WTO: Foregone revenues by PH on tariff and tax exemptions reach 1850 B

The Philippines has registered a considerable amount of foregone revenues amounting to R850 billion due to a wide range of tariff and tax exemptions provided under specific laws, more than double the R402.9 billion ($7.9 billion) in foreign direct investments (FDIs) it received in 2016, according to the WTO Secretariat Report.

The WTO is conducting the Philippines Trade Policy Review (TPR) for the fifth review of the trade policies and practices of country. The WTO meeting in Geneva started yesterday up to the 28th this month is a culmination of an intensive process that began last year with the preparation of a Report on Philippine Trade Policy by the WTO Secretariat and supplemented by a counterpart report by the Philippines’ Trade and Industry Department submitted in December, 2017.

For developing countries like the Philippines, the WTO TPR is conducted once every six years. Substantial developments that may have an impact on the global trading system are also monitored. The last Philippine review was conducted in 2012. The last Philippine review was conducted in 2012.

The WTO Secretariat report highlights the extent to which individual trading entities follow basic WTO principles concerning transparency of trade policies; non-discrimination in treatment of trading partners; the degree of stability and predictability of trade policies; the pattern of protection and the extent to which tariffs only are used as measures of protection in trade in goods; restrictions used in trade in services; and the record of adherence to the multilateral trading system, and participation in dispute settlement.

One of the highlights in the Philippine report was country’s considerable forgone revenues under tariff and tax concessions amounting to R549 billion in customs duties and R301 billion in VAT in 2016.

The foregone revenues can be traced to the country’s wide range of tariff and tax exemptions granted to investors as provided for under specific laws, the report stated.

According to WTO, the Philippines' tariff comprises 10,813 lines at the HS 2017 eight-digit level (compared to 8,299 in 2011), with rates ranging from zero to 65 percent. All tariffs are ad valorem. The average applied MFN tariff is 7.6 percent, up from 6.4 percent in 2011. The increase in the average tariff is mainly due to transposition to HS 2017 and the splitting of lines carrying high tariffs. Tariff rate quotas apply on 77 tariff lines. 65 percent of tariff lines (including all agricultural lines) are bound. The simple average bound rate is 25.7 percent.

The Philippines also grants at least MFN treatment to all WTO Members. It has preferential trading agreements with 15 partners: the other nine parties of ASEAN, and six countries that have negotiated agreements with ASEAN (Australia and New Zealand, China, India, Japan, and the Republic of Korea). An agreement between the Philippines and EFTA members has been signed, but not yet ratified. FTA negotiations with the European Union are ongoing.

The report, however, also cited the strong inflow of foreign direct investments (FDI) into the country.