Fight IT raises alarm bells on illicit operation of a Pampanga-based cigarette company

The Fight Illicit Trade (Fight IT) Movement has called on the government to tighten the noose on illicit cigarette traders as it expressed alarm over the rising cases of fake cigarettes being sold around the country.

Fight IT Chairman Jesus Arranza raised the concern following a court order that allowed the return of fake cigarettes and cigarette making machines seized from a raid in Pampanga back to the suspected illicit trader.

“We need intensified intelligence gathering, sustained enforcement thru more raids all the way to the successful prosecution in court of people involved in the illicit cigarette business to finally end this practice that has cost the government billions of pesos in revenues,” Arranza said.

It may be recalled that the Fight IT Movement played a major role in calling public attention to the fraudulent business practices of cigarette maker based in Bulacan that yielded P30 billion in deficiency tax payments, the biggest tax evasion settlement in the country’s history.

Arranza said he is still trying to comprehend why that the Court of Tax Appeals (CTA) granted the preliminary injunction requested by GB Global Exprez Inc., a cigarette company operating at the Angeles Industrial Park in Pampanga.

It is reported the cigarettes confiscated from GB Global did not contain the details of the manufacturer and destination country on the export packs, as required by law, even if the health warnings were in Thai. The packs also did not have tax stamps, a BIR requirement to show proof of excise tax payment.

Arranza, who is also chairman of the Federation of Philippine Industries (FPI), said that he is disappointed that the injunction allegedly directed the return of all the cigarettes seized and manufacturing equipment to the company.

“I was told by the BIR that the seized fake cigarettes and equipment are critical to support the case filed by the BIR. These are important pieces of evidence to the case,” Arranza stressed.

Based on the account of the raiding team, Arranza said the potential loss to the government in terms of excise tax and fine from the GB Global seizure would amount to Php1.08 billion.

On July 29, 2020, BIR-National Bureau of Investigation (NBI) Composite Team raided the factory of GB Global on verified information that the company were producing cigarettes supposedly for exports and yet were being distributed locally.

The raid yielded 4,786 master cases or 238,300 cigarette packs of non-BIR registered and noncompliant TWO MOON and SOHO brands. The illicit cigarettes were also without tax stamps as proof of excise tax payment in violation of Republic Act 10351 and BIR Revenue Regulations 7-2014 and 9-2015.

According to GB Global, the cigarettes in question were for export, yet the product packs did not bear the destination market, the name and address of manufacturer, and the BIR assessment number of the manufacturer and exporter.

With these violations, the BIR ordered the seizure of three cigarette-making lines and two cigarette-packing lines at the company’s facility.

The agency also found out that the Two Moon and Soho brands which have health warnings in Thai are not available in Thailand. These two brands, however, were openly sold in Central Luzon and some parts of Mindanao.