PHILIPPINES – TAXES ON DISTILLED SPIRITS
Document: Request for the Establishment of a Panel by the United States
Date: 29 March 2010
Document codes: WT/DS403/4; WT/DS403/1
Complainant: U.S.
Respondent: Philippines
Third parties: Australia, China, Colombia, EU, India, Mexico, Thailand, Taiwan
Dispute stage: Appellate Body
Agreements cited: Art. III:2  GATT 1994

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 (). 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 distilled 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)

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 examine the matter described above.