The Philippines is set to confront Thailand in June at the World Trade Organization (WTO) to demand compliance to a 2011 tax ruling on tobacco imported from the Philippines, because the livelihood of 1.9 million Filipino farmers is at stake if Bangkok continues to ignore the WTO verdict.
Ceferino S. Rodolfo, Board of Investments managing head and trade undersecretary for Industry Development and Trade Policy Group, said the Philippines set the schedule of the first round of negotiations on June 2, after the country has initiated its compliance-review procedure against Thailand.
This is part of the Philippines’s availment of the compliance review mechanism provided in the Dispute Settlement Understanding of the WTO, as Thailand has failed to comply with the ruling of the multilateral trading system. The Philippines brought a formal complaint to the WTO against Thailand back in 2008, saying Bangkok is unfairly imposing taxes on cigarette imports from the Philippine unit of Philip Morris.
The Philippines also said Thailand’s customs valuation process ran counter to the WTO Agreement on Customs valuation that sets transaction value as the primary basis for Customs valuation.
The Philippines won the case against Thailand in 2011, with the WTO ruling mandating the Bangkok to adjust its Customs valuation methods, effectively upholding the Philippines’ methodology in valuation. The dispute was revived after the Thai Public Prosecutor’s Office brought criminal charges against Philip Morris Thailand earlier this year, claiming that 272 import entries of the firm’s products were under-declared.
Thai authorities alleged in January that Philip Morris Thailand evaded some $551.27 million worth of taxes by under-declaring import prices for 272 batches of cigarettes from the Philippines between 2003 and 2006.
Philip Morris Thailand executives categorically denied this and condemned the charges, saying the move was “meritless, unjust and in violation of Thailand’s obligations to comply with the WTO Customs Valuation Agreement.”
Rodolfo explained the imports in question were covered by the WTO ruling, thus, the Thai authorities have no basis to dispute the decision.
“We’re going to ask what is their basis for their findings (of tax evasion) and their methodology,” Rodolfo told reporters. “In effect, they’re reversing the WTO ruling by pressing charges against Philip Morris Thailand,” he added.
If the Philippines will take the issue lying down, Philip Morris Thailand will have to pay the hefty penalties demanded by authorities. This will have an adverse effect on the livelihood of 1.9 million direct and indirect employees.
“Philip Morris Thailand procures its tobacco from the Philippines, these are grown by Filipino tobacco farmers. If they have to pay the penalties, Philip Morris may close down its business in the country. We may lose our main buyer of tobacco leaves, and our tobacco farmers will suffer the consequences,” Rodolfo added.