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16 December 2009
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Philippines keen to settle liquor tax issue with EU

The Philippines is seeking talks with the European Union to dissuade it from pursuing its plea for the World Trade Organization (WTO) to rule on their dispute over local liquor taxes, a Trade official said on Tuesday, reported online daily GMANews.TV.

The EU, for its part, said it was open to a dialogue before deciding whether to press its request for the WTO to form a panel. EU has already asked the international organization to appoint judges who will decide whether Philippine tax policy indeed unfairly discriminates against imported liquor.

Manila opposed the creation of the panel, thus preventing one to be formed as provided by dispute procedure rules. However, it can no longer do so if the EU asks for a panel a second time.

"Yes [we’re seeking talks in the meantime]," Trade Senior Undersecretary Thomas G. Aquino said in a text message late on Sunday. "It’s an allowed procedure if only to allow both parties to be certain of their positions or reasses and modify [stances] if warranted."

Sought for comment, the head of the European Commission’s delegation to Manila said they welcomed such talks. "The EU remains open to a dialogue with the Philippines on this issue. EU would even be ready to consider suspending dispute settlement procedures at any time if the Philippines were to take concrete steps to remedy this longstanding discrimination against EU exporters," Ambassador Alistair MacDonald said via e-mail.

He noted however that "the Philippines has failed to take any such steps to date," arguing that the tax policy has "serious economic implications" for the EU industry.

MacDonald claimed that imported spirits account for only 2 percent of Philippine consumption, when the average in similar markets is 15 percent.

A measure that seeks to impose a uniform tax rate on alcoholic beverages, regardless of origin, has been pending with the House of Representatives ways and means committee. It will likely be shelved, as legislators focus on passing the budget in the remaining few weeks of their term, House Majority Leader Rep. Arthur D. Defensor, Sr. of Iloilo said earlier.

The EU had hit the current tax policy under Republic Act 9334 for unfairly raising excise tax rates by 50 percent for imported spirits, compared to 30 percent for local spirits.

The Philippines argued that this difference should not affect sale of imported spirits as they cater to a market separate from those served by local alcohol producers.


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