2019 Review

Only 35% of agencies with obligations under the FCTC Protocol have or are considering implementing track and trace solutions. The tax stamp and secure printing industry appears to face the same intractable challenges time and again: solutions are pitched that never go to tender; tenders are issued but are never awarded; awarded tenders are challenged both in court and in the media; tenders are awarded for solutions that are never implemented; intentions to expand to other products never materialise; implementations are criticised as being ineffective; contracts are not renewed; or conversations around tax stamps and secure marks simply don’t even come up.

The presentation will explore the drivers that explain why tax stamp and secure marking programmes meet with less success than they could (or should), mostly as a result of shortcomings in tax administrations and agencies – from the lack of a burning platform, limited conceptual understanding of both the issues and the potential solutions, challenges around costs and funding models, being unprepared for industry push-back, and difficulties in leveraging potential allies. It will also provide some insights into how solution providers can change the dynamics.

The continuing success of counterfeiting and illicit trading in the alcohol and tobacco sectors has relied on the ability of criminals to copy authentic tax stamps to near perfection. Just as the science and artistry behind genuine tax stamps continue to evolve, so has the power of criminals to source and apply fake stamps that are astonishing in their ability to fool the market until they are detected either by chance or through robust forensic investigation.

In this talk, I argue that the success of the criminal sector relies on exploiting a fundamental psychological property of all humans, whether they are trained inspectors or lay consumers. I will describe this phenomenon and then propose a transformational solution that is based on two critical reforms – mitigating the psychosocial factors that allow criminals to succeed, and applying the right stamp design to assure total success of any programme that chooses to adopt it.

The emergence of a new generation of security solutions promises to galvanise the tax stamp sector and uproot long-held beliefs in this area. These disruptive technologies represent an entirely new way of thinking on how best to secure excise revenue and with it, the very products that consumers worldwide need to place their trust in.

As signatories of the FCTC begin preparations for compliance with the tobacco traceability requirements the EU has led the way by establishing detailed legislation and requirements in preparation of their May 20, 2019 launch. Multiple years of effort resulted in a detailed system with defined roles for numerous stakeholders including tobacco manufacturers, IT companies, traceability solutions providers, security printers, and Member State authorities. As others make plans for FCTC compliance it is worthwhile to evaluate the EU TPD to see which aspects could serve as a best practice elsewhere. Authentix will share its views on the positive and negative aspects of EU TPD. We will draw upon our experiences as a provider of a TPD Unique ID Issuance platform as well as a provider and supporter of comprehensive tax stamp programs.

With the implementation of the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products, dozens of countries are set to establish fully compliant regional and national track and trace systems by 2023. In this presentation, we provide a gap analysis by observing the prevailing tax stamp systems and outline key upgrades which are fully in line with FCTC Protocol guidelines, in particular with the provisions of Article 8.

Illicit trade stunts economic growth, damages brands and puts the health and safety of consumers at risk. As populations grow, consumer demands increase and international trade develops and grows in complexity, as do the challenges of illicit trade. These factors, combined with a trend for regional integration and a need for truly global authentication solutions, means a new approach to the track and trace market is needed.

De La Rue’s presentation will focus on an integrated next generation solution for track and trace that delivers regulation compliance, best practice and interoperability for all involved players. By drawing on first-hand experience to demonstrate this approach, De La Rue will clearly illustrate the benefits for both excise revenue collection and an easier route to industry implementation, in a combined and continued fight against global illicit trade.

Tax stamp producers regularly meet the demand of supplying cheaper tax stamps to the issuer. In business meetings we often hear the words ‘just provide me the minimum required security features and ensure the product is as cheap as possible’. But does reducing security really reduce the costs significantly?

What solutions can be chosen that provide a higher level of security but that do not increase the costs?

Ths presentation will provide cost-benefit analyses of different document security devices, with the pros and cons of their use. Moreover, the presentation will evaluate these devices with regard to the available space – which is getting smaller and smaller. Suggestions will be given to choose the most appropriate solutions/combinations.

This paper describes the digital services that we have implemented to simplify tax compliance for our taxpayers and at the same time ensure greater tax collection and address other tax challenges. We will describe the most important digital services and the solutions we have found within our tax administration processes (in total we have about 150 electronic services available for our taxpayers).

The Commissioner for the Tobacco Market (CMT), under the Ministry of Finance, is the competent body in Spain to safeguard the neutrality and free competition of the tobacco market within the national territory, by means of its regulatory and oversight functions, as well as by ensuring compliance of market operators with all regulatory regulations. The CMT also administers and supervises the State Tobacco and Stamp Expender Network and acts as an interlocutory body with market operators.
FNMT-RCM acts in Spain as a manufacturer of tobacco stamps and as the issuer of unique identifiers.
Both organisations have been involved in the development of a joint project that guarantees the traceability of tobacco products, and which is expected to serve as an example in other sectors suffering the effects of counterfeiting and parallel trade.

