2022 Review

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The digital tax stamp solution for the Republic of Malta covers multiple product sectors from FCTC/TPD compliance on tobacco products, to securing excise revenue on fermented drinks and lubricating oils.

This white paper reviews the challenges faced in successfully implementing such a wide-ranging programme, detailing the product and sector-specific customisations chosen, while ensuring consistent cross-government traceability and enforcement.

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The positive – and less positive – aspects of the EU tobacco traceability programme, and recommendations for an optimum system that works both inside and outside the EU.

These are important times for global tobacco track and trace systems.

On the one hand, the EU Tobacco Products Directive is undergoing a mandatory periodic review and, on the other, the parties to the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products have until 2023 to implement the track and trace provisions of the Protocol.

In light of these global developments, this paper looks at what we’ve learned so far with regard to tobacco track and trace and what should be the best practices for government authorities to take on board going forward.

We developed a simulation model to determine the breakeven cost of track and trace (T&T). The model determines the price of a T&T marker (such as a tax stamp) that sets additional revenue from T&T equal to the total cost of setting up and operating T&T. This means that a government would fully recovered its T&T expenses by collecting additional tax revenue. If the price of a marker is lower than the breakeven estimate, the T&T system would generate additional revenue.

This Excel-based model uses basic economic principles and is easy to operate. We created a three-stage, Excel-based simulation model for South Africa, but the model can be customised using data from any country.

With the requirement for digital tax stamp (DTS) solutions that meet the requirements of the World Health Organization Framework Convention on Tobacco Control, getting ever closer, De La Rue will share its experience gained through the implementation and operation of multiple FCTC schemes over the past two years.

The presentation will explain the approach for the solutions implemented, the challenges of this process and the requirements for ongoing efficient operation.

It will also discuss the relationship between printed tax stamps and track and trace coding, the role of each in an overall solution, and how these can be used together to gain additional advantages.

Finally, to share best practice and assist future implementations being considered by national tax authorities, the presentation will discuss use cases and lessons learnt from the schemes currently in operation.

As government authorities are looking for solutions that bring transparency and mobilise revenue beyond the market of traditional excisable goods, the ease of integration with external systems becomes more and more important. Technological requirements continue to evolve, and with it, the solutions available to address these needs. This presentation will introduce SICPA’s new technology stack, innovative capabilities, and broader product categories available for government authorities.

Item-level traceability of tax stamps has gained popularity. While standard visible barcodes deliver the traceability function, invisible barcodes double as a reliable covert security feature provided the taggant material is strictly controlled.

The presentation will focus on the challenges of ink jetting inorganic luminescent materials, employed as covert taggants, to print latent text and barcodes. It will describe the methods of preparing the jet taggant ink, the barcode scanning both in production and in the field, as well as the advantages and limitations of digital printing with ceramic taggants.

Governments are extending tax collection programmes beyond traditional luxury products such as tobacco, wine and spirits to finance post-pandemic economic recovery and health care programmes. Examples of these new markets are soft drinks, beer and water, to name a few.

While physical tax stamp technology has been used to address traditional market requirements using track and trace systems and labels and enhanced security features, their application to new markets may become challenging due to several reasons.

First, products such as beer and soft drinks are less expensive than luxury goods such as tobacco and spirits. This makes manufacturers more price-sensitive and requires an optimised project cost.

Second, production line speeds are faster and labeling products may reduce the line performance.

Last but not least, product shapes and colours are variables and adding labels to the same production line is challenging. It may also raise some concerns related to the product brand.

Digital tax stamps can be an interesting alternative to physical tax stamps and allow us to overcome some of the limitations of physical stamps. In this presentation, we discuss various challenges related to using digital tax stamps directly printed on products. We also present a novel approach involving AI-based security features that allow new markets to reduce implementation cost, keep the line performance and open the door to new opportunities towards an intelligent supply chain.

In the world of security printing, the words ‘digital printing’ are sometimes used to refer to a forgery or technology used by non-professionals. Security printing has always used state-of-the-art technology and, even today, in this digital/IT world, new developments in security printing are still continuous.

Some of the biggest requests from end users, besides the need for a high level of protection and simple authentication methods, are requests for flexibility, short delivery times and small production batches. So, how we can meet all of these requests with a cost-effective solution that doesn’t make compromises.

The answer lies in digital security printing, but we also need to understand the challenges that come with this, such as:
production workflow, including the physical security of products; the need to comply with the same standards that exist for ID documents and analogue security printing, authentication and the education of personnel, how to authenticate the products… and many more.

