Every year, about 130 billion cigarette tax stamps and 14 billion alcohol stamps are used in more than 80 countries. The combined forces of population and consumption growth continue to push these figures up, but other factors in the growth of tax stamps include their adoption by new countries, and the extension of existing stamp programmes to new products. What's more, over the last few years, many stamps have metamorphosed from traditional, paper labels with simple (or no) security features, to high-security authentication devices with integrated track and trace technology.  

So says the soon-to-be-published "Tax Stamps: A Technical Study and Market Report", which examines the current and future global tax stamp environment, while zooming in on specific countries and regions. It has been researched and compiled by Reconnaissance International, specialists in market intelligence for tax stamps via the Tax Stamp Forum and Tax Stamp News.

The original Tax Stamp Report was published in 2007 and was the first global study of its kind. It proved of value to customs and revenue departments looking to introduce or enhance their stamp programmes, and helped suppliers to identify business opportunities in countries that did not use stamps. 

A lot has changed in the tax stamp world since 2007, and following the success of the first report, the second edition will be published early this year. It will have a wider scope than the first.

For example, while the first report mostly targeted revenue authorities and suppliers, the second will address all stakeholders with a vested interest in excise tax collection from, mainly, tobacco and alcohol. This includes legislators, lawyers who draft legislation, economists with budgetary and fiscal responsibilities, investigation and enforcement agencies, and tobacco and alcohol manufacturers and distributors.

The new report will also put more emphasis on tax stamps as one of the "cogs in the wheel", albeit an important "cog". The experience of different countries shows that tax stamps cannot work alone, but then neither can any of the other "cogs", including appropriate legislation, supply chain control through licensing and track and track, border control and law enforcement, and training and education of inspectors and the public. All of these measures will be covered in the new report. 

And although the report is called "Tax Stamps", its scope will extend beyond the "traditional", paper-based stamp, to also cover fiscal markings applied directly to the product, and digital technology for authentication and proof of tax paid.

Moreover, while the first report listed the regions and countries using tax stamps, the products they used them on, and in what volumes, the new edition will delve deeper into each region and country. It will describe specific stamp systems by country, including features, technologies, issuers, suppliers, updates, and new programmes in the pipeline. In addition, it will give projected country stamp volumes to 2015, as a comparison to current volumes. 

The new report will go into more detail on tax markers used on other excise products, such as non-alcoholic beverages, mineral water and other consumable products. 

Not everybody is in favour of paper tax stamps, but most people agree that some form of secure mark is required to prove a product is genuine, to prove tax has been paid on it, and to track it through the supply chain, whether that mark is carried on a stamp or not. The second Tax Stamp Report will look at what is currently available to address these requirements, and who is using what, as well as describe how tax stamps fit into the bigger picture of a comprehensive tax and anti-illicit trade strategy.

The following gives an idea of what can be expected from each section of the report: 

Introduction 

This includes an overview of what has happened since the first report, together with an executive summary and description of the scope. 

Why Countries Use Tax Stamps 

It was only 20 years ago, when the world opened up to global trade and border controls came down, that many countries started using tax stamps for the first time, especially in Eastern Europe and the Former Soviet Union. The stamps gave governments an immediate solution to regain control over the goods - mainly cigarettes and spirits - that were being sold in their territory. 

In 1990, fewer than 20 countries were using tax stamps. Today, 81 countries use them, and at least another ten are planning to introduce them for the first time. The total number of stamps used worldwide is approximately 130 billion for cigarettes and 14 billion for spirits (in 2007 the figures were 124 billion and 12 billion respectively). 

But it is not just the quantity of stamps that is significant here; it is also the type and quality of stamps, and the wide range of products they are applied to. At least 40 countries or states have upgraded their existing programmes within the last ten years - or are in the process of upgrading them - to incorporate new security features and/or track and trace technology. About 17 countries have also extended their programmes to other products. 

So what is driving governments to adopt tax stamp programmes in the first place, and what is subsequently driving them to extend and upgrade their programmes? Furthermore, why is it that there are still 90 countries that don't use - and have no intention of using - tax stamps? 

These are the questions examined in this section; it will look at key drivers such as consumption and taxation trends, new technologies, international laws and industry agreements, and the success of the tax stamp as a driver in itself. 

How Tax Stamps Curb Illicit Trade 

There are, essentially, four kinds of illicit trade that occur at each stage of the supply chain, right up to the retailer. A comprehensive anti-illicit trade strategy that combines tax stamps or marks, track and trace systems, supply chain licensing and enhanced enforcement is the most effective way to address each kind.  

This was the conclusion of a 2009 study funded by the Canadian Tobacco Control Research Initiative, in which 30 policymakers responsible for excise tax, enforcement and customs from around the world, together with a number of international organisations, were asked to advise on the best measures to tackle illicit trade. 

This section describes the findings of the study, focusing on on how each element of an anti-illicit trade strategy - including tax stamps - is more or less effective against particular kinds of illicit trade. 

How Tax Stamps Work 

A tax stamp is more than a small strip of paper sold by a revenue authority to a manufacturer to stick on his products to show that excise tax has been paid on them. 

In essence, that is what it is. But, in order to be effective, a tax stamp programme must conform to a number of strict parameters that render it more complex and that place restrictions on the kind of stakeholders involved - especially those that supply the stamps. 

