WTO to back EU, US on Philippines spirits tax

WTO to back EU, US on Philippines spirits tax

The World Trade Organisation is believed to have sided with the US and EU over their claims of an illegal tax on imported spirits in the Philippines.

The official ruling from the World Trade Organisation (WTO) dispute settlement panel remains confidential, but just-drinks understands from sources familiar with the situation that the US and EU have emerged victorious. As a result, the WTO is set to call on the Philippines to reduce tax on imported spirits.

If confirmed, victory in the dispute could help spirits producers across Europe and the US gain greater access to the Philippines market and, in many cases, rebuild positions lost.

Annual spirits exports to the Philippines from the EU fell by 50% to EUR18m (US$25.7m) between 2004 and 2007, following the introduction of new tax rules favouring locally-produced alcohol, according to European Commission figures.

The EU and US launched separate complaints at the WTO against the Philippines, but, in April 2010, the WTO combined these into one case. Tax on imported spirits, the EU and US argued, could be up to 50% higher than on domestic products.

Brandy de Jerez from Spain stands to gain most from a reduction in tax, due to its popularity with local consumers. Scotch whisky distillers could also profit, having seen exports to the Philippines tumble by 80% between 2003 and 2008 to just GBP3m (US$4.8m) in '08, according to Scotch Whisky Association figures.

US spirits exports to the Philippines, meanwhile, were valued at $671,000 in calendar 2008, according to trade body the US Distilled Spirits Council.

Trade bodies on both sides of the Atlantic have strongly supported action against the Philippines. The European Spirits Organisation, CEPS, said in its annual review, published this month, that it "is hopeful that the [WTO] Panel will trigger a satisfactory resolution to this longstanding request for a level playing field".