In the last decade, our entire world has changed, and that change is no longer linear, it is exponential!

We’ve changed dramatically as consumers!

Even our basic needs have changed with the digital revolution, and the Print is no exception

However, the adoption of digital printing for Security is limited, mainly due to a lack of available technology, the recent epidemic has shown us how important a quick response is in issuing personal documents that can be verified through unskilled people.

This is where HP Indigo Secure comes into the picture – to fill the gaps, with advanced secure digital printing technologies.

Whether it’s the forgery of identities, travel documents or vaccination certificates, document fraud is on the rise. Visible digital seals (VDS) protect paper-based or digital documents like tax stamps and make them impossible for criminals to counterfeit.

We provide insight into how a VDS works and give an overview of existing specifications and examples of where VDS is already in use and part of our daily lives.

We also present a guideline of the anatomy and structure of a modern tax stamp using a VDS.

But how can we protect VDS codes against copying if it comes to direct marking?

The presentation will provide an insight into the world of anti-copy and anti-cloneable codes and how the VDS could be a part of it.

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The use of tax stamps ensures the adequate collection of fiscal revenues and helps to combat illicit trade in alcohol and tobacco products. Curtailing criminal activities in this area is a challenge faced by border protection/customs authorities globally. Tax stamps are one of the most effective monitoring, control, and enforcement systems, that can be adopted by customs administrations to prevent leakages of lawful revenues due to the state. Successful anti-fraud strategies must be evidence-based and targeted to the nature of the fraud, and effective implementation will depend on well-designed and resourced surveillance systems.

Sri Lanka Customs implemented the Foolproof sticker system on imported liquor in 2019. However, due to various technical issues, as well as at the request of local manufacturers, implementation of the system on locally manufactured alcohol and tobacco products was delayed until January 2022.

The Governor of the Central Bank of Sri Lanka announced in January 2022 that ‘… government is expecting additional excise tax revenue of 60 million rupees (USD300,000) monthly by implementing the Foolproof sticker system’.

This paper will describe the Foolproof system as well as present a case study demonstrating enforcement techniques used by Sri Lanka Customs with regard to a large illegal export of foreign cigarettes to Europe in early 2021.

Capturing product samples globally, via a single interface: Tax Stamp, Cigarette Waste and Market surveys Presentation of methods used to detect tax stamp fraud and smuggling in the tobacco industry. How to organize large-scale surveys capturing cigarette packaging waste. Suspicious patterns in survey data.

When excise tax stamp systems are being planned, rolled out or renewed, thought needs to be given to the longevity and future proofness of the system. This presentation outlines the role of thinking in terms of functional units that make up a system, rather than getting tied up in a silo.

The basic assumptions of ISO 16678:2014 (for interoperable object identification and related authentication systems) and ISO 22381:2018 (for establishing interoperability among object identification systems)
are recaptured in this presentation. In particular, the role of a third-party unique identifier (UID) issuing instance is highlighted in detail.

U-NICA is a leading Swiss provider of digital product protection and authentication solutions.

We use the latest technologies in image processing and machine learning, which enables us to offer solutions to a wide range of markets.

To ensure the highest security standard, copy-proof visible and invisible digital security technologies are applied. To keep the copy protection and security barrier as high as possible, multiple digitally linked security features are added to the tax stamp. This layered approach to brand protection is our philosophy and the reason it allows us to guarantee such a high level of protection.

U-NICA’s digital security technologies are securely authenticated using mobile devices such as smartphones or tablets. Once the customers have downloaded our intuitive app, they can check the authenticity of the products they have received.

All generated verification results including the corresponding geo-data can be viewed in real time using our cloud based scryptoTRACE web portal. This online platform is the central control and management unit of U-NICA’s digital security platform. All product verification results and global product movements as well as the designs and layouts of the tax labels are stored here.

Digital Variable Embossing of Holographic Images Revolutionises Anti-Counterfeiting

Nanografix Corporation/Hologramas de Mexico Group was founded in 1984 by Dan Lieberman to develop and market brand protection and document security solutions based on holographic and optical structures.

For over 30 years, major recurring questions with hologram applications have been:

• Is there a way to manufacture holograms or optical structures instantly in such a way that each one is unique and variable?
• Is there a way to manufacture holograms that is more effective and less expensive than embossing and UV casting?
• Can the production of holograms and optical structures be integrated within the printing process in a single pass to improve productivity and minimise supply chain disruptions?

