THE Philippine Economic Zone Authority (PEZA) has suspended the operations of two errant cigarette manufacturers involved in illicit cigarette trade but both companies defied the suspension order.

Lawmakers have found out that GB Global Exprez Inc. and GB-BEM Cigarette Company Inc., both operating inside economic zones, persisted with their manufacturing operations despite PEZA’s suspension order last February.

At the meeting of the House ways and means committee Technical Working Group (TWG) chaired by Party-list Rep. Jericho Jonas “Koko” Nograles on April 20, committee members said they have received reports that the two companies remain operational producing 8389 brand cigarettes.

The TWG is working on addressing the loopholes in the system of the importation and exportation of tobacco products which, according to Nograles, are being abused by cigarettes manufacturers located in economic zones.

Congressman Nograles disclosed of a report to the committee that GB Global and GB-BEM are actively producing having manufactured 2,200 mastercases or 1.1 million packs of 8389 brand cigarettes for the period March 22, 2021 to April 19, 2021 alone.

PEZA Director General Charito Plaza earlier said she has ordered the suspension of operations and incentives of GB Global and GB-BEM since February for non-registration with the Bureau of Internal Revenue (BIR) hence, absence of the necessary permit to operate.

The two PEZA locators were the subject of raids conducted by the BIR last year due to lack of manufacturing permits from the revenue agency. The raids are now the subject of parallel investigations by the House committee on ways and means, Department of Finance (DOF), BIR and PEZA.

Finance Secretary Carlos Dominguez took note of the questionable operations of the cigarette manufacturers as he raised alarm on the growing incidence of illicit tobacco trade in economic zones, depriving the government of various revenues which include excise tax, income tax, VAT and customs duties when their products are sold in the domestic market.

Dominguez had written Trade and Industry Secretary and PEZA chair Ramon Lopez 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 congressmen, however, confronted her 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 are still operating as of April 20, 2021.

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

The report reaching the congressmen confirmed the active operations of the company starting March 22 and said to be 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 Php62.7 million.

The House ways and means committee chaired by Rep. Joey Salceda tasked the TWG to work on the necessary review and amendments of BIR Revenue Regulation No. 9-2015, entitled Amending Section 9 of the Revenue Regulations No. 7-2014 – prescribing the affixture of internal revenue stamps on imported and locally manufactured cigarettes and use of the Internal Revenue Stamp Integrated System (IRSIS).