Manila expected to lose imported liquor tax case

The Philippines is expected to lose a case filed by the European Union (EU) over Manila’s alleged discriminatory taxation on imported liquor, officials said on Monday. Similar disputes submitted by South Korea, Japan, and Chile at the World Trade Organization (WTO) against the EU have lost, the Trade Department’s assistant secretary Jose Antonio Buencamino said. As a result, the Philippines may only end up spending a lot of money only to lose in the end, the Finance Department’s fiscal planning director Teresa Habitan said. Tokyo, Seoul, and Santiago launched a strong and even a well-funded counter case at the global trade body but later lost, Habitan said, adding that the Department of Finance does not have the budget for such expenses. Trade Undersecretary Thomas Aquino has informed the House ways and means committee that the case could involve millions in litigation costs since the government will have to hire international trade lawyers who will be paid in dollars or euros. However, the government may be put in a bind since the legal costs are excluded from the country’s national budget, he said. “But they [Congress, Department of Finance] know somebody has to pay," Aquino said in an interview. Habitan said the solution involves changing the current arrangement to a single uniform excise tax system for “sin products" through legislation. Congress should already enact the long-sought changes to the sin tax law this year to keep the pressure off from the WTO and the EU. In the meantime, local distillers have sought government approval to allot funds for the trade dispute’s litigation costs. The government should shoulder the cost of prolonged litigation to ensure that the case is won, Olivia Lim-Aw, a spokesperson of Philippine distillers said. “Earmarking a little of the P4 billion in our excise payments would just be fair," she said. “It’s the Republic of the Philippines being sued not us. We must allocate funds for this purpose." This sentiment was shared by House ways and means chair Rep. Exequiel Javier who said that the DOF should take care of the legal expense. In an earlier hearing, Buencamino warned that the case filed at the WTO may drag on for 15 months and that the EU may cut its purchase of Philippine-made goods such as canned tuna and electronics products. [See related story here.] In 2008, some $8.5 billion worth of locally-made goods were sold to the EU. Of this figure, $5.85 billion were electronics products while $163.25 were canned tuna exports. - GMANews.TV