Tax stamps can boost government finances in post-COVID world

15 Aug 2020 | Press Releases

Trade bodies, government officials and NGOs have highlighted the crucial role of tax stamp and traceability programmes in boosting government finances strained by the COVID-19 pandemic.

An online webinar held by the International Tax Stamp Association (ITSA) brought together 160 stakeholders from around the world to discuss best practices for implementing a tobacco control and revenue-raising programme, against the backdrop of the World Health Organisation’s (WHO) Framework Convention on Tobacco Control (FCTC) Protocol to Eliminate Illicit Trade in Tobacco Products.

The need for such a programme has increased dramatically in the global coronavirus pandemic, which has seen government revenues plummet, deficits rise and debt levels swell to eye-watering proportions. At the same time, fraudulent trade is reported to have accelerated as counterfeiters and perpetrators of organised crime look to capitalise on the mayhem the pandemic has caused.

ITSA said properly implemented tax stamp and traceability programmes could help governments protect and recoup much-needed revenues as they battle to get their public finances back on track.

Juan Carlos Yañez, chairman of ITSA, said: “The pandemic’s strain on national economies and public health make these programmes more important than ever. When implemented correctly, tax stamp and traceability programmes are proven to deter tax fraud, make supply chains more secure, create a level playing field for compliant manufacturers and protect public health, brands and consumer confidence. In addition, most new tax stamp schemes have no upfront implementation costs so governments don’t have the hefty financial outlay upfront – vital in the current climate when public finances are stretched.

“Whether your country, state or jurisdiction currently uses a tax stamp scheme or is considering introducing such a scheme, it would be worth finding out what a modern tax stamp programme can deliver and why now is the right time to introduce or expand your current scheme.”

Effecive tax stamp programmes have three main components: tax collection, product authenticiation and track and trace. The combination of these elements can create a powerful, secure system for managing and monitoring the movement of tobacco products around the globe. Webinar attendees also discussed the importance of effective production monitoring and the need for a Global Information Sharing Focal Point (GISFP) that would facilitate the exchange of important data and best practice between countries.

Part of the debate focused on key points raised in ITSA’s blueprint for an FCTC-compliant programme. Within its blueprint, ITSA puts forward a series of recommendations on operational aspects of a tax stamp and traceability system and assignments of responsibility. The recommendations include establishing a national and/or regional database to register stakeholders (manufacturers, distributors and wholesalers) and products, and affixing on every pack of cigarettes a tax stamp issued by the competent authority of the destination market. This model aims to reduce fraudulent trade, promote best practice by adhering to the principles set out in the FCTC Protocol, and create a competitive market of T&T system suppliers and associated technology innovation.

Juan Carlos Yañez said: “Our blueprint aligns closely with the FCTC Protocol, which is an internationally recognised model of best practice for the regulation of tobacco production and distribution. Article 8 of the Protocol stipulates that the implementation of tax stamp and traceability programmes should be largely free from the influence of the tobacco industry to ensure they remain safe and secure. By doing this, it will make it easier for governments to recoup much-needed taxes, reduce crime and improve health outcomes in their respective countries.

“ITSA stands ready to support governments and other tax administrations as they battle to recover from the COVID-19 pandemic.”