EU argues Colombia tax on imported spirits is discrimination, asks for WTO panel to rule

22-Aug-2016 - Last updated on 23-Aug-2016 at 12:32 GMT

The EU is looking to the World Trade Organization for help as it tackles a dispute with Colombia over import tax. Pic: ©iStock/monticello-sldesign78

The EU has requested the establishment of a World Trade Organization (WTO) panel to rule on a dispute over what it says is Colombia's discriminatory treatment of imported spirits.

In March 2016, the EU and Colombia held consultations, however they failed to reach a solution to the dispute. The EU says Colombia has made efforts to bring about reform since the initiation of the dispute, but it believes that EU spirits continue to be discriminated against in the Colombian market.

EU spirits are subject to higher taxes and local charges than those applied to local brands. In addition, market restrictions apply in the departments or local subdivisions of Colombia. The departments impose market-access restrictions that the EU says is in contravention of Colombia's non-discrimination obligations under WTO rules.

The EU says it has raised the issue with Colombia on numerous occasions, including in bilateral meetings, WTO meetings and OECD membership discussions.

Colombia’s 35% alcohol threshold

The national consumption tax on spirits was split in two tax brackets in 1995 and has been ‘specific’ since 2002, with tax calculated by percentage point of alcohol content per unit of 0.75 liters.

The EU argues there is an artificial amount of 35% of alcoholic content for the tax brackets, with most imported products falling into the higher bracket, and most locally-produced spirits in the lower bracket.

The situation is similar in the departments (departamentos) – administrative sub-divisions of Colombia – where a local charge is levied instead of the national consumption tax.

According to the EU, departments can also arbitrarily deny access to imported brands.

EU most affected by taxes

The EU is the main exporter of spirits to the Colombian market and, as a result, the trading partner most affected by these measures (followed by Mexico, Costa Rica and the US).

In 2014, EU exports of spirits to Colombia – valued at €43m ($48.6m) – represented approximately 14% of total agricultural exports to Colombia and 77% of total Colombian imports of spirits.

Whiskies represent the highest share (€36m/$40.7m), followed by liqueurs and cordials (€4m/$4.5m).

Next steps in WTO procedure

The EU's request for the establishment of a WTO panel will be discussed at the meeting of the WTO Dispute Settlement Body (DSB) on September 2.

If Colombia does not agree at the meeting, the EU may table a second request at the following DSB meeting which, according to WTO rules, Colombia cannot block.