Philippines spirits tax appeal rejected

03 January, 2012

The European Union and the US Distilled Spirits Council (DISCUS) have welcomed a decision that finds the Philippines to be in breach of trade rules when it comes to tax on imported spirits.

The World Trade Organisation’s (WTO) final ruling found that the Philippines’ excise tax on distilled spirits is discriminatory and in violation of WTO rules. The Philippines introduced an appeal of previous findings in September 2011. The WTO's final ruling rejects this appeal. 

EU trade commissioner Karel De Gucht said: "The Appellate Body has confirmed that the excise tax regime in the Philippines is designed and applied to protect the domestic industry against the competition of imported spirits and violates the important principle of non-discrimination enshrined in the WTO agreements."

DISCUS president Peter Cressy said: “The Philippines’ excise tax system is a textbook case of discrimination against imported products.”

He pointed out that the Philippines levy a tax on imported spirits up to 43 times greater than on domestically-produced spirits.

“With a trade barrier of that magnitude, it is no wonder that US spirits have barely made a dent in the nearly $3.4 billion Philippines spirits market. We urge the Philippines to take immediate steps to bring its tax system into compliance with WTO rules and replace its current regime with a fair, non-discriminatory excise tax system,” Cressy added.

According to DISCUS, the decision represents the final stage before the WTO adopts the findings of the US government’s formal challenge of the Philippines’ discriminatory excise tax system for spirits. The US launched a formal challenge in January 2010. In August 2011, a WTO dispute settlement panel ruled that the Philippines’ excise tax regime violated fundamental WTO rules, which prohibit discriminatory treatment of imports. The most recent ruling by the WTO Appellate Body affirmed the panel’s ruling and rejected the Philippines’ appeal.

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