Gov't campaign vs. illicit cigarette trade shows ties between companies
Rigorous government enforcement actions against illicit cigarette trade uncovered interlocking ties among companies that were subject of a series of raids and seizures.
The Bureau of Internal Revenue and the Bureau of Customs discovered this in the enforcement operations against GB-BEM Cigarette Company Inc. located at the Pampanga Economic Zone and GB Global Exprez Inc. operating inside the Angeles Industrial Park.
On February 5, 2020, the BIR Strike Team and the National Bureau of Investigation (NBI) conducted an enforcement operation against the GB-BEM cigarette factory inside the Pampanga Economic Zone.
A statement by the Department of Finance (DOF) on April 6 said the BIR shut down the factory of GB-BEM because it was manufacturing cigarettes without the necessary permit to operate.
As a result, the BIR seized 21 cigarette-making machines, 12 mastercases of Two Moon cigarettes and two warehouses full of Two Moon and D&B, and assorted packaging materials. BIR totaled the seizure to 1,656,880 cigarette packs which were not registered with the revenue agency and not having the proper license to operate.
“The company claims that it has a tolling agreement with a Malaysian-based client and that the cigarettes are 100-percent exported,” said the DOF statement, citing Deputy Internal Revenue Commissioner Arnel S.D. Guballa in a report to Finance Secretary Carlos G. Dominguez III.
Following information that GB-BEM and GB Global are affiliated companies with common shareholders and officers and that illegal Two Moon cigarettes were prevalently sold around Central Luzon, the same BIR-NBI Composite Team conducted an inspection of the factory of GB Global on July 29, 2020.
The inspection yielded 4,786 mastercases of non-BIR registered and non-compliant Two Moon and Soho cigarettes. Because of such violations, the BIR ordered the seizure of three cigarette-making lines and two cigarette-packing lines at GB Global.
The seizure, however, did not materialize because of a cease-and-desist order sought by GB Global that was granted by the Court of Tax Appeals.
On October 2, 2020, the BOC conducted an enforcement operation against an illegal printing facility of cigarette packs in Cabanatuan City. And the BOC found the presence of illicit Two Moon packs in the facility.
The BOC said non-documented Chinese nationals were operating the machines when the raid was conducted. It was also reported that several Filipino factory workers were allegedly prevented from going out of the facility.
The BOC discovered that GB Global was ordering its Two Moon labels/blanks from this printing facility as shown by Purchase Orders.
The enforcement team noted that records of the Securities and Exchange Commission, ex-Mighty Corp. General Manager Greg Lim and Benson Chua are the biggest shareholders and both are directors of GB-BEM and GB Global. It will be recalled that Mighty Corp. made a tax settlement of P30B with the government and sold its cigarette business following tax evasion cases.
At the start of the year, Finance Secretary Carlos Dominguez pushed for an intensified campaign against illegal cigarette trade, saying he expects illicit trade to soar due to higher excise taxes. He said the BIR and BOC must “intensify surveillance and enforcement” against the manufacture and sale of illegal local cigarettes and smuggling of imported counterfeit products that do not pay taxes.
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