In the last 15 years, Dan Lieberman has focused his R&D on finding the right answers, and he is now introducing a novel technology where a 3-dimensional optical structure is directly digitally ‘printed’ on a substrate (paper, board, polymer), with variable embossed digital holographic data embedded in the optical structure that can be read either with a proprietary scanning device or with a smartphone app.

With this technology, printers will be able to create their own variable embossed holographic images in-house and on the fly on their printing press. Digital variable embossing of holography just becomes one extra ink in the printing process, that falls in register with the other ‘inks’ in a single pass, thanks to a dedicated print attachment designed as an add-on to existing web- or sheet-fed presses.

Process steps are:

a. A proprietary software collects original images and prepares them in a special file that is stored on a database and is ready to be sent to the optical print attachment. The print attachment control system then feeds a different optical or holographic image together with different data to each printed document, at a printing speed compatible with that of banknote, security document or packaging presses. Images may also contain overt and covert optical security features that are also unique to each printed document.
b. Inside the print attachment the special file ‘prints’ a pattern on the substrate in register to the other inks already printed by the host press.

To fully understand the concept of the technology, optical structures must be thought of as a combination of patterned relief (similar to engraving, embossing or to the tactile effect of intaglio ink on paper) and tiny dots of inks (pixels) entangled in the patterned relief.

Being configured as an attachment, the optical print unit can be easily implemented as a retrofit on any offset, flexographic, digital, or numbering press, as well as on an inspection or finishing machine. Its operation does not require any extra handling and storage of printed security material.

That innovative technology achieves the long sought out physical-digital convergence of security features, reaching an all-new level of document security and counterfeit deterrence, whilst making holography affordable for the first time in a wide range of applications.

It is ideal for banknotes, ID documents, and brand protection, enabling instant authentication through machine-readable personalised features.

Adding serial numbers and barcodes to revenue tax stamps creates a unique identifier for each individual stamp and is the basis for traceability. The further addition of covert UV fluorescent and/or IR security features provides hurdles and challenges for counterfeiters. These covert features can be applied as variable images, random patterns as well as alphanumeric codes and/or barcodes.

Advanced quality control solutions can inspect and verify both overt and covert features. The systems can create a special data file, combining the retrieved data from the features. This data can be used to track the stamps through the finishing and packing process. The final version of the data file can then become the basis for a unique and reliable track and trace solution.

In India, TAX Stamps were introduced in the 1990s. Since then, tax stamps playing a robust authentication solution used by various State Excise Department authorities to curb the illicit trade, protect consumers, and increase excise revenue. Today, more than 22 States (including Union Territories) in India use approximately 22 billion tax stamps per annum. Over the year, there has been an evolving upgrade in tax stamps security features & many of them are now adopting a phygital approach. The presentation will provide an overview, trends, statistics, and updates on India’s latest phygital security features and innovations on tax stamps.

Through a mix of software and hardware solutions, the tax stamp industry has seen significant technological advancement in security, authentication and track and trace capabilities. Within this, there has been a renewed focus on using secure unique identifiers in an overarching system to provide a multifunctional tax stamp to 150 jurisdictions globally. Despite the stellar advancements in unique identifiers used in the tax stamp industry, a recent study by Kurti et al (2019) found that over 23% of New York City cigarette tax stamps from 2,357 tested were fake, citing mismatches in the microscopic features on the stamp.

Here, we present Optical Q-ID as a simple, cost-effective solution to the problem of anti-counterfeiting, authentication and track and trace supply chain management, leveraging quantum mechanics. At the atomic scale, everything is unique; Q-ID tags employ materials, whose external properties are defined by nanoscale, macroscopic imperfections. A smartphone, with no additional hardware, reads a unique ‘quantum fingerprint’ identity from the tag and verifies it was generated by a quantum material, making cloning and simulation impossible. In essence, the world’s first quantum secure tax stamp technology, empowering all in the global supply chain to be the custodian of product security, armed with just a smartphone.

Kenya commenced the implementation of its track and trace technology in 2013 when the Excisable Goods Management System (EGMS) was progressively rolled out.

It was also noted that other than the excise laws, there are other laws in Kenya that require products to be marked for different purposes. In view of this, some products end up with multiple marks/stamps and manufacturers and importers must incur additional cost for acquiring the multiple marks as well as affixing them.

