The 3rd Tax Stamp Forum took place September 12-14, 2011 in Washington DC. Its focus is on the deployment of technologies and systems that increase government revenues and decrease trade in contraband and counterfeit products through fiscal verification, supply chain security and product authentication.   

The programme was divided into sessions as follow:  

- Session One: the Tax Stamp Environment -  tax evasion, smuggling, counterfeiting and the role of organized crime  

- Session Two: Practical Counter Solutions - implementation, investigation and enforcement 

- Session Three: Production, Authentication and Track & Trace - technology solutions that offer fiscal verification, supply chain logistics and/or product authentication  

- Session Four: End-to-End Systems - case studies demonstrating the successful implementation of tax stamp programs around the world.  

Click here to download the brochure   

Monday, September 12

2.00pm-5.00pm - Workshop - the Technology Behind Tax Stamp Security
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6.00pm - Cocktail reception 

Tuesday, September 13

9.00am - Welcome and Introduction
Astrid Mitchell, Reconnaissance International

SESSION ONE: The Tax Stamp Environment

9.10am - Understanding Cross-Border and Illicit Trade in Tobacco Products
Loren Yager, US Government Accountability Office (GAO)  

In June 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act (Pub. L. No. 111-31), which directed GAO to report on illicit trade in tobacco products. This presentation examines (1) incentives that are important for understanding cross-border and illicit trade in tobacco products; and (2) different schemes used to generate profits from cross-border and illicit trade in tobacco products. Tobacco products face varying levels of taxation in different locations, creating opportunities and incentives for illicit trade. For example, cigarettes are taxed at the federal, state, and in some cases, local levels. According to industry representatives, taxes and other fees make up significant components of the final price of cigarettes, averaging 53% of the retail price. A wide range of schemes are used by different actors to profit from illicit trade in tobacco products, mainly through the evasion of taxes. Schemes can range from individual consumers purchasing tax-free cigarettes from Internet Web sites, to larger-scale interstate trafficking of tobacco products, to smuggling cigarettes into the country by criminal organizations. 

9.30am - International Regulations Relating to Tax Stamps – Challenges and Opportunities
Jeannie Cameron, JCIC International (formerly BAT)   

With the growth of global illicit trade, especially in products that are subject to excise tax such as tobacco and alcohol, there is a growing need for governments to do more to protect revenue streams that fund essential services and infrastructure.  Verification of the payment of taxes and duties is therefore of fundamental importance to economies.  The Framework Convention on Tobacco Control (FCTC) is a global treaty negotiated by over 190 governments and provides an international legal framework for all areas of tobacco control including measures to prevent illicit trade.  The treaty requires all ratifying governments to implement measures to reduce illicit trade and specifically requires them to consider tracking and tracing measures.   In 2006 the FCTC Conference of the Parties agreed to negotiate a Protocol to provide detailed provisions including measures to secure the supply chain and ensure taxes and duties are not evaded. This presentation will outline the measures contained in the FCTC and its developing Protocol as they relate to supply chain security, tracking and tracing, product authentication and tax verification.  While the presentation will focus on tobacco as the leading industry affected by this type of product related international law, it will be relevant for alcohol and other products. 

09.50am - Excise Taxation and Illicit Trade: Balancing Tax Policy and Administration to Optimize Revenues
Elizabeth Allen, ITIC (International Tax and Investment Center)

This presentation will focus on optimizing revenue from excise taxation on alcohol and tobacco products through a strategic approach to tackling illicit trade. How can excise taxation policies support the fight against illicit trade? What are the other significant factors in a strategic approach to countering illicit trade in alcohol beverages and tobacco products? What part can partnerships play in a successful anti-illicit trade strategy? What administrative policies, skills and tools can revenue and customs administrations deploy to improve their effectiveness? Are tax stamps the right direction? How can new technologies be used to reduce counterfeiting, reduce compliance and administration costs and improve collection rates?

