VOLUME 8 – NO 5 / MAY 2016
Cattaneo Security Acquires
Key Customer in Philippines
‘Get Ready for
Plain Packaging’,
Says WHO
For the 2016 World No Tobacco Day
– held every year in May – the World
Health Organisation and Secretariat of
the WHO Framework Convention on
Tobacco Control called on all countries
to get ready for plain packaging on
tobacco products, declaring that it
was now possible to observe the
globalisation of plain packaging.
Cattaneo Security’s Phoenix IV intaglio printing press.
Cattaneo Security, a division of
Cattaneo Meccanica SpA, famous for
the production of intaglio web presses,
has just signed a contract with APO
Production Unit Inc, Philippines, for the
sale of a complete turnkey solution for
producing security documents.
Under the contract, Cattaneo Security
will provide APO with a new intaglio line
that will be mainly dedicated to printing
passports, but that will also enable APO
(which is a government-run printing office
responsible for the country’s tobacco
stamp programme) to print tax stamps,
tax banderoles, ID documents, and
certificates.
The new line comprises software and
systems that encompass the entire
document production process: from
graphic design to platemaking to printing.
Atropos graphic software
Starting with the design, Cattaneo
Security’s Atropos graphic software allows
security printers to create an artwork
vector image (ie. AI, EPS) from a source
raster image (ie. BMP, JPG, PNG).
Atropos is mainly intended to produce
black-and-white and colour stroke vector
images that simulate artwork created in
the traditional way with a burin (the sharp
tool used to engrave intaglio plates).
The software can be semi-automatic
or automatic, enabling the graphist to
automatically fill areas using a wide choice
of stroke templates.
The templates can also be modified to
incorporate different security features,
including latent images, guilloches and
microtext.
Hyperion software for intaglio
plate design
Also included in the turnkey solution is
Hyperion: a security graphics software
dedicated to creating layouts for Cattaneo
Security’s Helios intaglio platemaking
system. The software allows prepress
operators to maximise the potential of
Helios by assigning different depths,
engraving profiles and grip types to each
design element of a given project. The
process starts with the importing of a
very high-resolution graphic file and ends
with the export of a ‘laser-engrave-ready’
design to the Helios system.
Continued on page 3 >
www.taxstampnews.com
Plain packs were first introduced in
Australia in December 2012, and on 20
May this year they were implemented
in France, Ireland and the UK (thereby
coinciding with World No Tobacco Day).
Furthermore, a slew of other countries –
including Norway, Singapore, Canada,
Chile, Brazil, Panama, New Zealand and
Belgium – are reported to be at various
stages of considering plain packs.
According to the WHO, early evidence
of Australia’s experience implementing
plain packs suggests that the measure
has begun to achieve its public health
objectives. The WHO cited an expert
analysis by the Australian Department of
Health which found that the introduction of
plains packs, together with new and larger
health warnings, had reduced smoking
prevalence in Australia beyond the preexisting downward trend.
Furthermore, a comprehensive study of
the Australian illicit tobacco market (by
KPMG) found that, despite fears of soaring
illicit trade in the face of plain packaging,
such trade had actually remained roughly
constant (see The Evolution of Tax Stamps
for a Plain Packaging World, TSN March
2016).
Add to these encouraging results the latest
overturning of a legal challenge to plain
packs by the tobacco industry (this time in
the UK), and the door has opened wider
for the entry of new members into the
plain pack ‘club’.
Update on ITSA’s Latest Activities
A lot has been happening since last
November, when the International Tax
Stamp Association (ITSA) was launched
at the Tax Stamp Forum™ in Miami.
This first update highlights the main
developments since the launch, and
also describes actions in the pipeline for
2016/17.
Six new members
In addition to its ten founder members,
ITSA has so far welcomed six new
members this year. They are: Allexis
(see also page 3), Leonhard Kurz, Jura,
Luminescence, Rolland and Uflex – all
leading providers of tax stamps or their
integrated components and systems.
ITSA is actively seeking more new
members. If you are a supplier of tax
stamps or their components and are
interested in applying for membership,
please go to www.tax-stamps.org to
complete an application form. Alternatively
please contact Nicola Sudan, ITSA General
Secretary, at nicola@reconnaissance-intl.
com.