Currently in most countries/economies, like ours, different government agencies have a requirement for a mark to show compliance. A good example is the Kenya Bureau of Standards which requires a mark on locally produced goods and imports (a mark of conformity) and Kenya Revenue Authority which requires an excise stamp on excisable products. Other government bodies/agencies will also have to approve either products or companies and this means that a manufacturer or importer will have to bear the cost of all these marks.

The idea is to transform the Revenue Authority stamp into a single government mark of compliance for all agencies, which means that all approvals by these different agencies would pass through the same platform. The final approver would be the Revenue Authority which would also be the issuer of the tax stamp. This paper/digital stamp would then carry all the information required for companies to demonstrate compliance, thus making the cost of doing business cheaper (they would only have to pay for one mark/stamp). Furthermore, a product would not lose its appeal by being crowded with all manner of ‘government stamps’.

This presentation will cover the following points:

– Brief history of Sri Lanka Customs;
– Pilferages, leakages and illegal removal of foreign liquor products from duty-free shops and service bonded warehouses;
– Proposal of tax stamps for duty-free liquor under customs control;
– Budget proposal for application of tax stamps in Sri Lanka in 2016;
– Gazette notification of June 2019 for implementation;
– Sri Lanka Customs takes the lead to implement tax stamps on liquor products sold at duty-free shops from July 2019.

We talk a lot about security design as an important part of a secure document. As a basic rule, we emphasise that in secure design/printing basic CMYK colours and commercial screens/raster graphics should not be used, but at the same time more and more security products are being printed with digital printing technology.

In most cases, security design is connected to key security elements such as a guilloche, microtext and latent image. But these elements can only protect a product if they are designed and printed according to very strict rules.

If a security document printed with digital technology could risk looking like a forgery, the question is: should we even be using digital technology to print security designs?

Notwithstanding this question, digital printing is more and more used in the security printing industry not only for personalisation but also for printing the core design; therefore, we need to understand what is possible and what is not in order to produce quality security products.

The main advantage of digital printing above conventional printing is not just the possibility to include unique information on each stamp in the form of serial numbers or barcodes. This is already in place for tax stamps globally.

Advantages of a totally digital solution are that the technology is easy to implement, it offers security printing in an efficient way and results in a high ROI by reducing costs.

However, the key question still is: can a tax stamp be printed 100% digitally to achieve the level of security to combat counterfeiter and deliver track and trace?

The answer is yes, it is already a reality.

Unlike a conventional process, dry toner technology provides a complete security solution from design to print with zero stock.

As well as anti-counterfeit features previously only available in conventional printing, the technology offers new and unique security features that can be applied in a flexible and affordable way.

Governments no longer require multiple printers and processes but can implement this in house, with a single pass process, or alternatively outsource to a security printer.

Xeikon offers practical solutions for tax stamp programmes globally.

The scope of a tax stamp is to provide evidence that duty for a product has been paid (or not paid). At the same time, it needs to be secure to ensure protection against counterfeiting.

The KURZ tax stamp solution provides a simple way to manage the whole lifecycle of every single tax stamp.

The connection of physical tax stamps to software opens up an entire new world and new functionality.

The solution allows revenue authorities to proof the authenticity of the tax stamps, as well as control the ordering, production and supply chain process. Data aggregation, product information and reporting modules complete the system.

The list of new functionalities for tax stamps has endless opportunities – depending on the needs of revenue authorities for their tax stamp programme.

The presentation will provide an insight into the world of modular, functional tax stamps and show how digital processes help revenue authorities in their daily work.

This paper covers the topic of blockchain and covert security features, addressing questions such as: how is blockchain impacting secure track and trace and where has it been implemented, how could blockchain fit into a track and trace solution under the FCTC Protocol, and what if covert security alone was enough?

During the last decade, the European Union approved directives and regulations with the aim to counteract the illegal markets in the pharmaceutical and tobacco product sectors. The two regulatory frameworks emerging from the European Commission activity are deeply different.

For tobacco products, the EC established a clear distinction between traceability systems and anti-counterfeiting features (codes and databases on one side, security printing technologies on the other), while the medicines’ traceability system defined in the European Regulation 2016/161 considers the coding system and traceability database strong enough, in itself, to guarantee the pharmaceutical product anti-counterfeiting.

The Italian experience in the control of the pharmaceutical market, based on the Bollino Farmaceutico security stamp, is the combination of a traceability system managed by the Italian institutions, and the security printing features of Bollino Farmaceutico.

The Italian system is the most effective anti-counterfeiting and traceability system for the pharmaceutical market in Europe. It traces every packet of medicine sold in Italy, in every stage of the packet lifecyle (from production to the pharmacy, in an e-pedigree monitoring model), with the complete integration of traceability, anti-counterfeiting and national medicine reimbursement systems.