10.10am - The US Master Settlement Agreement
Michael Hering, National Association of Attorney Generals (NAAG) 

10.30am - Questions

10.50am - Break and exhibition viewing

11.20am - Illicit Trade in Tobacco Products in Latin America and the Caribbean
Alejandro Ramos Carbajales (consultant and member of the FCA) 

This presentation will address the present reality of illicit trade in the region, covering governments and the reality of not doing enough to combat this trade, the reasons being scarce resources are scarce and legislation that is inadequate to provide law enforcement. The role of some key countries like Paraguay and the free trade zones in the Caribbean in promoting a growing illicit trade in cigarettes will be discussed, as will illegal manufacturing as the principal form of illicit trade in the region vis-a-vis counterfeit in other regions. Tax stamps and other forms of traditional controls are not effective and this will be discussed too, along with a list of countries and their use (or otherwise) of such controls. The presentation will conclude with a list of requirements to reduce illicit trade and the constraints that apply to these.

11.40am - Tax Stamps - Latest Market Statistics and Analysis
Glenn Wood and Nicola Sudan, Reconnaissance International 

In late 2007 Reconnaissance International published Tax Stamps: a Technical Study and Market Report, the first study of its kind to examine and analyse the evolution and implementation of tax stamp regimes around the world. But much can change in the space of just a few years. And due to demand, following the success of the 1st edition, the 2nd report is now underway, to be published in late 2011. The latest report will contain a wealth of updated facts and figures on the proliferation of tax stamp programmes around the world and the factors driving their deployment.  This presentation, from the Report’s authors, will provide a preview of the latest figures in terms of consumption and tax stamp usage, an overview of the new technologies that are being now being deployed, the spread of programmes from tobacco and alcohol to beverages and other excisable products and the political, regulatory and fiscal driver that hold the key to the market’s growth.   

12.00pm - Criteria and Methodology for Effective Tax Stamp Programs in Different Economic Environments
Nina Valieva, Kyrgyzstan State Agency for Information Resource & Technologies (former)  

Every state wants to secure its budget revenues, and excise stamp schemes have proved to be very effective in helping this task. But sometimes the expectations are so high that excise labels are viewed almost as a miracle tool, enabling full collection on their own of excise to government budgets. If this doesn’t happen as expected, the excise stamp scheme is discredited. In order to avoid this and to introduce fully customized schemes, we believe that it is important to work out certain criteria excise stamp scheme effectiveness in different economic environments. This presentation will take into account such factors as the dynamics of budget revenues and the development of a legal market in excised products, the circulation of counterfeit stamps and accessibility of all market participants to the relevant data. It will also propose a methodology to analyze the following data for the purposes of excise stamp scheme feasibility studies:
-  state objectives for using excise regulation;
-  consumption of excised products;
-  determination of market volume of excised products and growth potential;
-  statistics of budget revenues and dynamics of changes in state legislation regulating the market of excised products;
-  levels of contraband;
-  tax legislation and level of consumption in neighbouring countries.

12.20pm - Questions

12.35pm - Lunch  

SESSION TWO: Practical Counter Solutions

2.00pm - The Challenges of Introducing Digital, Encrypted Track & Trace Tax Stamp Systems
Keith Canning, American Wholesale Marketers Association   

This presentation will review the shortcomings and financial burden of the current tax application system and the new digital tax stamp system that Keith Canning's company, wholesaler Pine State Trading Co, has recently implemented for the state of Massachusetts. Keith will discuss the need for more cooperation and understanding by all stakeholders in the system to improve both the existing system and digital system. The utilization of technology and data to enhance, manage and prevent illicit trade and tax evasion of products is critical to the industry.  Keith believes it is vitally important that we all work together to create the best deterrents and implement the best systems possible to prevent illicit trade and tax evasion of products sold in the tobacco arena. 

