES Asean Affairs                      17  August 2011

Philippines appeals WTO spirits ruling

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The Philippines Department of Trade and Industry on Tuesday said it will appeal a World Trade Organization ruling that rendered illegal the taxes and duties the Philippines levies on alcoholic drinks from the US and the European Union.

The WTO panel report circulated on August 15 showed that the excise tax applied on distilled spirits in the Philippines discriminates against imported spirits and is therefore in violation of the principle of non-discrimination enshrined in the General Agreement on Tariffs and Trade.

Designed to help domestic distilled alcohol producers who use local cane and palm sugar, the excise tax unfairly disadvantaged imported hard liquor, the WTO said.

The complaints from the US and the European Communities argued that because the Filipino products were marketed as whiskey, gin, vodka, and tequila just like the foreign products, they should be taxed at the same rate, even though they are made from different materials.

Manila argued however that the base materials used in distilling were different, making the products different.

“Because imported spirits are taxed less favorably than domestic spirits, the Philippine measure, while facially neutral, is nevertheless discriminatory,” the Geneva-based WTO said in its ruling.

The European complaint had said that the tax had helped limit foreign products to just 2.5 percent of the domestic market, which it called “rather oligopolistic,” controlled by three large Filipino groups.

“Today’s ruling demonstrates the commitment of the United States to combat trade barriers wherever they occur,” said US Trade Representative Ron Kirk in a statement.

In a separate statement, John Clancy, EU Trade spokesman said the panel report confirms the discriminatory nature of Philippine taxes on foreign wines and spirits.

“In light of the clear findings of the panel, we hope the Philippines will take the necessary steps to remedy this longstanding situation without further ado,” Clancy said.

The EU said the taxes applied on imported distilled spirits are 10 to 50 times higher than those applied on spirits manufactured in the Philippines.

From 2004 to 2007, EU exports of spirits to the Philippines had more than halved from around +37 million to +18 million due to the excise tax regime.

Earlier, the Distilled Spirits Association of the Philippines said the imported alcoholic drinks have an adverse pact on local manufacturers, allied industries, the Filipino consumers and the economy in general.

DTI Secretary Gregory Domingo said the agency will consider the recommendations of the industry on the appeal.

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