Japan has joined the ranks of countries that deem Philippine taxes on foreign carriers as discriminatory, records from a March trade policy review at the World Trade Organization (WTO) show.
The issue was raised alongside trade and investment concerns that were echoed by other countries in a compilation of questions and answers gathered by the WTO secretariat.
Japan, which pointed to the Philippines’ 3% common carriers tax (CCT) and 2.5% gross Philippine billings tax (GPBT), was quoted as saying: “Japan considers that these tax systems which only apply to foreign international ship carriers might be inconsistent with the principle of the national treatment of GATS (General Agreement on Trade in Services).”
“Japan would like to know the view of the Philippines on its GATS commitment,” it added.
The national treatment provision of the GATS, of which the Philippines is signatory, prohibits policies that favor domestic service providers over foreign companies.
A Philippine response was not available on the transcript, which only read “reply to follow.”
Sought for comment, Trade Undersecretary Adrian S. Cristobal, Jr. told BusinessWorld that the issue was not expected to affect relations with Japan or the implementation of a bilateral trade agreement. Other countries similarly raised the issue, he noted.
“Any issue may be raised during policy reviews. It does not necessarily mean that these countries will file disputes,” Mr. Cristobal said, adding: “We leave it to the legislators.”
Aside from Japan, Indonesia also sent in a question on whether the Philippines was looking to “harmonize” its CCT and GPBT with measures of other countries.
Local and foreign business groups claim that the Philippines is the only country that imposes a CCT. The matter has led to KLM Royal Dutch Airlines’ ending direct flights from Manila to Amsterdam last month.
Congress has moved to address the issue, with the House of Representatives in March approving on second reading House Bill 6022, which seeks to repeal the CCT and drop the GPBT if the foreign carriers’ home countries agree to withdraw counterpart taxes.
A similar measure in the Senate remains at the committee level.
Japan, along with other WTO members, also sent in questions on the Philippines’ plans to open government procurement to foreign suppliers, eliminate or ease foreign equity limits on construction companies and public utilities, and liberalize the banking sector.
The Philippines, in the transcript, promised to review the concerns but also noted that “the Constitution enshrines Filipino preference.”
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By: K. A. M. Patria
Source: BusinessWorld, May 8, 2012
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