2.20pm - What the Tax Stamp Market has in Common with Sesame Street, Microsoft and American Express
Helen Cochrane, De La Rue 

The tax stamp market is going through rapid change as revenue authorities and enforcement agencies arm themselves with the latest technologies to combat illicit trade.  It is becoming essential to easily tell genuine products from fake, to see real-time supply chain information and to have indisputable proof in a court of law.  Other industries have already learned some important lessons in these areas that could provide a valuable advantage in the protection of tax revenues.  This presentation will take you on a whistle stop tour of illicit trade and explore the sometimes surprising solutions used to protect the world best known products and documents.  From software authentication to banknote validation and from fake pharmaceuticals to identity protection, we will demonstrate the technology available today that can be applied to tax stamps.  We will also discuss the power of industry collaboration, where this has worked, and where it has failed.  A fascinating look at the broader landscape of product and consumer protection. 

2.40pm - Digital Versus Physical Tax Stamps - the Pros/Cons and a Cross-Industry View
Ruth Thomson, Cambridge Consultants   

The discussion around digital versus physical tax stamps will continue to intensify as technology progresses and a wider range of solutions becomes available. Both offer advantages to stakeholders in the supply chain. Both, however, have vulnerabilities. This talk will use an independent view to explore the differences between the different solutions, the pros and cons, and vulnerabilities, and the potential additional business benefits of both.  We will also take a cross industry view to draw the comparison of use of digital and physical systems in the pharmaceutical industry.

3.00pm - A Criminal Act, a Civil Solution - a Study of Tobacco Tax Evasion in Cook County
Kristopher J Anderson, Cook County Department of Revenue 

Cook County in the state of Illinois, has an area the size of Delaware (including Chicago) and five million people, and is second only to Los Angeles county in terms of population. It levies its own tax, as do four of its municipalities, and has recently leapfrogged most US jurisdictions by becoming an early adopter of tobacco stamps with unique serialisation. Key to the introduction of such stamps has been the implementation of a ‘holistic’ program of enforcement to ensure their effective deployment. Less than five years ago, for example, the Cook County Department of Revenue (DOR) had no field investigators actively searching for the Cook County tax stamp.  From that point to now the Cook County DOR has experienced many growing pains and many achievements.  This presentation will discuss ordinance changes, experiences in the field, creation of the Department of Administrative Hearings, the continued trickery of merchants and the methods that are being used to overcome their efforts to avoid payment of taxes.

3.20pm - Questions

3.40pm - Break and exhibition viewing

4.00pm - The Tax Stamp and Criminal Investigations
John W Colledge III, former criminal investigator and consultant in anti-illicit trade  

Most discussions regarding the selection and application of tax stamps are focused on revenue collection, tax paid verification, health, sometimes anti-counterfeit, but seldom upon criminal investigations.  Most current tax stamp and other marking systems are of little value to criminal investigators responsible for complex trade fraud and other tax evasion schemes.

Trade fraud investigations are labor intensive and require searching of large volumes of paper and automated data from multiple sources.  Modern criminal investigators are looking for "smart systems" that will minimize traditional trade fraud investigative methodologies.  Modern tax stamp and other marking systems could also provide proactive measures such as tracking, tracing and other data mining applications capable of searching for trade anomalies that would suggest trade fraud, tax evasion and other criminal schemes.

4.20pm - Why Track & Trace is Valuable in the US Tobacco Market - a Forthcoming Request for Information
Maurice ‘Mo’ Gilmore, Arkansas Tobacco Control Board and chair of FTA Technology Committee   

A tax stamp system for tobacco product that has track & trace features would be useful in tax audits and the enforcement of tobacco law in general, and the enforcement of cigarette minimum price laws in particular. Many states in the US and many countries in the world have minimum mark up percentages on cigarettes when they are sold from the wholesaler/stamping agent to the retailer and from the retailer to the consumer. This presentation will detail how enforcement authorities can use the data captured to catch violators selling cigarettes below cost of the minimum price and to develop inspection plans based on reports produced by the track & trace system. The presentation will also provide an update on the Federation of Tax Administrators (FTA) Tobacco Tax Section Technology Committee, which is currently working on an RFI for a track & trace system including revenue collection using tax stamps or other technology to capture the data needed.

