1.
Chile appeals certain issues of
law and legal interpretation developed in the Panel Report, Chile – Taxes on Alcoholic Beverages.[1] Following a request for consultations[2], a
Panel was established on 25 March 1998 by the Dispute Settlement Body (the
"DSB") to consider a complaint by the European Communities against
Chile regarding its Special Sales Tax on Spirits, as modified by the Additional
Tax on Alcoholic Beverages ("Impuesto Adicional a las Bebidas Alcohólicas" or
"ILA").[3]
2.
The ILA provides a transitional
tax system (the "Transitional System") for distilled spirits
("spirits") which is applicable until 1 December 2000, and a revised
tax system (the "New Chilean System") which will be applied from 1
December 2000.[4] The New Chilean System taxes all spirits on
the basis of their alcohol content and price.
Spirits with an alcohol content of 35° or less are taxed at a rate of
27 per cent ad valorem. From a rate of 27 per cent ad valorem, the tax rate increases
in increments of 4 percentage points per additional degree of alcohol, until a
maximum rate of 47 per cent ad valorem
is reached for all spirits over 39°.[5] The Panel found that roughly
75 per cent of the total volume of domestically produced spirits will
be taxed at 27 per cent ad
valorem, while over 95 per cent of the total volume of imported
spirits will be taxed at 47 per cent ad valorem.[6] A detailed description of the factual aspects
of the dispute is provided at paragraphs 2.1 to 2.29 of the Panel Report.
[1]WT/DS87/R,
WT/DS110/R, 15 June 1999.
[2]On
4 June 1997, the European Communities requested consultations with Chile with
regard to the Special Sales Tax on Spirits (WT/DS87/1). On 15 December 1997,
the European Communities further requested consultations with Chile with regard
to the modifications to the Special Sales Tax on Spirits introduced by the
enactment of the Additional Tax on Alcoholic Beverages, contained in Law No.
19,534 of 13 November 1997 (WT/DS110/1).
[3]Pursuant
to Article 9.1 of the DSU, the DSB, at its meeting of 25 March 1998,
agreed that the Panel established on 18 November 1997 to examine the complaint
contained in document WT/DS87/5 should also examine the complaint contained in
document WT/DS110/4.
[4]Panel
Report, para. 2.3.
[5]Ibid., paras. 2.5 and 2.6,
and Table 2.
[6]Panel
Report, para. 7.158.