Inside this Issue
1 Cattaneo Security Acquires
Key Customer in Philippines
1 ‘Get Ready for Plain
Packaging’, Says WHO
2 Update on ITSA’s
Latest Activities
3 Allexis’ Automated System for
Managing Entire Tax Stamp
Lifecycles
4 Turkey’s Banderole Product
Monitoring System Extends
to New Products and Users
5 ISO 19998 Progress
5 Meyercord Revenue Renews
Two Contracts
6 Liquor Tax Stamps to Keep
Jharkhand ‘Hooch-Free’
7 Liquor Taxes in The United
States – A Brief History
2 TAX STAMP NEWS | IN THE NEWS
Formalised relationship established
with ISO
One of the main goals of ITSA this year is
to actively support the development of the
new ISO 19998 standard for tax stamps,
which is currently under development (see
update from Project Leader Ian Lancaster
on page 5). In order to do this, ITSA
has formalised its relationship with ISO
(International Standards Organisation),
by becoming a member of the British
Standards Institute. BSI membership will
allow ITSA to be appointed as an ISO
expert and member of the 19998 working
group.
The next step in the 19998 development
process is to have all sections of the
standard written in time for the next group
meeting in September.
Adoption of 19998 is foreseen for the end
of 2017.
2016/17 action plan taking shape
In addition to ITSA’s objectives with regard
to the new ISO tax stamp standard, the
following actions have been identified for
2016/17:
1. Advocate the use of tax stamps
to those authorities in the process
of developing technical standards
for tobacco traceability and security
features.
These authorities include the WHO
Framework Convention on Tobacco Control
Secretariat (and its Protocol to Eliminate
Illicit Trade in Tobacco Products) and
the European Commission’s DirectorateGeneral for Health and Food Safety (with
regard to the EU Tobacco Products
Directive).
The European Commission, in particular, is
at the crucial stage of assessing technical
standards for the traceability and security
requirements of the Tobacco Products
Directive, and it is ITSA’s objective to ensure
that the EC and its consultants have a clear
understanding of how tax stamps offer a
more suitable solution for traceability and
security than do pure coding technologies.
To this end, ITSA is in the process of
forming a working group composed of
those ITSA members who are interested
in taking an active role in achieving this
objective.
2. Issue a series of white papers
(supported by face-to-face meetings
and presentations) to assist national
tax and customs authorities, and
other stakeholders, to make informed
decisions with regard to new or
upgraded tax stamp programmes.
The first white papers will cover:
• The difference between authentication
and track and trace, demonstrating why
a non-secure track and trace system is
not a viable option;
• Basic tax stamp requirements and
specifications (based on common best
practices and ISO 19998 developments);
• The do’s and don’ts of writing an RFP for
a tax stamp programme.
3. Increase general awareness of ITSA
and its mission, as well as awareness
of the importance of tax stamp
programmes.
This will be achieved through:
• The release of news articles and position
statements for trade media publications;
• The publication of ‘reactive’ white papers
that comment on third party statements
and reports;
• Participation in industry events, in the
form of an exhibition booth or speaker
slot (see below schedule);
• Distribution of a general ITSA position
statement, as well as a periodic
e-bulletin, to government and nongovernment bodies.
ITSA’s conference attendance
plan identified
ITSA recently participated in the High
Security Printing™ Europe conference
in Bucharest with an exhibition booth. It
also participated in the World Customs
Organisation IT Conference & Exhibition
with a presentation on the evolution of tax
stamps and how they can serve customs
and border control to combat illicit trade.
ITSA is also planning to exhibit or make a
presentation at the following events during
2016/17:
• High Security Printing Latin America,
20-22 June, Mexico City;
• Federation of Tax Administrators Tobacco
Tax Section Annual Meeting,
14-17 August, Rhode Island, USA;
• The Holography Conference,
29-30 November, Warsaw;
• High Security Printing Asia,
5-7 December, Singapore;
• Tax Stamp Forum,
30 January-1 February 2017, Berlin.
As ITSA’s intention is to give all members
the opportunity to get involved in its
activities, the conference presentations will
be made by different ITSA members.
Find out more about ITSA at www.taxstamps.org, or contact Nicola Sudan.
