by. Joel San Juan 02/01/2012

Solicitor General Jose Anselmo Cadiz said the consultation is necessary to assure stakeholders that their interest would be protected in the implementation of new tax laws in compliance with the WTO treaty provisions.

The WTO Dispute Settlement Panel ruled in August 2011 that the Philippines’s excise-tax system violated fundamental WTO rules which prohibit discriminatory treatment of imported spirits.

Earlier, the European Union and the United States claimed that the Philippines’s excise tax on distilled spirits violates its obligations under Article III-2, first and second sentences of General Agreement on Tariffs and Trade (GATT) 1994.

Working closely with the Distilled Spirits Association of the Philippines (DSAP), the Philippine government appealed the panel’s ruling but the WTO Appellate Body rejected in December 2011 the appeal with finality and ruled that the Philippine excise tax on imported distilled spirits is discriminatory and in violation of WTO treaty provisions.

Olivia Limpe-aw, president of the DSAP, said the government should comply but should minimize the negative effects of the WTO ruling on the industries.

Limpe-aw reiterated DSAP’s position against proposed measures restructuring the existing excise tax to unitary rate.

“Under unitary, they’re bringing down the tax rate on the imported spirits and they’re jacking up ours by almost double. That for me will spell the death of the industry,” Limpe-aw said.

“A one-peso increase in the retail price is a very big impact on the demand for product because it’s not a question of they want to, but a question of can they afford it? And we have numerous studies on price elasticity in relation to demand. Whatever we do, we should go for the minimum damage to the industry,” she added.

But Cadiz acknowledged that the Philippine government has an obligation to bring its tax system into compliance with WTO rules not only because it is a member of good standing but it also has a mandate to protect the interest of the local distilled spirits and sugar industries.

“We must, in complying with the WTO treaty provisions, also take into consideration the view and inputs of the Philippine in this case and that is why we must strike a balance between our obligations as a member of good standing of the WTO and not lose over the interest of Philippine nationals,” he said.

Cadiz made known the government’s plan to conduct consultations with stakeholders during his appearance before the House committee on way and means tackling the issue.

Rep. Isidro Ungab (3rd District, Davao City), committee chairman, said they will invite those in the distilled spirits and sugar industries to get their inputs on how to mitigate the negative effects of the WTO ruling.

Reps. Tomas Apacible (1st District, Batangas) and Jocelyn Limkaichong (1st District, Negros Oriental) agreed that the affected sectors must be invited to hear their views on the WTO ruling.

Both Apacible and Limkaichong came from provinces producing sugar and molasses which are raw materials in distilled spirits.

Cadiz earlier admitted that the survival of the Philippine industry of distilled spirits, which generates P50 billion a year, as well as the employment of thousand of Filipinos, is at stake.

Source: Business Mirror