This section looks at how the tax stamp programmes of today typically operate, and the characteristics of each stakeholder. It covers legislation behind tax stamps, the specification and tendering process, selecting the right supplier, and the stamp issuing and tax collection process. The systems in place in four different countries are used to illustrate differences in stamp issuing and tax collecting around the world; these range from the traditional and manual, to the digital and highly automated. 

Technologies for Production, Application and Authentication 

This section looks at the evolution of the tax stamp, from a simple printed item without security, to a complex, multi-layered security device with track and trace capability. 

The tax stamp will be "dissected" and each of its components examined: from the substrate - which is usually paper - to the fixed and variable printed markings on the paper, to the adhesive that holds the paper to the product. 

Each of these elements - the print, the substrate and the adhesive - are candidates for security technology, thus allowing for a wide gamut of techniques, all of which are described and evaluated in this section. 

In addition, the different methods and machinery for applying tax stamps to cigarette packs and beverage containers will be examined. Included here will be wet-glue, pressure-sensitive and fusion applications, as well as the latest developments in this area. 

The section will also describe the different digital numbering and coding technologies for unique item identification. These technologies, together with their supporting systems for authentication and track and trace, are increasingly integrated into the stamps of many countries. These technologies not only apply unique codes or features, but they also generate the codes in the first place and provide manufacturer and product information within the codes. The print-on-demand, personalisation and non-impact properties of digital printing provide complementary security to more traditional technologies, which will be described in length in this section. 

The Digital Revolution

The demands made on tax stamps these days have become much more complex. They must provide fiscal verification, supply chain visibility and product authentication. This has led to considerable debate on whether physical stamps are able to meet these demands versus digital systems. The tobacco industry itself is strongly proposing the abolition of physical stamps in favour of digital marking, which is supposedly capable of authenticating and tracking products. This section looks at the factors in this debate and the fundamental differences between authentication solutions versus purely track and trace systems to inform those on both sides of the debate as to the capabilities and limitations of each approach.  

This section is written by Mrs Jeannie Cameron of JCIC International, who was formerly head of strategic advocacy on anti illicit trade and tax evasion for the BAT Group. 

Control, Investigation and Enforcement 

Although strong enforcement is considered the cornerstone of any excise tax and anti-illicit trade programme, the primary authorities involved in the administration and control of these programmes - customs and police - have generally completely distinct and sometimes competing cultures. Customs administrations are focused on revenue collection and contraband interdiction, and not the typical police functions of investigations, arrests and confiscation of criminal proceeds. And programmes are often implemented without the participation of law enforcement and investigative authorities.

Matters are further complicated by the inclination of customs towards trade facilitation, rather than trade obstruction.  

In such adverse conditions, how can enforcement officers ever hope to do an effective job? Especially if even international regulations, such as the FCTC protocol on illicit trade, are flawed as far as the enforcement process is concerned? The protocol is a hybrid health and law enforcement treaty, negotiated by a health-based organisation with no expertise or mandate for customs or law enforcement matters. Although the emphasis of the protocol is tobacco, many of the issues raised in its negotiations are applicable to other products. 

These are the questions raised in this section by Mr John W Colledge III, former US criminal investigator and consultant in anti-illicit trade. Mr Colledge examines the kind of process needed for effective control, investigation and enforcement. This includes adequate legislation, impartial economic and threat analyses, the right field authentication tools, a global data-sharing system, and secure and unique markings on products. 

The Global Use of Tax Stamps 

This is the heart of the new Tax Stamp Report. It will take a region-by-region and country-by-country look at current excise challenges affecting different parts of the world and what is being done to address those challenges, in terms of types of tax stamps and systems deployed - or soon to be deployed - issuers and producers, and successes and drawbacks. It will also look at current tax stamp volumes by country, as well as projected volumes for 2015. 

Case Studies 

In this section, a number of countries, already briefly described in The Global Use of Tax Stamps section, will be the subjects of individual reports. The reports will delve more deeply into the specific issues that have driven each country to adopt or upgrade its tax stamp system, the reasons for choosing a particular system or technology, the return on investment, and the benefits - or disadvantages - derived from the system.

Conclusion 

This will be a final word on the future of tax stamps, digital marks, and track and trace technology, in terms of drivers, volumes, systems and technologies. 

Appendix 

As a complement to the detailed country information and case studies, the appendix will feature a profile of each country in terms of demographics, consumption levels, and relevant revenue authorities. 

The tax stamp world is evolving rapidly, to reflect shifting economic, political and technological landscapes. All those with a vested interest in tax stamps need up-to-date knowledge on what is happening - and what is likely to happen - on a regional, national and global level. The aim of the Tax Stamp Report is to make sure they have this knowledge.

The Report is sponsored by a number of leading companies involved in the supply of tax stamp solutions, including API, Arjowiggins Security, De La Rue, EDAPS, Giesecke & Devrient, Goebel, Holostik India, Hueck Folien, KBA NotaSys, Luminescence, SICPA and Tullis Russell.   

The pre-publication price (before the end of February) is £675. The post-publication price is £875. Revenue and customs agencies will receive a copy free-of-charge (one copy per organisation).

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