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A REPORT declaring Philippine taxes on liquor imports as discriminatory has finally been issued by the World Trade Organization (WTO), prompting the complainants — the United States and the European Union — to call for immediate reforms even as Manila said it would appeal.
A widely expected panel report released on Monday upheld the claim that Philippine taxes on foreign brands such as Jack Daniels and Brandy de Jerez — involving rates up to 40 times more than those for products made from local materials such coconut — violated global trade rules.
Manila has 60 days from the report’s release to plead for a reversal. The decision, to be made by another panel, could take as long as 90 days from the date of the appeal’s filing. It will also have to be ratified by the entire WTO.
But while the process still has some ways to go, an initial panel ruling is normally upheld, as was the case earlier this year when the Philippines won a cigarette tax dispute versus Thailand.
“We are thoroughly reviewing the WTO report while at the same time working closely with our relevant stakeholders to present a strong case in the appeal process,” Adrian S. Cristobal, Jr., undersecretary for international trade, yesterday said in a statement.
The Office of the Solicitor General, supported by Trade and Finance departments, will be working with the Distilled Spirits Association of the Philippines (DSAP) in building the appeal.
The DSAP, in a separate statement, claimed the same rates were applied across the board and that the US and EU’s claim of lost exports could also be attributed to continued global uncertainties.
“The decline in US and EU exports to the Philippines cannot be attributed to our taxation system but is due to many factors such as sluggish economy, low purchasing power, inflation, etc. Even domestic spirits have experienced lower consumption this year,” DSAP President Olivia Limpe-Aw said.
The US and the EU, for their part, called on the Philippines to quickly comply.
“We urge the Philippine government to comply swiftly with the panel’s recommendations and rulings, and level the playing field for our exports immediately,” US Trade Representative Ron Kirk said in a statement.
EU spokesman John Clancy also pressed the Philippines to end the discriminatory tax system “without further ado.”
The European Union and United States are the world’s No. 1 and No. 2 exporters of distilled spirits but have been all but shut out of the Philippines, described as one of the largest markets for alcohol in the Asia-Pacific region.
The victory is expected to help US producers like Brown-Forman and Fortune Brands break into what is said to be a $3.4-billion Philippine spirits market.
Brown-Forman, based in Louisville, Kentucky, owns the Jack Daniel’s brand, and Fortune Brands, in Deerfield Illinois, produces Jim Beam whiskey.
Brandy de Jerez, meanwhile, is a grape brandy from the area around Jerez de la Frontera in Andalusia, Spain and is a protected designation that includes its traditional method of production.
The WTO panel, in its report, pointed out that both foreign and local distilled spirits had the same physical qualities and overlapping market, hence the difference in taxes was excessive and discriminatory.
“With respect to physical qualities and characteristics — color, flavor, and aroma — on the basis of the evidence before us, we conclude that there is no difference between imported and domestic Philippine distilled spirits, nor between distilled spirits made from the designated materials and those made from other materials,” the report states.
“The end uses of each distilled spirit, and the manner in which each is drunk, does not depend on the origin of the spirit (domestic or imported), nor on the raw materials used in its production,” it added.
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By: E. J. Diaz and Reuters
Source: Business World, Aug. 16, 2011
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