The paper will show the effectiveness demonstrated by the Bollino system in Italy and in other European countries (with real investigation cases and evidence) with the explanation of why security printing is still the only way to distinguish the original from the fake.

The oil marking process in Mozambique started last year on 1 August and is being run both by the Ministry of Energy and Mineral Resources and the Tax Authority, to solve the problem of oil adulteration that was causing harm to the environment and vehicle performance, on the one hand, and the loss of fiscal revenues due to transit oil smuggling into the domestic market, on the other.

While the Ministry guarantees a better oil quality to consumers and has the authority to define the mechanism of control of commercialised oil product characteristics – which must be done through a system that allows the systematic verification of oil products in all marketing stages – the Tax Authority looks after revenue collection and is responsible for the implementation of anti-smuggling measures.

To better assess the situation, prior to the programme, a pilot project was held in Beira, which revealed that kerosene was being used to adulterate diesel and that the country was losing roughly $40,322,580.00 per year.

So, it is the objective of this paper to present the Mozambique experience in oil marking and how the expectancies of efficiency in oil quality control and revenue collection were achieved.

New technologies for tax stamps are evolving into more complex and complementary solutions. Tax stamp designers are being forced to make tradeoffs between, on one hand, maximimising security while allowing for ubiquitous non-proprietary reading systems, and, on the other hand, achieving a cheap and fast solution. Unique elements that are impossible or impractical to reproduce have a key role to play in this context, and one of the current challenges is to design and print a tax stamp both with all the traditional security elements and a unique, machine-readable and unclonable element.

In this paper we present the UniQode system for tax stamps. UniQode allows for the use of a cryptographic graphic code along with holograms and/or ink mixed with special visible metal particles (glitter). The hologram or glitter inks will produce a random pattern which, according to the disorder and chaos theory, is not possible to reproduce as is, thus constituting a physically unclonable function. To avoid the need for a database, a cryptographic code is printed with some minutia of the unique elements, thus allowing for an offline validation of the authenticity of the tax stamp.

Rotarylogic (RL) and a leading international foil supplier are developing a new and extremely novel method of embossing a registered cross foil, which can be full width or in the form of sections across the web. This process has been developed exclusively for the tax stamp industry.

The application of a registered cross foil raises the level of difficulty for counterfeiters. The special cross foils have to be generated by the foil producer, which allows for total security in the production process.

RL foil application software technology has allowed the creation of this new form of anti-counterfeiting and brand protection, not previously possible with conventional techniques.

The report looks at the causes of the illicit tobacco trade and how governments can protect tobacco excise duty revenues based on well planned and designed tobacco taxation and appropriate enforcement. Notably, we would present these elements of our analysis:

– Correlation between tax yield and level of illicit trade, also affordability vs enforcement;
– Comparison between tobacco and alcohol that demonstrates how affordability becomes a principal driver of illicit trade, even more so in the absence of adequate enforcement;
– Some specific country case-studies, eg. from Russia, looking at all the factors that contributed to the recent growth of illicit tobacco trade;
– Resulting insights into the need to align taxation strategy and anti-illicit trade measures.

Our intent is that by clearly identifying and explaining the root causes of illicit trade, the focus of governments, regulators, enforcement and other influential stakeholders will shift to tackling both illicit demand stimuli and supply development in a unified way, resulting in more focused, cost-efficient and effective preventative measures being adopted.

The tax stamp industry in India has been in existence for almost 21 years, during which time it has gone through major transformation. From the first thin glassine-based paper to holographic tax stamps and now the new generation tax stamps with physical and digital authentication, the industry has noticeably shifted towards authentication and track and trace. There are important learnings from this shift, both good and bad. My presentation will provide an overview of some of these learnings, as well as look at market size and recent trends and developments.

Counterfeiting is a serious and critical issue for security printers, end users and authorities. Intergraf’s mission is to protect this highly secure industry and contribute to the fight against fraud with the help of certifications.

Intergraf has been developing standards for security printers and their suppliers for more than 15 years and initialised the development of the CWA 14641, CWA 15374 and, more recently, the ISO 14298 standard in cooperation with representatives from standardisation institutes and industry experts from 25 countries and 5 continents.

The certifications started in 2000 and since then been a recognised reference for governments, tender issuing authorities and other end customers to guarantee high-quality security management system and to help fight against counterfeiting of printed matter, such as ID documents, passports, credit cards, banknotes, stamps, tax stamps, tobacco and alcohol banderols.

Throughout the world, Intergraf certificates stand for trusted security printers and trusted suppliers to the security printing industry and are integrated in many tenders every year – over 130 certified production sites in more than 50 countries rely on Intergraf certifications.

This presentation will show how to benefit from using ISO 14298 certification according to Intergraf Certification Requirements as a cost- and timesaving tool in tender documents and as a strategy to prevent security breaches.