Allexis’ Automated System for Managing
Entire Tax Stamp Lifecycles
In January 2015, Tax Stamp News™
reported that the Slovakian Mint
(Mincovňa Kremnica) had become the
sole supplier for the Slovak Republic‘s
alcohol and tobacco stamps, following
a decision by the Ministry of Finance to
set up domestic stamp production under
full government control.
The second module enables tax and
customs authorities to review and approve
tax stamp orders, and provides inspection
tools for validating stamps and detecting
fraudulent activity. This module also
includes a space for the processing of
reports on suspicious tax stamps received
from the mobile apps of consumers.
With no prior involvement in printing,
the Mint had just 12 months to set up
manufacturing lines and go into production.
In order to meet this objective it hired a
number of printing industry experts, as well
as a local IT company, whose task it was
to implement an automated system for
managing the stamps and controlling their
movement.
The third module is a space dedicated to
producers and importers. It allows them to
order the desired type and amount of tax
stamps, to manage and register new types
of packages of taxable goods, to prepare
monthly evidence reports of labelled goods,
and to return unused tax stamps after
expiration.
That local IT company was Allexis, based in
Bratislava.
The Tax Stamps Management and Control
System (TSMCS), implemented by Allexis
in 2014, consists of a single solution which
manages the entire lifecycle of each tax
stamp. This includes the ordering of the
stamps by manufacturers and importers,
the printing and distribution of bulk stamps,
and the control of the stamps by revenue
authorities, customs, and individual
consumers.
The TSCMC consists of a number of
distinct modules.
The first module involves the management
of tax stamp printing orders, stocks, and
distribution to individual customers.
The fourth module is the mobile app for
consumers (available for both iOS and
Android). The stamps are equipped with
serialised QR codes that consumers
can scan and verify using the app. By
comparing the information in the QR code
with the product they are holding in their
hands, consumers are able to detect
fraudulent products.
All the modules operate within the
framework of a complex central
provisioning system, which manages
each tax stamp at each stage of its life,
in combination with a backend database,
where all the information about each stamp
is stored. The central provisioning system
guarantees the confidentiality and security
of the TSMCS as a whole.
Tens of thousands of stamps
verified
In 2015, around half a million tax stamps
were printed and registered into the TSMCS
in the Slovak Republic. Out of this number,
several tens of thousands of stamps
were verified either by tax and customs
authorities, or by consumers via the mobile
app. And out of this number, less than one
tenth of scanned tax stamps were identified
either as incorrectly applied, or as not found
in the system.
The TSMCS has proven to allow authorities
to verify significantly more samples in less
time, especially when compared to the
conventional control methods of standard
tax stamps without digital protection
features.
Allexis believes that the future of tax
stamps lies in digital security, as well as in
the involvement of all stakeholders in the
management, control and verification of
stamps.
Cattaneo Security Acquires Key Customer (continued)
Helios intaglio engraving system
Helios is a direct laser plate-engraving
system for intaglio printing, which does
away with the need to use chemicals in the
engraving process.
The process is designed to guarantee
the same elegant, graphical and accurate
designs achieved by the traditional method
of engraving on copperplate with a burin.
The system is also compatible with KBANotaSys and Komori intaglio presses.
Plate polishing and rubber cutting
The solution also includes an automatic
plate-polishing system (PPS) for removing
swarf and debris caused by laser engraving.
The end result is a mirror-finish intaglio
plate, which is essential to ensure highquality printing.
In addition, the company’s automated
rubber-cutting machine (RCM II) is used for
inking plates and cylinders.
Both the PPS and RCM II systems are
compatible with KBA-NotaSys and Komori
intaglio presses.
Phoenix IV printing press
Phoenix IV is Cattaneo Security’s fourcolour, intaglio printing press. It uses just
one plate and four chablons, prints up to
5,000 impressions an hour and has both
web-to-web and web-to-sheet capabilities.
Phoenix IV was the first intaglio printing
press produced by Cattaneo Meccanica
with the intention of guaranteeing both
high-quality intaglio printing and versatility
of use. The company has achieved this
dual objective with a machine that performs
‘gearless’ multi-format printing without the
need to change cylinders.
In addition, Phoenix IV offers the possibility
to print on wide-ranging substrates, from
paper to plastic, and from 45-200g in
weight. This includes self-adhesive labels,
which have not historically combined well
with intaglio.