4.40pm - Building the Optimum Excise Tax Collection Control through an Integrated Excise Stamp Management Solution
Oleksii Darskyi, EDAPS Consortium

A comprehensive solution that allows enforcement of excise tax collection and relevant control needs to include both high-secure tax stamps with field devices and a global information management system. Such solutions should be build on a modular basis to enable the realization of appropriate features in accordance with authorities’ needs, while real-time reporting features can track and trace of excisable products and tax stamps along the entire supply chain. The presentation will provide some suggestions for such a solution.

5.00pm - Questions

5.15pm - End of first day

7.00pm - Cocktail reception

7.30pm - Conference dinner

Wednesday, September 14  

SESSION THREE: Technology Solutions for Production, Authentication and Verification

9.00am - Counterfeiters and Diverters:  Fitting the Right Layer of Protection to the Type of Adversary
Matt Moffett, Meyers Printing Company

 There are many available security technologies for preventing counterfeiting and or diversion. The approach has been to offer these solutions as covert and overt layers, meaning the more features you add the more secure the label or package.  But how do you know what security technologies will provide the best ROI and at the same time provide a level of security that fits the need and can be easily detectable? We have seen labels designed with up to 14 covert and overt features. Does this layered approach truly work? How does the average person (consumer) know what they are buying is not counterfeit? How does anyone know without using expensive forensic technologies and equipment to investigate? In our session we will review and discuss the merits of using currently available digital technologies that include the use of secured codes as a cost effective solution that will improve security performance, traceability and ease of use. The simplest solutions provide the best prevention and assistance to the average consumer and particularly law enforcement officials in spotting and preventing counterfeits.

9.20am - Combining Authentication and Traceability for Increased Tax Collection
Majid Fazeli, Authentix 

At the 1st Tax Stamp Forum, Authentix advocated the benefits of moving toward a paperless stamp, or digital tax stamp, to improve excise tax revenue collection processes and to reduce costs.  Since then, there has been much progress made in the development of covert marking technologies relevant to excise stamp design and construction. It is now possible to integrate authentication features with serialization printing platforms,  thus providing a greater cost advantage and a higher level of tax stamp security.  At the 3rd Tax Stamp Forum, we will discuss how the integration of authentication and serialization features will further increase the velocity of information gathering, supply chain visibility, tax stamp verification/authentication and distribution processes—making the tax collection process more efficient and more effective for tax collection authorities worldwide.

9.40am - Tax Stamp Authentication via Imprinted Electronics
Scott White, Pragmatic Printing  

At the 2nd Tax Stamp Forum in London last year, Nano ePrint presented a novel approach to enhancing tax stamps with nano-scale electronic logic, a new concept in printed micro-circuitry using a process similar to the embossing of optical security features, namely optical manipulation by microstructures.  The technology was still at the development stage, with the company stating that it hoped to have a working device  available by the time of the next Tax Stamp Forum in the form of an RFID element on a tax stamp. PragmatIC Printing has now acquired the printed electronics business of Nano ePrint, and, true to its word, will present progress on the practical application of this technology and a roadmap to commercial deployment.

10.00am - Tax Stamp Individualization - Impact versus Non-Impact
Thorsten Tritschler, Atlantic Zeiser 

Numbering or serialization of tax stamps has been common in many countries for over 100 years. It is used for security purposes, for logistical reasons and to optimize the process. With the availability of digital technologies like ink jet and laser systems (NON-IMPACT), one now can question whether the classical mechanical numbering (IMPACT) is still a useful technology, or whether a transition towards the digital technology is needed. The presentation will show the differences and pros and cons of impact versus non-impact. 

