Tuesday, December 4, 2012

Sin Tax Bill Violates General Agreements on Tariffs and Trade (GATT)?

Senator Miriam Defensor Santiago asked on Monday the Senate panel on bicameral conference committee to require the Department of Trade and Industry (DTI) to comment on her opinion that a Sin Tax bill provision will violate General Agreements on Tariffs and Trade (GATT).

Santiago made this appeal to the Senate panel members composed of Senators Franklin Drilon, Panfilo Lacson, Sergio Osmena III, Ralph Recto, Ferdinand 'Bong-bong' Marcos Jr., Pia Cayetano and Senate minority leader Alan Peter Cayetano.

"I humbly but strongly recommend that our Senate panel should require the secretary of DTI to appear before the panel and explain whether my humble opinion, based on DTI experience with the WTO, should be a valid concern of the bicam," Santiago said in her privilege speech.

Santiago was particularly alarmed by the "local content requirement" or LCR that is included in the recently-passed Sin Tax bill.

"I particularly refer to the Senate version, Sec. 145, on Cigars and Cigarettes, stating: "Of the total volume of cigarettes sold in the country, any manufacturer and/or seller of tobacco products must source at least fifteen (15) percent of its Virginia leaf raw materials locally," she said.

She recommended to the Senate panel that the local content requirement or LCR should be reviewed first before the bicam meeting on Wednesday.

"In my humble opinion, the Philippines might be brought before the WTO Dispute Settlement Body, on the ground that it violates GATT 1994 Article 3, which deals with the topic of National Treatment on Internal Taxation and Regulation," Santiago explained.

Santiago said Article 3 provides in paragraphs 1 and 5, as follows:

"1. The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specific amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production."

"5. No contracting party shall establish or maintain any internal quantitative regulation relating to the mixture, processing or use of products in specified amounts or proportions which requires, directly or indirectly, that any specified amount or proportion of any product which is the subject of the regulation must be supplied from domestic sources. Moreover, no contracting party shall like likewise apply internal quantitative regulations in a manner contrary to the principles set forth in paragraph 1."

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