Furthermore, the press uses recycled
wiping paper to replace water and chemical
compounds, thereby demonstrating a
greater respect for the environment.
The complete turnkey system can be
viewed in October and November this year,
during an ‘open house’ event at Cattaneo
Security’s facility, near Bergamo, Italy.
For more information contact:
Mrs Patrizia Mantegazza (Marketing
& Sales Manager) p.mantegazza@
cattaneomeccanicaspa.com.
Mr Bruno Terni (Business Development
Manager) [email protected].
TECHNOLOGY PROFILE | VOLUME 8 – NO 5 | MAY 2016
3
Turkey’s Banderole Product Monitoring
System Extends to New Products and Users
In 2007, the Turkish Revenue
Administration introduced its Banderole
Product Monitoring System (in Turkish:
Bandrollü Ürün İzleme Sistemi, or BÜIS),
on tobacco, spirits, wine and beer,
thereby making Turkey the first country
in the world to implement such a system
across multiple product groups. The
prime contractor for the system was
SICPA-ASSAN – selected through a
public tender – and the company chosen
to print the stamps was the TEKEL
Packaging Factory of Istanbul.
the consumer as a ‘final auditor’.
The purpose of the BÜIS system – which
was designed and installed without any
financial load for the Administration –
was to protect the country’s special
consumption tax revenue on tobacco and
alcohol products by monitoring the local
production, import and distribution of these
products.
The label is equipped with a multi-layered
security mechanism, where informationbased and material-based layers join
forces to provide a combined solution for
authentication and traceability.
Since the implementation of the system,
a regular increase in special consumption
tax recovery has been achieved, to the
extent that, between 2007 and 2014, 150%
additional tax was reported to have been
collected on tobacco and alcohol products.
The system also succeeded in eliminating
discrepancies between export, production
and sales declarations of different
companies, as well as significantly reducing
the number of unrecorded company
activities (500 companies are today
registered in the system, compared to 211
in 2007).
The Administration also reported that
BÜIS had led to a significant increase
in the detection of illegal products. For
example, between 2013-2014, around
300 million packs of smuggled cigarettes
and 1 million bottles of smuggled alcoholic
beverages were seized. And between
2007 and August 2015, around 1.4 million
Administration audits – involving 74 million
products – took place, resulting in legal
proceedings being initiated for about 13
million of those products.
In addition, BÜIS has also extended
product-wise to include a new export
marking system to prevent the sale of
export cigarettes on the domestic market.
The upgraded banderole now incorporates
authentication and verification features
for all stakeholders, including consumers.
It takes the form of a paper label carried
on domestic and imported tobacco and
alcohol products (domestic beer and export
cigarettes carry a directly printed secure
code).
Overt and semi-covert material-based
security is provided by an optical feature
which comprises a colour shift and dualpolarisation effects (the polarisation is
viewed through a special filter distributed
by the Administration to supply chain
operators).
The information-based security comes in
the form of two serialised matrix codes, one
superposed on the other. The first code is
a visible secure QR code for consumers
to read with a smartphone app, and the
second is an underlying covert code for
official use only. The codes are further
secured by material security in the form of
an optically active motif printed within the
QR code, as well as material-based covert
features for detection by officials.
With the new contract came the New
Generation BÜIS, which was launched in
June 2015 with a number of key changes
that included an upgraded banderole.
Whereas the original system had provided
a structure for government auditors,
producers/importers and the contractor
company to work together in a state of
compatibility – as well as mutual control –
the new system has expanded to include
4 TAX STAMP NEWS | CASE STUDY
The covert features in the banderole
(including the covert code and any
material-based features for authentication)
can, however, only be accessed by
Administration auditors using special handheld mobile audit devices.
Around 1,000 of these special devices
have been distributed to enforcement
officials from the Tobacco and Alcohol
Market Regulatory Authority (TAPDK), as
well as tax auditors and customs officers.
The reading of the code with the device
validates the code as genuine and gives
officials immediate access to information
pertaining to the product on which the code
is attached.
Approximately 3 million product audits
are performed annually by means of
these devices, which represent the most
comprehensive, common product audit
numbers in the country.
In addition to the audit devices, 180,000
examination devices (consisting of filters
for detecting the dual-polarisation effect on
the banderoles) have been supplied to the
nation’s distribution points, for the purpose
of verifying the stamps at retail level.