Kenya is in the process of reviewing the multiple regimes for product marking with a view to consolidating all regimes into one integrated product marking system.

This is expected to create synergy in the fight against illicit trade by bringing together the agencies responsible for fighting tax evasion, illicit trade and counterfeits, among other issues. In addition, it is expected to improve the ease of doing business in the country by reducing the cost of acquiring government marks, the cost of affixing the marks, and the time taken to obtain approvals from the multiple government agencies, among other benefits.

The legislation in Chile has allowed for the adoption of product traceability since 2016. This paper presents Chile’s experience in the application of fiscal traceability on cigarettes and its potential extension to other products.

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Mr. Mandiola is currently head of FMA Corp, a strategic advisory firm that helps both private companies and government entities, primarily in Latin America, with their adaptation to the latest digital, security and business environments.

Mr. Mandiola began his career at a lobbying firm in Washington, DC, before entering the banking world at Lloyds Bank and then returning to Chile to Banedwards (now Banco de Chile).  He has held several executive roles in different companies and was Managing Director of SKY TV, DIRECTV, and Turner/TimeWarner in Chile as well as working for the Chilean government as Managing Director of Casa de Moneda de Chile (Chile’s State Mint and Printing Company).  In this last role, Mr. Mandiola was influential in promoting the use of Tax Stamps, which resulted in the eventual adoption of such a system by Chile’s Tax Authority.

Due to his experience, Mr. Mandiola is a frequent invited speaker at international conferences, as well as a registered consultant for ITSA (International Tax Stamp Association) and Reconnaissance International.

Mr. Mandiola holds degrees from Georgetown University in Washington, DC, and the University of California at Irvine, as well as political studies at the University of Essex.  In 2019, Mr. Mandiola was certified as a board member by the Universidad de Los Andes in Santiago.

Until the early 2000s, even the electricity was an issue in Georgia, not to say anything about electronic services. This meant that, after the collapse of the Soviet Union and the Wars in the 90s, in Georgia, neither were the governmental offices, nor the individual households supplied with electricity on a regular basis.

Therefore, all tax administration and tax services were entirely conducted on paper-based forms in Georgia. The offices were poorly equipped with information technologies. On average, 1 computer was shared by 60 tax officers. It was practically impossible to make any kind of analysis, such as comparing taxpayer’s data of similar business. It was equally impossible to implement risk-based tax audits; there was almost no exchange of data between governmental bodies and so on.

However, since then, significant results have been achieved in Georgia to the extent that the Revenue Service is now one of the most advanced and rapidly developing tax administration in the world. In this presentation, the Georgia Revenue Service (GRS) will present the digital administration and services that are provided to its users. The presentation will cover existing services, as well as new initiatives that are in the process of development and/or implementation at GRS. Additionally, the presentation will cover recent updates regarding the excise stamps and traceability that had already been implemented in recent years and which are now undergoing an upgrade under the new contract signed with SICPA in 2022.

What will influence the design of the tax stamp or secure label of the future? One thing seems certain; these designs will be influenced by the need to interact with new technologies. The aim of this presentation is to examine likely routes that these technologies will take so we can plan for this and best identify the threats and opportunities these will bring.

Smart or intelligent packaging is a concept that is becoming reality. As the term ‘smart’ becomes extended to cities, homes and manufacturing we need to consider the implications for traceability and the designs of tax stamps and labels. Internet of things and 5G connectivity will surely have an influence here.

We often discuss smartphone interaction of tax stamps and labels, but we should consider how this may look in the future. We may be better placed by considering this as interaction through mobile devices such as wearables. The smartphone itself is subject to evolution to other forms.

Finally, we will examine the potential for new technology players to disrupt this market, either by design or as an inadvertent consequence of their activities.

This presentation will give an overview of international standards relevant to tax stamps. This includes ISO 22382:2018, of course, as this is the standard for tax stamps. But there are others that are relevant, such as ISO 14298, on the management of security printing processes; ISO 22383 guidance on authentication solutions for material goods; GS1’s Global Traceability Standard and ISO’s interoperability standards for anticounterfeiting systems. I will highlight the key points of each standard, looking at why and how they are relevant to the design and production of tax stamps.

ISO 22382 is due for review in 2023, in line with ISO’s five-year review procedure, so In the second part of the presentation, as Project Leader for this standard, I will examine what should be covered in that review. In particular, I will consider the pros and cons of converting it from a guidance standard to a compliance standard – i.e. so organisations can be certified that they comply with the standard.