10.20am - Questions

10.40am - Break and exhibition viewing

11.10am - Track & Trace for Tax Stamps with a Human Face – Public Benefits for T&T Systems
Max Zolotukhin, Andrews & Wykeham

The paper will describe the benefits of track and trace systems in boosting the collection of excise duty on cigarettes, alcohol and other products and curbing counterfeit, product diversion and grey imports and the key benefits which these systems can offer to the public. In particular, the paper will cover:
-  the importance of maintaining or increasing excise revenues in challenging economic climate;
-  history of track & trace solutions; examples of successful implementations;
-  concepts of a track & trace system, possible architectures;
-   online vs offline systems to suit a particular territory and market sector;
-  formats of track & trace excise labels, their machine readability, application issues;
-  security technologies implemented in track & trace labels (materials, security print, holography);
-  benefits track & trace solutions can offer to the public (direct benefits: consumer web interface, anti-counterfeit functionality, “public policing” of the marketplace; indirect benefits: tax revenue increases);
-  Andrews & Wykeham’s Theseus as an example of a track & trace system 

11.30am - Codentify - an Analysis of its Security and Fraud Detection Effectiveness
Zbigniew Sagan, Advanced Track & Trace 

Some of the major tobacco manufacturers are proposing to replace paper tax stamps with the Codentify™ system,  which comprises eye-readable code  printed directly onto packs. Codes can be verified by phone or through e-mail, SMS or dedicated internet platform. Although the technical details of Codentify™ are not available, its principles are disclosed  in a PMI patent (EP1719070) which describes means of producing and verifying codes which do not need to be stored neither transmitted. This presentation makes an analysis of the fraud detection effectiveness of Codentify™. While we dispute the allegation that it authenticates (as copies of valid codes cannot be detected unless they are blacklisted), we take a pragmatic look and address the following question: how effective can Codentify™   be in detecting the various types of frauds, and generally in combating illicit trade?  Insights into this question are brought by a mathematical model, which models the incentives and strategy  of producers, inspectors and illicit traders.

11.50am - Tax Stamp Verification Using Mobile Handsets
Dr Michael Fiedler, Giesecke & Devrient 

The number of available tax stamp solutions including serialization concepts rises year by year. A backend database can advantageously relate variable lifecycle data to the stamp or product identity generated by the unique serialization code. Two success factors remain of constant importance: security and usability, both influencing the acceptance of a solution by all relevant stakeholders. Security is of principle importance when regarding data privacy, copy protection of the excise stamps and a secure supply chain of security features. On the other hand, sophisticated security concepts are likely to fail if they are too complicated – or even simply too inconvenient – to use. 

Applications for mobile phones and smartphones allow field verification of unique serialization barcodes printed onto the tax labels by online displaying the individual lifecycle and product information. Additionally, they can instruct the user on-site how to verify additional security features present on package or label. Mobile phone deployment fosters participation of many possible stakeholders, increasing the feedback of valuable tracing data. An application suite for a wide spectrum of mobile devices extends verification of genuineness to the consumers and builds a powerful concept to increase counterfeit deterrence. 

The presentation provides an overview about the general process of deploying  serialized tax stamps and the special aspects  resulting from verification by mobile phones.

12.10pm - Canada's New Tobacco Stamping Regime
Phil McLester, Canada Revenue Agency and Spencer Mandy, Canadian Bank Note Company

While stamping regimes are not new, the approaches to implementation, delivery and support are as varied as the stamp designs themselves which explains why some regimes are successful while others are less effective. The new Canadian Tax Stamp Regime’s success was built on a multitude of effective activities including: a transparent public tendering process, comprehensive amendments to the legislative framework supported by changes to related stamping regulations, a reasonable implementation transition period and clear accountability procedures to ensure stamp compliance and integrity, along with exhaustive consultations with various stakeholders. Another key element was the selection of the private sector enterprise chosen to design, produce and deliver the new stamp and related systems.  