Centralised end-to-end data
These impressive results led to the
Administration’s decision to remain with
the incumbent provider when the contract
came up for renewal in 2014.
New generation BÜIS
Administration auditors can inspect all
features, producers and distributors can
examine semi-covert features (such as
the dual-polarisation), and consumers
can examine overt features. In addition, all
stakeholders can either use the smartphone
app to read the QR code, or they can query
the code’s alphanumeric counterpart in the
form of an SMS message, or by visiting
www.buis.com.tr.
Turkey’s tax stamps for alcohol and cigarettes (in the
form of a paper label). Beer products carry a directly
printed secure code.
This multi-layered approach provides
all stakeholders (producers, importers,
exporters, wholesalers, distributors,
retailers, consumers, and inspectors)
with their own dedicated feature on the
banderole.
The BÜIS system allows all relevant
data to be gathered online from the
entire production and supply chain,
and consolidated in a centralised data
management system. The data comes
from each end of the process, including
the production and personalisation of
banderoles, the delivery of the banderoles
to the companies, and their activation
on production lines. Also included is
manufacturing data obtained from devices
on the production lines (such as product
SKUs, packing volumes and product
descriptions), audit information from
government mobile audit devices and
– finally – data acquired from consumer
examinations.
All of this data is securely integrated in
the data management centre – with no
intervention from producers – thereby
allowing the Administration to monitor the
tobacco and alcohol industry.
The system constitutes a platform
for comparing the gathered data with
companies’ tax declarations, as well as for
allowing the data itself be compared and
cross-checked.
The system is available to all stakeholders
through a single web portal with secure
login access. Through this portal,
registered companies can place banderole
orders and monitor their status, and the
Administration can manage banderole
production and stock control, as well as
access the entire database for the purpose
of making business intelligence reports.
And there is even an open public area for
consumers.
Administrative operations such as
managing users and authorisations, and
adding new companies and production
lines, are also conducted through
this portal. The portal is designed to
comply with the inspection and report
requirements of any stakeholder, from
the Revenue Administration, TAPDK, and
auditors, to producers, importers, and
consumers.
BÜIS itself is not enough
The Administration has acknowledged
that the BÜIS programme alone, even
though it has proven to be a powerful
tool, is not enough to provide effective
auditing and protection of tax revenues,
and needs to be supported by strongly
applied legislation and the proper legal
infrastructure. This is why, since 2007,
the Administration has issued more
than ten pieces of legislation, and has
adapted a number of laws to define the
BÜIS operating rules. In addition, all data
generated in the system is fully consistent
with excise tax regulations.
International recognition
In 2015, the success of the system was
recognised at the international Tax Stamp
Forum™, when the Turkish Revenue
Administration received an Excellence
in Tax Stamps award for best tax stamp
programme. When presenting the award,
one judge commented that Turkey had
made itself a leader and innovator in
tax stamp programmes, and that the
new generation BÜIS programme had
succeeded in taking it to the next level.
Every year, approximately 7.5 billion
products are individually marked with
tax banderoles or directly printed codes,
through the BÜIS system.
Vice Consul Ahmet Yildiz of the Consulate General
of Turkey accepts Best Tax Stamp Programme
award on behalf of the Turkish Revenue
Administration at Tax Stamp Forum, Miami.
ISO 19998 Progress
The Editorial Group working on ISO
19998, the proposed international
standard on Requirements for the
content, security, issuance and
examination of excise tax stamps, met
in Suwon, South Korea, during a weeklong meeting of the Working Group
(WG) 4 of Technical Committee (TC)
292.
TC 292, set up in January 2015 by
ISO, now covers the broad topic of
Security and resilience, while WG 4
covers Authenticity, integrity and trust for
products and documents. ISO 19998 is
therefore being written under the auspices
of WG 4.
The Editorial Group took a hard look at
progress on 19998, reaching two key
conclusions: first, that there are several
sections of the standard still to write;
second, that certain sections of the
standard are too detailed, which could
make it difficult for the intended readers
– primarily from stamp-issuing authorities
– to understand these sections.
As the next meeting of the group will be
in September, the intention is to have
all sections written by then so that this
meeting can consider the complete first
draft (in ISO terms, a working draft). And
the simplification of some sections is
intended to provide clear guidance to
issuing or specifying authorities, without
becoming bogged down in detail.
