. /.   WORLD TRADE  
ORGANIZATION  WT/DS403/4 
29 March 2010 
 
 (10-1710) 
 Original:   English 
  
 
PHILIPPINES – TAXES ON DISTILLED SPIRITS 
 
Request for the Establishment of  a Panel by the United States
 
  
 The following communication, dated 26 March 2010, from the delegation of the United States 
to the Chairman of the Dispute Settlement Body, is  circulated pursuant to Article 6.2 of the DSU. 
 
_______________ 
  
 On 14 January 2010, the United States request ed consultations with the Philippines pursuant 
to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes  
("DSU") and Article XXII of the General Agreement on Tariffs and Trade 1994  ("GATT 1994") with 
regard to the taxation of distilled spirits by the Philippines (WT/DS403/1).  Consultations were held 
on 23 February 2010, but have failed to resolve the dispute. 
 
 The Philippines taxes distilled spirits at rat es that differ depending on the product from which 
the spirit is distilled.  Distilled spirits produced from certain materials that are typically produced in 
the Philippines are taxed at a low rate.  Other distille d spirits are taxed at significantly higher rates (for 
example at a rate that is approximately from 10 to 40 times higher than the rate for the domestic 
product).  The tax rate also depends on whether the product from which the spirit is distilled is 
produced commercially in the country where it is pr ocessed into distilled spirits.  The Philippine taxes 
on distilled spirits do not appear to tax importe d distilled spirits and directly competitive or 
substitutable domestic distilled spirits similarly.  The taxes appear to be applie d in a way that affords 
protection to domestic production.  In addition, the taxes appear to subject imported distilled spirits to 
internal taxes in excess of those applied to like domestic products.  
 
 The United States understands that the instrume nts reflecting the Philippine measures include: 
 
– Section 141 of the National Internal Revenue Code of 1997  (Republic Act No. 8424, 
an Act amending the National Internal R evenue Code as amen ded and for other 
purposes , as subsequently amended, particular ly by Republic Act No. 9334, an Act 
increasing the excise tax rates imposed on alcohol and tobacco products, amending 
for the purpose Sections 131, 141, 142, 143, 144, 145 and 288 of the National 
Internal Revenue Code of 1997, as amended ); 
 
– Republic Act No. 8240, an Act amending Sections 138, 139, 140 and 142 of the 
National Internal Revenue Code, as amended and for other purposes ; 
 
– Revenue Regulations No.  02-97, Governing Excise Taxation on Distilled Spirits, 
Wines and Fermented Liquors ;  
 
– Revenue Regulations No. 17-99, Implemen ting Sections 141, 142, 143 and 145(A) WT/DS403/4 
Page 2  
 
  and (C) (1),( 2), (3) and (4) of the National In ternal Revenue Code of 1997 relative to 
the Increase of the Excise Tax on Distille d Spirits, Wines, Fermented Liquors and 
Cigars and Cigarettes Packed by Machine by Twelve Per Cent (12%) on 
1 January 2000 ; 
 
– Revenue Regulations No. 9-2003, Ame nding Certain Provisions of Revenue 
Regulations No. 1-97 and Revenue Regula tions No. 2-97 Relative to the Excise 
Taxation of Alcohol Products, Cigars and Cigarettes for the Purpose of Prescribing 
the Rules and Procedures To Be Observed in the Establis hment of the Current Net 
Retail Price of New Brands and Variants of New Brands of Alcohol and Tobacco 
Products ; 
 
– Revenue Regulations No. 23-2003, Implemen ting the Revised Tax Classification of 
New Brands of Alcohol Products and Variants Thereof Based on the Current Net 
Retail Prices Thereof as Determined in  the Survey Conducted Pursuant to Revenue 
Regulations No. 9-2003 ; 
 
– Revenue Regulations No. 12-2004, Providi ng for the Revised Tax Rates on Alcohol 
and Tobacco Products introduced on or before December 31, 1996, and for those 
Alcohol and Tobacco Products Covered by  Revenue Regulations No. 22-2003 and 
23-2003, Implementing Act No. 9334 ; and 
 
– Revenue Regulations No. 3-2006, Prescribing the Implementing Guidelines on the 
Revised Tax Rates on Alcohol and Tobacco Products Pursuant to the Provisions of 
Republic Act No. 9334, and Clarifying Cert ain Provisions of Existing Revenue 
Regulations Relative Thereto ; 
 
as well as any amendments, replacements, related measures or implementing measures.  
 The Philippine measures appear to be incons istent with the first and second sentences of 
Article III:2 of the GATT 1994.   Accordingly, the United States respectfully requ ests, pursuant to Article 6 of the DSU, that 
the Dispute Settlement Body establish a panel, with  standard terms of re ference as set out in 
Article 7.1 of the DSU, to ex amine the matter described above. 
 
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