British Ambassador to Manila Stephen Lillie has urged the Philippines to promptly comply with the decision of the World Trade Organization (WTO) that declared the current taxes on imported spirits as excessive and discriminatory.
“I hope the Philippine government will take immediate steps to achieve strict compliance with WTO rules, which I believe is consistent with President Aquino’s stated wish to make the Philippines a more business-friendly environment,” Lillie said in a statement on Thursday.
Earlier, however, Undersecretary for International Trade Adrian S. Cristobal Jr. said the Philippines will appeal the decision.
He was quoted as having said the government was thoroughly reviewing the WTO report to present a strong case in the appeal process.
Derek Page, director of UK Trade and Investment in Manila, said a more simple and nondiscriminatory tax structure with a reasonable rate will not only present opportunities for international spirits, but also help grow tax revenue for the government and reduce nontax paid alcohol.
“Overall, this result will benefit the entire industry both local and international, as well as the government and consumers,” said Page.
European exporters of liquor complained they suffered a steady decline in sales due to the tax differential being imposed by the Philippine government. They said that between 2004 and 2007, European Union (EU) exports of spirits to the Philippines have more than halved—from around €37 million to €18 million.
The EU sought consultations with the WTO in July 2009 on the “discriminatory excise taxation regime” on distilled spirits in the Philippines.
The tax rules impose different treatments, according to the raw materials used in the production of the distilled spirits. Domestically produced spirits are subject to a flat specific rate; virtually all imported spirits are subject to a system of price bands at substantially higher taxes.
Tax rates applied to imported products are from 10 to almost 50 times higher than those applied to domestic spirits, depending on the net retail price of the imported product. The EU said the rules violate Article III: 2 of the General Agreements on Tariff and Trade.
As part of the corrective measures, the Department of Finance submitted in 2009 a draft bill to Congress to redress the situation. This, however, was not acted upon.
In October 2009 WTO consultations in Manila confirmed the inconsistency of the Philippines’s tax rules on imported liquor prompting the EU to seek the help of the WTO’s dispute-settlement panel. The US filed a similar case against the Philippines in March 2010.