However, details will be provided in an
annexe (published as part of the standard),
so someone who wants to study this
detail can do so.
One example of this agreed approach is
the description of authentication features
in the standard. The current draft lists ten
families of such features, and in Suwon
the Group considered the draft description
of holograms and OVDs – the first family
to be expanded as an example of what
was intended for the other features. The
Group concluded that this description
was too technical and too long, therefore
off-putting for a non-specialist reader, and
that only a short description of the feature
and how it is used is needed.
ISO 19998 is still on track for publication
around the end of 2017, but the group has
put in a formal request to ISO to extend
the time allowed. This results from the
delay in starting work on 19998, which
was approved in September 2014 but
with a first meeting of the Editorial Group
in March 2015 – a six-month delay – as
a result of the disbanding of TC 247 (the
group’s original parent TC) and the setting
up of TC 292.
Ian Lancaster, Project Leader, told Tax
Stamp News™ that this had been a very
constructive meeting, with all members
of the group working hard to keep the
project on target and on track in terms
of content and timing. He mentioned,
however, that he would still welcome
participation in the Editorial Group from
representatives of companies using or
applying tax stamps. Anyone from such
organisations interested in contributing to
the standard should contact Ian at ianl@
reconnaissance-intl.com.
Meyercord Revenue
Renews Two Contracts
The US states of Georgia and Missouri
have once again selected Meyercord
Revenue as their excise cigarette tax
stamp provider. Both contracts were
awarded in May.
The company has been partnering with
Georgia on its tobacco excise tax solution
since 1963. ‘Meyercord Revenue has a
rich history of partnering with the state of
Georgia in the tobacco excise tax space.
This extension is a testament to SICPA’s
success in delivering results in this field,’
said Meyercord Revenue President Alex
Finkel.
As for Missouri, Meyercord Revenue
has been providing this state with its
proprietary FUSON® tax stamps since
1994. ‘We are honoured to continue
to partner with the state of Missouri on
its tobacco tax programme. Meyercord
Revenue continues to invest in and
develop its sets of products and services
and we are confident that we are providing
the best in anti-counterfeiting technology
and leading customer service through
our FUSON heat-transfer cigarette tax
stamping system,’ said Mr Finkel.
The awards closely follow two other
recent awards presented to Meyercord
Revenue by the states of New Hampshire
and Vermont, in February and March
respectively.
Founded in 1894, Meyercord Revenue
is the leading US provider of excise tax
collection solutions, with customers
in 46 US states and more than 160
municipalities and Native American tribes.
IN THE NEWS | VOLUME 8 – NO 5 | MAY 2016
5
Liquor Stamps to Keep Jharkhand Hooch-Free
Since 1 February 2016, all alcohol
bottles in Jharkhand, India have been
carrying tax stamps for liquor revenue
and consumer protection, making
Jharkhand the 23rd Indian state (out of
29 states and seven union territories)
to adopt tax stamps. In India today,
approximately 11 billion stamps are used
per annum for liquor revenue protection.
In an exclusive interview with Tax Stamp
News™, Jharkhand Excise Department
officials Mr Vinod Shankar Singh, Excise
Commissioner, Mr Gajendra Singh, Deputy
Commissioner Excise and Dr Rakesh
Kumar, Assistant Commissioner Excise,
shared their views about this initiative.
Q: Can you briefly describe the structure of
the Jharkhand Excise Department, as well
as the different types of liquor sold in the
state?
A: The Jharkhand Excise and Prohibition
Department was formed at the same
time as the state of Jharkhand itself,
in November 2000. The Department is
primarily responsible for the administration
and execution of state government
excise policies and programmes. The
Excise Commissioner is the head of the
Department and he is assisted by a Deputy
Commissioner and Assistant Commissioner
at the Department headquarters.
Jharkhand is divided into three excise
divisions (North Chotanagpur, South
Chotanagpur, and Santhal Pargana),
each of which is controlled by a deputy
commissioner. Each division is further
divided into 19 excise districts, under the
charge of an assistant commissioner or
superintendent.
The liquor sold in Jharkhand consists of
Indian Made Foreign Liquor (IMFL), beer,
wine, low-strength carbonated alcoholic
beverages, and country liquor, all of which
are available in different bottle sizes (plus
beer also comes in a can).