12.30pm - Questions

12.50pm - Lunch   

SESSION FOUR – End-to-End Tax Stamp Systems (Case Studies)

2.00pm - A New Tax Stamp for Spain
Paloma Varela, Fabrica Nacional de Moneda y Timbre

Spain was the first nation in the world to use stamped paper, in 1637, followed by Belgium and the Netherlands in 1648, France in 1655 and England in 1694. Nowadays, the Spanish banknote and security printer FNMT-RCM produces both tobacco and alcohol tax stamps for the Spanish government. This presentation will cover products, the manufacturing process and the amounts delivered every year to the customer is included in the presentation, along with details on smuggling, its influence on stales and tax collection and health problems related to the poor quality of the tobacco and the alcohol. Counterfeiting is also affecting to these products and images of real and counterfeited labels will be shown. The challenge now is to start a redesign of these products that will improve security without increasing costs, and is involveing the evaluation of new inks, foils and substrates together with elecronic printing and unique identification and verification. 

2.20pm - Increasing Revenue and Decreasing Counterfeits in Ukraine with Multi-Layered Security
Tal Gilat, InkSure Technologies

The Government of Ukraine has been running a tax stamp program for years, but before 2008 the program was not achieving all of government's revenue collection goals. In addition, large amounts of counterfeit tobacco and alcohol products were passing through the country's borders.  In 2008 Ukraine decided to upgrade their tax stamp program, deploying a multi-layered security solution comprising advanced holograms and taggants. The new tax stamps have more than fulfilled the government's initial goal of increasing revenue and decreasing counterfeits.  The investment into the tax stamp program has generated a positive ROI and has paid for itself several times over.

2.40pm - Decentralised Excise Programs – Liquor Tax Stamps in India
Holostik India

3.00pm - Questions

3.15pm - Break

3.30pm - New Shrink Sleeve Solution for Liquor in Colombia
Andres Diaz, Figurazione

In developing countries locally-produced alcoholic beverages are very often the brand leaders in the market with distribution in supermarkets, gas stations, liquor stores, right down to every corner shop in the smallest village. The challenge to combat the fraudulent production and sale of “knock offs” is huge and requires special solutions to protect the consumer from being deceived at the point of purchase or consumption. The design of a protection program needs to take in account many factors, but above all, ensure that both the consumer and authorities can readily identify in the market place a fraudulent or adulterated product.  Raising consumer awareness has to be part of the program, along with the training of the authorities whose job it is to check the product and take legal action against distributors and producers of fraudulent or adulterated versions. The application of the security components during the manufacturing process must be so designed as not to impede production efficiency and be a consistent part of the brand presentation.  The components used to allow authentic product identification need to be authorized by the relevant governmental body and above all must not impact product performance. This presentation will demonstrate just such an integrated solution in Colombia which, after nearly three year in the market, has produced very favourable results.

3.50pm -  Russian Tax Stamps for Alcohol - 5 Years into the Programme
Oleg Loginov, Federal State Unitary Enterprise Goznak   

The presentation is concentrated on the current status of the Russian state programme for tax stamps for alcohol, detailing the peculiarities of the Unified Automated State Information System (EGAIS) - automatic system of control and registration of goods and documents (including tax stamps). It gives a glimpse of the participants of the systems, role of Goznak as a manufacturer in it. The main emphasis in the presentation is made on description of the security complex of the functioning tax stamp of the Russian Federation. Commonly-used methods of forgery for tax stamps are also described.

4.10pm - Stamping of Alcoholic Beverages and Tobacco Products in Mexico
Belen Saenz de Miera Juarez, National Institute of Public Health

Stamping of alcoholic beverages and tobacco products can be an important element to control local production and illicit trade of these products. In Mexico, however, while tax stamps for alcoholic beverages have been in force for several years, proposals to introduce tax stamps for cigarettes have been dismissed or not put into effect. The aim of this presentation is to discuss the characteristics of tax stamps for alcoholic beverages in Mexico and recent proposals to implement this type of measure for cigarettes. A brief review of alcohol and tobacco taxation will be presented too as well as a description of both markets in Mexico..

4.30pm - Questions

4.45pm - Concluding remarks and close of conference
Glenn Wood, Reconnaissance International

5.00pm - Farewell drinks