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WTO Again Strikes Down Philippine Taxes on Distilled Spirits

Friday, December 23, 2011
Sandler, Travis & Rosenberg Trade Report

The World Trade Organization Appellate Body has upheld a dispute settlement panel ruling against excise taxes the Philippines imposes on imported distilled spirits such as whiskey, brandy, gin, vodka and tequila, the Office of the U.S. Trade Representative announced Dec. 21. This case centered on the fact that distilled spirits made from certain materials typically produced in the Philippines, such as cane sugar and palm, are taxed at a low rate while distilled spirits made from other materials used more often by foreign producers, like wheat, are taxed at rates approximately 10 to 40 times higher. The Appellate Body affirmed that this scheme is contrary to WTO rules, which generally prohibit member countries from discriminating between imported and domestic products in their tax regimes.

According to the Distilled Spirits Council of the U.S., distilled spirits exports from the U.S. to the Philippines were valued at just $997,000 in 2010 and declined 28% in the first nine months of 2011 compared to the same period in 2010. By contrast, U.S. spirits exports worldwide exceeded $1 billion in 2010 for the fourth consecutive year and were up nearly 17% for the first ten months of 2011.

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