Philippines wins cigarette tax case vs Thailand

Malacañang on Saturday welcomed a decision by the World Trade Organization upholding the Philippines’ position in a cigarette export valuation case that Manila brought against Thailand.

The Palace said the case stemmed from a claim by the Philippines that Thailand was carrying out unfair trade practices. The Philippines then asked the WTO in February 2008 to determine whether Thailand’s policies indeed adversely affected Philippine cigarette exports.

On Friday, the appeals body of the WTO largely upheld a ruling that Thailand’s taxes on imported cigarettes were unfair.

“The Appellate Body upheld the core findings challenged by Thailand on appeal,” the WTO said in a summary of the 89-page Appellate Body ruling posted on its website.

The case between the two Southeast Asian neighbors turned on “customs valuation”—the placed put by customs officials on imports that can differ from that declared by the importer, and is often a source of trade disputes.

The Philippines argued that a series of customs valuation and domestic taxation measures starting in 2006 had undermined the competitiveness of imported cigarettes against those produced by the state-controlled Thailand Tobacco Monopoly.

This hurt Philippine exporters such as the local operation of Philip Morris International as well as tobacco growers in the archipelago, it said.

The Appellate Body backed the initial panel’s findings issued in August that Thailand had violated WTO rules “by subjecting imported cigarettes to VAT liability in excess of that applied to like domestic cigarettes.”

Thailand had contravened the trade body’s rules by subjecting imported cigarettes to less favorable treatment than that accorded to domestic equivalents, the appeals judges said.

The Appellate Body called for Thailand’s measures to be brought into conformity with the Agreement on Customs Valuation.

Deputy Presidential Spokesperson Abigail Valt, said over state-run radio dzRB that the WTO ruling would level the playing field in the tobacco trade between the two countries.

“All we wanted was a level playing field and this, we hope, would really help our tobacco farmers. We are hopeful that this would not have any ill effects on the very wonderful relationship that we have with our neighbor Thailand,” Valte said.

“The dispute mechanisms under the WTO are there exactly to resolve these trade issues like the one we raised and this is what came about. So we are happy with the decision,” she added.

Norman Bordadora; Reuters