VZCZCXRO6419
OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHML #1056 1380036
ZNR UUUUU ZZH
O 180036Z MAY 09
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4132
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUCPDOC/USDOC WASHDC IMMEDIATE
RUEHZU/APEC COLLECTIVE IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI//FPA//

UNCLAS MANILA 001056 
 
SIPDIS 
 
STATE FOR EAP/MTS, EAP/EP, EEB/IFD/OMA 
STATE PASS EXIM, OPIC, AND USTR 
STATE PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE 
TREASURY FOR OASIA 
USDOC FOR 4430/ITA/MAC/ASIA & PAC/KOREA & SE ASIA/ASEAN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV PGOV RP
SUBJECT:  Revenue Crunch Leads to Questionable Book Tax 
 
¶1. Summary:  The Philippine Bureau of Customs decision to levy 
duties on foreign book imports has generated an outcry in the 
Philippine media, led by internet forums, and by affected 
businesses.  Philippine Senator Miriam Defensor-Santiago has called 
for a formal investigation into the decision, noting that charging 
duty on books appears to violate the Florence Agreement of 1950, 
which pledged signatories to exempt books from customs duties.  End 
summary. 
 
¶2. Local internet discussion forums broke the news when the 
Philippine Bureau of Customs started collecting import duties on 
books, in apparent violation of the Florence Agreement of 1950, 
whose signatories, including the Philippines, agree not to impose 
import taxes on books.  Publishers report that in March Customs 
began stopping shipments of imported books, refusing to release them 
until importers paid a 5% tariff.  Customs then refined its policy, 
citing the Philippine Tariff and Customs Code, to charge a 1% duty 
on educational, scientific, and cultural books, and a 5% tax on 
other books.  A Philippine Department of Finance official reportedly 
told a group of publishers that the Philippine government would 
henceforth interpret the Florence Agreement as requiring that only 
books directly "used in book publishing" qualify for duty-free 
entry. 
 
¶3. Post first learned of the new tariff in March from the 
Association of American Publishers, who mistakenly thought the issue 
would be quickly and easily resolved.  In May, the issue began to 
appear in internet discussions.  A few days ago, Philippine Senator 
Miriam Defensor-Santiago criticized the violation of the Florence 
Agreement, called for a Senate investigation with the support of 
four colleagues, and made the issue front-page news. 
 
¶4. In addition to the sudden reinterpretation of the Florence 
Agreement, foreign publishers and local bookstores allege that 
Customs deliberately slows its assessment of imported books, by 
insisting on inspecting each imported book by hand, in order to 
increase storage charges.  One local bookstore claimed that a 
shipment of books worth $10,000 attracted duty of less than $300 but 
storage charges in excess of $4,000 while the shipment was 
painstakingly inspected. 
 
¶5. As in most commercial disputes in the Philippines, there are 
allegations of corruption; it is alleged that Customs officials 
prolong the inspection process because they profit personally from 
the storage charges.  However, most observers believe that the 
driving force behind the decision to tax book imports is the 
persistent revenue shortfalls in both Customs and the Bureau of 
Internal Revenue.  Revenue for this year is already hundreds of 
millions of dollars behind official targets. 
 
¶6. Comment:  Post believes that the tariff is unlikely to survive 
the current business, media, and congressional criticism, and that 
it will soon be rescinded.  However, we will closely monitor the 
issue and weigh-in against the tariff at appropriate opportunities. 
 
 
MEMMOTT