2 cigarette makers still operating in defiance of PEZA suspension order

MANILA, Philippines – Two cigarette firms — the GB Global Exprez Inc. and GB-Bem Cigarette Company Inc. — have continued to operate despite being suspended last February by the Philippine Economic Zone Authority (PEZA) for being involved in illicit trading.

Members of the House ways and means committee revealed this last April 20 in a meeting of its technical working group (TWG), which is chaired by PBA Rep. Jericho Jonas Nograles.

The TWG is working on addressing the loopholes in the importation and exportation of tobacco products that are being abused by cigarette manufacturers in economic zones, according to a statement issued by Nograles last Friday.

In the April 20 meeting, Nograles said in his report that the two manufacturers produced 2,200 mastercases — or 1.1 million packs of 8389 brand cigarettes from March 22 to April 19.

Before that meeting, PEZA Director General Charito Plaza said she had ordered the suspension of operations
and incentives of GB Global and GB-BEM for non-registration with the Bureau of Internal Revenue (BIR), which meant they not have permits to operate.

Last year, the BIR raided the two PEZA locators for that same reason. The raids are the subject of parallel investigations by the House committee on ways and means, Department of Finance (DOF), BIR, and PEZA.

Finance Secretary Carlos Dominguez III had also raised the alarm on the growing incidence of illegal tobacco trading in economic zones as it had been depriving the government of tax revenues.

Dominguez had sent Trade Secretary Ramon Lopez, who is also PEZA chairman, a letter about the issue, saying: “It appears that manufacturers took advantage of the lackadaisical monitoring inside the zone to perpetuate their schemes under the cover of laws, rules and policies enacted to favor them.”

“As a result of this loophole, two enterprises which are both PEZA-registered locators were able to allegedly manufacture unregistered cigarettes inside a special economic zone and supply these illicitly to the domestic market,” Dominguez stated in his letter.

When queried during the TWG meeting on the status of GB Global and GB-BEM’s operations, PEZA Deputy Director General Mary Harriet Abordo said both businesses are no longer operational, citing a report by Zone Manager Danny San Gabriel.

The committee members confronted her, however, with the report that this was not the case.

Deputy Speaker Deogracias Victor Savellano expressed his disappointment with the PEZA official’s statement, saying that both were still operating as of April 20, 2021.

Later, as Abordo verified the matter with the zone manager, she confirmed that GB Global had workers in the facility and werecurrently doing a “dry run.”

The report reaching the committee members confirmed the continued operations of GB Global since March 22, producing 100 mastercases daily.

The potential loss in government excise and value-added taxes from the 2,200 mastercases or 1.1 million cigarette packs illicitly manufactured by GB Global would amount to P62.7 million.

The House ways and means committee, which is chaired by Rep. Joey Salceda, tasked the TWG to work on the review and amendments of BIR Revenue Regulation No. 9-2015 — entitled Amending Section 9 of the Revenue Regulations No. 7-2014.

The regulation prescribes that internal revenue stamps be affixed on imported and locally manufactured cigarettes and use of the Internal Revenue Stamp Integrated System (IRSIS).

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