Government urged to appeal WTO ruling on imported liquor tax

Manila, Philippines - The Distilled Spirits Association of the Philippines (DSAP) urged the government yesterday to appeal the World Trade Organization’s ruling which declared illegal a local tax provision that allegedly discriminates against foreign brands.

 “The battle isn’t over for the local distilled spirits industry. The Philippines needs to appeal WTO’s findings because of its adverse impact on local manufacturers, allied industries, the Filipino consumers and the economy in general. DSAP believes that until the is resolved by WTO’s Appelate Body, the rulings are not binding on the parties,” DSAP said in a statement.

 On Tuesday, a WTO legal panel issued a confidential ruling that Philippine taxes on spirits discriminate against brands such as Jack Daniel’s and Jim Beam as well as Spain’s Brandy de Jerez, while allegedly favoring domestic producers that use alcohol derived from locally grown sources.

 DSAP said its members are aware of critical matters that need to be brought to the attention of the Appellate Body by the Philippine government. It said DSAP members are closely working with Solicitor General Jose Anselmo Cadiz, co-counsel former Justice Florentino Feliciano of SyCiplaw Office and Gregory Spak of White & Case in Geneva to fight for the Philippines’ rights under GATT 1994 and the WTO dispute settlement system.

 “As far as the distilled spirits industry is concerned, the Philippines has never discriminated against any imported product. There’s a whole range of imported brands in the country. Products such as Jack Daniel’s, Jim Beam are priced much higher than domestic brands even without the taxes. Hence, they simply do not compete in the same market as local brands,” DSAP stressed. The group is composed of Destileria Limtuaco, San Miguel Corp., Ginebra San Miguel Inc., Tanduay Distillers Inc., Emperador Distillers, Alcohol Distilleries-Absolute Chemicals Inc., Consolidated Distillery Inc., Far East Alcohol Inc., Central Azucarera de Tarlac and Berbacs Chemicals.

DSAP explained that although the Philippine distilled spirits market is big in terms of volume consumption, 98 percent of said consumption is on the low-priced or economy brands with average retail price of P65 per 700 ml bottle.

 “About 98 percent of Philippine households can only afford P60 per week for distilled spirits. Jack Daniel’s retails at P825/750ml bottle and the net retail price (without VAT and excise tax) is P560/750 ml bottle. This shows that said imported brands are clearly priced way out of the reach of the ordinary man on the street,” DSAP said.

 The group warned further that any new measure that would raise taxes on alcohol products would have a big impact on the consumption of spirits. DSAP expects a substantial contraction in the market demand given the very low elasticity of demand for distilled spirits in the Philippines.

The domestic producers of spirits have always taken the purchasing power of the mass market into consideration in their business plans so as to be able to deliver the best product at prices affordable by the great mass of consumers. The industry has not hesitated going to the extent of sacrificing margins, DSAP added.