Officials from Taiwan and the US held their first round of bilateral consultations on Thursday to discuss Taipei's proposal to lower its tax on rice wine.
Board of Foreign Trade Deputy Director-General Chu Wei-cheng (朱為正) is heading the delegation, which arrived in the Washington on Wednesday for the consultations under the WTO framework.
The US delegation is led by Scott Ki, an official with the US Trade Representative office.
The two sides have not divulged the results of Thursday's talks.
Under the WTO framework, Taiwan must win the support of the US and the EU for its proposed rice wine tax reduction.
As a condition for its WTO membership, Taiwan agreed to tax rice wine at the same rate that it taxes other similar products, namely distilled spirits.
It agreed in pre-WTO entry talks with the US and the EU to tax distilled spirits on the basis of quantity -- NT$150 per liter in the first year of accession and NT$180 per liter from the second year.
Government officials stationed in the US said in private that American and European liquor makers have gained enormous profits from the new alcohol tax system.
They said Taiwan may have to offer trade concessions in exchange for US approval the proposed rice wine tax reduction.
Since Taiwan's WTO entry, the price for a 0.6L bottle if rice wine has risen from NT$21 to NT$130, including the mandatory NT$90 tax.
The price hike has spawned a thriving market for bootleg rice wine. At least 11 people are thought to have died after drinking bootleg wine that contained high levels of methanol.
Because of this, the government has drafted a revision to the Wine and Tobacco Tax Act (菸酒稅法) aimed at replacing the NT$150 per-liter tax with one of 120 percent of the price of every 0.6L bottle. The proposed tax cut is expected to bring the selling price down NT$130 to between NT$50 and NT$60.
Taiwan wants the US and the EU to agree the tax on distilled spirits should not exceed NT$185 per liter. The proposed tax rate will be applied to all distilled spirits, regardless of their origin, to meet the WTO's "national treatment"
requirement.
According to its WTO entry terms, Taiwan must not reduce the tax on its wine for the first 30 months after its accession.
If the US and the EU are not willing to compromise on this issue, Taipei may have to turn to WTO arbiters for a resolution. If foreign liquor producers disagree with Tai-pei's wish to cut the tax, Taiwan might have to reimburse the losses they suffer.
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