American and European interests are bearing down hard on local distilleries run by local taipans through the efforts of a powerful global trade body to pressure the government to scrap taxes on distilled spirits.

The US and the European Union, through the World Trade Organization, renewed their call for the WTO to compel the government to comply with the global trade group’s ruling declaring local taxes on distilled spirits illegal and discriminatory.

But in a classic David-vs.-Goliath confrontation, the country’s top taipans, through the Distilled Spirits Association of the Philippines told off the two trading giants; “Not just yet.”

The taipans -- Ramon Ang of San Miguel Corporation; Lucio Tan of Tanduay Distillers, Inc.; Andrew Tan of Emperador Distillers, Inc.; and Olivia Limpe-Aw of Destileria Limtuaco & Co., Inc., (representing the country’s biggest distillers and alcohol producers) -- stressed the huge economic impact of the WTO ruling that threatens the very survival of the distilled spirits manufacturing sector including allied and downstream industries.

They said DSAP members produced some 66 million cases of distilled spirits in 2010 with gross sales of close to P50 billion (almost $1-billion).

In a statement, DSAP president Olivia Limpe-Aw said the decision of the WTO Panel on the Philippines-Taxes on Distilled Spirits case is not yet binding on the parties until the appeal is taken to and processed by the WTO Appellate Body.

DSAP said Malacañang has earlier announced that it would appeal the panel report to the WTO Appellate Body and will pursue the Philippines’ rights under GATT 1994 and the WTO dispute settlement system.

Luckily, the DSAP found an ally in Congress. Upon the request of local distillers,  Speaker Feliciano Belmonte, Jr. also ordered the suspension of deliberations on all bills seeking to amend the excise tax laws pending before the House of Representatives’ ways and means committee while the Philippine Government is pursuing its WTO appeal.

In separate letters to Belmonte and House ways and means committee chairman Rep. Hermilando Mandanas, DSAP members raised concerns that the Philippine government’s chances of success could be imperiled if Congress continues to deliberate and comment on the country’s excise tax system while the case is pending before the WTO.

DSAP said the WTO Panel did not seriously and carefully analyze the Philippines ’ basic defenses. The group stressed that the Philippines does not discriminate against imported products.

“The rates that apply to distilled spirits produced from raw materials such as sugar of the cane (molasses), buri palm, coconut, cassava, camote etc. under Section 141 (a) of the Tax Code are enjoyed by both domestic and imported spirits.  For example, locally-made Tanduay Rum and imported Bacardi Rum pay the same rate of excise tax at P14.68/proof liter and yet their net retail prices (750ml, excluding excise tax and VAT) are worlds apart – Tanduay at P50 and Bacardi at P430,” Limpe-Aw said.

DSAP sees the EU export slump and the US financial woes as main reasons behind the WTO suit filed against a small developing country like the Philippines. Limpe-Aw said despite their own economic hardship, Philippine distillers have basically kept to their own, supplying Filipinos with distilled spirits and drinks that the mass market can afford.

“The decline in US and EU exports to the Philippines cannot be attributed to our taxation system but is due to many factors such as sluggish economy, low purchasing power, inflation etc. Even domestic spirits have experienced lower consumption this year,” she said.