EU against PH sin tax

The European Union continued to express its objection to the Philippines’ “unfair” sin tax bill, as it warned it would be forced to “retaliate” through the World Trade Organization (WTO) if both houses of Congress fail to amend the measure.

This was disclosed by Ifugao Rep. Teddy Brawner Baguilat, who are among the six Filipino legislators who met EU Trade Commissioner Karel De Gucht.

Quoting de Gucht, he said the approved House and Senate versions “will not pass the WTO compliance because of unfair taxation and if the bill is not amended, EU will be forced to ‘retaliate’ through the WTO.”

The EU official expressed concern that the sin tax proposes a higher tax based on the retail price and the highest band of the tax is perceived to hit imported spirits, Baguilat said.

But Davao Rep. Isidro Ungab, chairman of the House Committee on Ways and Means, and Iloilo Rep. Niel Tupas Jr. defended the bill, saying that the Department of Finance (DOF) and the Department of Trade and Industry has assured that the taxation scheme was WTO compliant, he said.

“Our delegation stood by our position that imposing a unitary tax for all spirits would be disadvantageous to local liquor because the price difference between locally produced liquor and that of foreign products was very wide,” the House leader said.

Baguilat disclosed that De Gucht, who has a reputation of being a hard-nosed and candid diplomat, presented a possible middle ground “in which EU can be amenable to graduated tax scheme allowing a higher tax for foreign liquor provided there is a clear rationale behind the tax regime and that foreign liquors will not be unfairly disadvantaged.”

He even noted that the Philippine embassy officials are saying that a lower rate for higher-priced liquor, mostly imported brands) might be acceptable to EU.

“I think this is significant because we are on the verge of ratifying a PCA (will try to get what it means) which is a general framework plan of trade for PH-EU and we’re also working on a possible free trade agreement at the end of the year which can grant Philippine products more access to European markets while enticing more EU investments in the Philippines,” Baguilat said.

He cited that a scoping paper has already been sent to the Philippines and is currently being studied by the DTI.

“If we get this sin tax issue with EU resolved, I believe we can pursue the trade agreements including the proposed GSP (generalized system of preferences) for Philippines. This GSP, separate from the FTA, will grant selected Philippine products tax-free or lower-tariff access to EU (provided we comply with 27 conventions that EU has mentioned),” Baguilat said.

“While resolving the issues of EU with the sin tax is not tied to approval of these agreements, there is an implied threat that the talks can bog down if EU will be disappointed with its request for a second look at the bill as De Gucht said “how can PH be interested in a free trade agreement when it starts by approving a law that would unfairly tax foreign liquor?” he pointed out.

Baguilat expressed belief that “there is a window for an acceptable compromise with EU and if this is hammered out, it can lead to a better economic cooperation with the world’s largest economy.” –CHARISSA M. LUCIO, Manila Bulletin