Brussels, 5 October 2009
EU and Uruguay settle complaint over taxation of imported spirits
The European Commission has today decided to close an investigation into Uruguay's taxation regime on spirits, following the removal of unfair barriers to the sale of European spirits in the country. The investigation had been opened under the EU Trade Barriers Regulation (TBR) following a complaint by the Scotch Whisky industry. The Commission's enquiry led to changes in the Uruguayan legislation without the need to resort to WTO dispute settlement.
EU Trade Commissioner Catherine Ashton said: "The focus of EU trade policy is to create real benefit for businesses, workers and consumers. I am delighted that we have solved this issue without having to resort to WTO litigation."
On 2 September 2004, the Scotch Whisky Association lodged a complaint alleging that sales of Scotch whisky in Uruguay were hindered by various obstacles to trade, notably a discriminatory excise tax. During the investigation conducted by the European Commission the Uruguayan authorities expressed their willingness to seek a mutually satisfactory solution, and proposed to settle the case on the basis of various elements, notably the legislation on excise taxes.
The main trade barrier subject to investigation was the discriminatory excise tax in Uruguay (IMESI - Impuesto Especifico Interno). Instead of using the actual transaction value of the spirits at the point of first sale as the taxable base, the spirits were divided into groups ("categorias") on a price-per-litre basis. They were then assigned a price (determined by the Uruguayan authorities) upon which the excise tax was levied, putting the EU products in the highest-priced category. In the new legislation, in light of the agreed settlement to the case, the tax is determined by adding a fixed value to a tax on value of the product, which means that there is a single tax rate and the discrimination is removed. The volume and value of exports of Scotch whisky to Uruguay have increased by more than 30% since the entry into force of the revised legislation.
Aside from the issue of taxation, other barriers included (1) lack of transparency and predictability of Uruguayan excise taxes in general, (2) exclusion of whiskies matured for three or more years from the lowest category of taxation (per EC Regulation as of July 2000 all EU whiskies must be matured for at least three years, while all whiskies produced in Uruguay are aged less than three years), (3) requirement to affix tax stamps on imported whiskies, (4) requirement to pre-pay excise taxes at the time of customs clearance. All of these barriers have been addressed.
The TBR has become an important part of EU trade policy, as it allows the Commission to work with businesses to identify and address the barriers that matter most to them. The TBR has been in force since January 1995 and permits any EU enterprise or association to lodge a complaint with the Commission which will then investigate and seek to remove barriers inconsistent with international trade rules (those of the WTO and other international agreements). Since 1995, more then 20 TBR examination procedures have been initiated, and the TBR has been successful in obtaining the removal of illegal barriers in a broad range of sectors including textiles, steel, music, spirits, automobile, and shipbuilding and against a broad range of countries including the United States, Brazil, South Korea and Uruguay.