United States Trade Representative, Ron Kirk, has announced that the US has requested World Trade Organization (WTO) dispute settlement consultations with the Philippines regarding the latter’s excise taxes on imported distilled spirits, such as whisky and gin.
As the Philippines taxes imported distilled spirits at significantly higher rates than domestic distilled spirits, Kirk said: "We are going to the WTO because we want to ensure that US producers have access to their markets overseas." He urged “the Philippine government to eliminate that discrepancy and level the playing field for our exports immediately."
WTO rules generally bar WTO members from discriminating between imported and domestic products in their tax regimes. It was confirmed that the US government has raised concerns over this issue with the Philippines over the past several years, both bilaterally and in WTO forums.
In addition, after the European Union (EU) requested WTO dispute settlement consultations on these taxes in July 2009, the US joined these consultations and participated in meetings between the EU and the Philippines in October 2009. After there had been no resolution of its dispute, the EU requested the establishment of a WTO panel last month. It has been reported that the EU is considering a renewal of that request, given that the problem remains.
It was explained that the Philippines applies tax rates to distilled spirits that differ depending on the product from which the spirit is distilled. The Philippines taxes distilled spirits made from certain materials that are typically produced in the Philippines at a low rate. Imported distilled spirits are taxed at significantly higher rates (from approximately 10 to 40 times higher) than the low rate applied to domestic products.
In the Philippines, producers use domestic materials, such as sugar and palm, to create a variety of different distilled spirits, including whisky, brandy, gin, vodka, and tequila. These distilled spirits compete with US and EU imports of the same spirits made from other materials (such as whisky distilled from wheat).
According to US figures, since 2003, imports – including US products – never exceeded 5% of the total sales of spirits in the Philippine market. The US distilled spirits industry contributed to more than USD113bn of US economic activity and over 1.2m jobs in 2007.
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