PHILIPPINES – TAXES ON DISTILLED SPIRITS
Document: Request for Consultations by the United States
Date: 18 January 2010
Document codes: WT/DS403/1; G/L/914
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 Consultations by the United States

 The following communication, dated 14 January 2010, from the delegation of the United
States to the delegation of the Philippines and to the Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

 My authorities have instructed me to request consultations with the Government of the
Republic of the Philippines ("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 respect to the taxation of imported
distilled spirits by the Philippines.

 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.
The Philippines' taxes on distilled spirits appear not to tax similarly imported distilled spirits
compared to directly competitive or substitutable do mestic distilled spirits. The taxes appear to be
applied in a way that affords protection to the dom estic products. In addition, the taxes appear to
subject imported distilled spirits to internal taxes in excess of those applied to like domestic products.

 The instruments 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, Governi ng 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 or 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, Amending 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 P rice 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.

 These measures appear to be inconsiste nt with Article III:2 of the GATT 1994.

 We look forward to receiving your reply to the present request and to fixing a mutually
convenient date to hold consultations.