[Intl-tobacco] Chile initiates WTO complaint against Peru tax on cigarette imports

[Robert Weissman]

International Trade Daily
      Wednesday, March 7, 2001

      Taxation
      Chile Initiates WTO Proceedings
      Against Peruvian Cigarette Taxes


GENEVA--Chile has initiated dispute settlement proceedings at the World
Trade Organization against Peru regarding a tax on cigarettes that it says
discriminates against foreign suppliers.

In a request for WTO consultations with Peru dated March 1 and circulated
to WTO members March 6, Chile claims that by imposing a higher consumption
tax on cigarettes that are marketed in three or more countries, Peru is
effectively applying a higher rate to imported cigarettes in violation of
WTO rules prohibiting discriminatory treatment in the internal taxation of
foreign and domestic goods.

At issue is Peru's Supreme Decree No. 158-99-EF of September 1999 that
amended existing rules under which different levels of cigarette taxes
were applied according to the type of tobacco used. According to Chile,
the difference in the level of tax applied to cigarettes under the new
system "appears to be contingent only on the number countries in which the
different commercial brands of cigarettes are marketed," i.e., more than
three or less than three countries.

The criterion is a source of concern "since it could signify
discrimination against imported cigarettes, from Chile for example, which,
being marketed in more than three countries, are subject to a higher tax
than local brand cigarettes," Chile said. The current situation, Chile
added, "is damaging to Chilean cigarette exports to Peru."

If the two countries are unable to resolve their differences within 60
days, Chile can proceed to ask for the establishment of a WTO panel to
rule on its complaint.