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Tax on distilled spirit by Philippines discriminatory - WTO

30th December, 2011
The World Trade Organisation’s (WTO) appellate body, in its report circulated on 21st December, 2011, has held that the excise tax on distilled spirits, as prevalent in Philippines, whereby lower rates of tax were prescribed for spirits manufactured from specified raw materials and a higher rate when non-designated raw materials were used, is discriminatory. 

The Appellate body under the DSU, while upholding the panel report, held that the measures of imposition of lower tax when the spirit is made from raw materials like sap of the nipa, coconut, cassava, camote, or buri palm, or from juice, syrup, or sugar of cane and a higher tax when the same was made from other material, was violative of Article III.2  of the GATT.  EU and USA had brought the issue before the WTO contending that lower rate was being applied on domestic spirits as same were principally made from the designated materials and a higher rate was being imposed on the imported spirits which mainly used cereals or grapes.
The appellate body held that Philippines has acted inconsistently with first sentence of Article III:2 of the GATT 1994 by imposing, on each type of imported distilled spirit, internal taxes in excess of those applied to the same type of domestic distilled spirit. The Appellate Body however, reversed the Panel's finding that all imported distilled spirits made from non‑designated raw materials, irrespective of their type, are “like” all domestic distilled spirits made from designated raw materials. It upheld the findings that all imported and domestic distilled spirits under consideration are “directly competitive or substitutable” within the meaning of Article III:2, second sentence, of the GATT 1994.
India along with Australia, China, Mexico, Thailand and Chinese Taipei had represented before the DSB as third party.
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