Manila, Bangkok agree on cigarette tax reforms

from today's issue of BusinessWorld:

The Philippines and Thailand have agreed on policy reforms required by the World Trade Organization (WTO) regarding a trade dispute, won by Manila, involving Bangkok’s cigarette tariffs.

“The Philippines and Thailand mutually agreed to a reasonable time frame for Thailand to comply with the ruling of the WTO. This agreement reflects the effectiveness of the multilateral trading system in resolving trade issues to expand global trade,” Trade Secretary Gregory L. Domingo yesterday said in a statement.

A WTO document dated Sept. 27 states that both parties agreed that “With respect to the DSB’s (Dispute Settlement Body) recommendations and rulings ... the reasonable period of time to comply shall be 15 months, expiring on 15 October 2012. With respect to ... all other measures, the reasonable period of time to comply shall be 10 months, expiring on 15 May 2012.” By mid-October, the Thai government is expected to resolve its inconsistent application of value-added tax (VAT) rates on locally made and imported cigarettes.

The Philippine government filed a case before the WTO after Thai authorities charged higher duties on cigarette exports by Philip Morris Philippines on suspicion of undervaluation of goods.

A preliminary decision in favor of the Philippines was issued in November last year, which was followed by an appeal by Bangkok last February. A WTO Appellate Body adopted the original panel recommendation in July 15.

Sought for comment, Philip Morris Philippines Manufacturing, Inc. (PMPMI) Managing Director Chris Nelson said: “We are very pleased with the Philippines and Thailand having agreed on a clear timetable. Based on my understanding, the first aspect of the reform involves promoting transparency in customs valuation. The second aspect will involve the actual adjustments on tax.”

Exports to Thailand by Philip Morris Fortune Tobacco Corp., a PMPMI merger with Fortune Tobacco Corp., grew by 12.9% to seven billion sticks last year.

The Philippines is the leading cigarette exporter in Thailand, the Trade department noted. It said that last year, local tobacco producers held some two-fifths or $200 million of the Thai market.