Q: Why did you adopt tax stamps and
what are the challenges for the Excise
Department?
A: Tragedies involving the consumption of
hooch (which is a name given to inferior or
illicit liquor) have always been a concern for
excise departments. Jharkhand is a hoochfree zone as there has not been a single
hooch tragedy reported since the formation
of the state in 2000. However, to prevent
such incidents occurring in the future, we
decided to adopt tax stamps.
The adhesive labels ensure that the
products are genuine, safe and secure, up
to the moment they are delivered to the end
consumer. They prevent innocent people
buying fakes at the price of legitimate
products.
6 TAX STAMP NEWS | ON THE RECORD
A second reason for adopting tax stamps
is that revenue from excise duties is very
important for most of the states in India.
Q: What is the revenue of the Jharkhand
Excise Department and what are your
expectations now that tax stamps have
been adopted?
A: The revenue for the 2015-16 financial
year was INR 9.16 billion ($136 million)
compared to INR 7.64 billion for 2014-15.
This represents an increase of 20%.
This year our target is INR 11.1 billion ($165
million).
Q: Please describe your tax stamp solution.
A: The stamp is a paper-based excise
adhesive label. Each label measures 75mm
long x 15mm wide and comes in different
colours for different variants. For example,
it is blue for IMFL, red for beer, yellow
for country-made liquor, green for spicy
country liquor and pink for imported foreign
liquor. The colour categorisation will change
every quarter.
The labels carry a ‘JH’ inscription followed
by a 10-digit alphanumeric code. The
naked eye is able to detect the colour of the
label, the JH inscription and the code. But
to be able to further verify the authenticity of
the label, each one carries a computerised
signature of the Excise Commissioner,
which can only be seen in UV light.
In addition, users are able to check
the authenticity of the liquor on their
smartphone by downloading the i-nigma
Barcode Scanner app (available on iOS and
Android). This will allow them to scan and
read the information in the datamatrix code
printed on the labels.
Q: What is the percentage of liquor
counterfeiting in Jharkhand?
A: It is difficult to give an exact percentage.
However, an estimate for IMFL is 7-10%,
whereas for country liquor it soars to more
than 40%. The Excise Act was amended
in 2015 to include harsh penalties for
people involved in liquor counterfeiting and
smuggling. For example, fines are 25 times
higher than before, and severe cases can
carry ten-year prison sentences – or even
life imprisonment if the crime involves a
hooch tragedy.
Q: What was the selection procedure for
specifying the stamps and their supplier?
A: Although we had access to various
studies and took inspiration from the tax
stamp programmes of neighbouring states
like Uttar Pradesh, Orissa and Chhattisgarh,
the selection process was very difficult.
We had been wanting to implement
tax stamps for quite a while now – and
had even floated a tender to this effect
three times since 2011 – but a number
of different problems prevented us from
selecting the vendor.
Mr Vinod Shankar Singh, Excise Commissioner
(left) and Mr Gajendra Kumar Singh, Deputy
Commissioner, Jharkhand Excise Department.
Finally, in mid-2015, we initiated talks with
India Security Press, a unit of Security
Printing and Minting Corporation of India
Ltd (SPMCIL), which is a wholly owned
company of the government of India.
The entire process was completed within
three months by the Ministry and state
government, and in November 2015, the
tax stamp programme finally started to be
implemented on Jharkhand’s liquor bottles.
We have an annual requirement of 600
million tax stamps per annum and the
tender is subject to renewal every financial
year. We are currently using a pilot batch
of stamps on liquor products, and based
on our experience with this batch, we may
decide to upgrade some aspects of the
programme.
Q: What is the distribution system?
A: Currently, the India Security Press
supplies tax stamps to Jharkhand State
Beverages Corporation Ltd (JSBCL) for
distribution. The stamps are kept in a highly
secured warehouse under the surveillance
of JSBCL. JSBCL will maintain a stock to
cover at least four months’ worth of stamp
requirements.
The liquor distilleries collect the stamps
from JSBCL once they have paid for their
order. No damaged tax stamps can be
scrapped without permission of the Excise
Commissioner.
Q: What are your enforcement efforts?
A: To counter the problem of illicit liquor and
smuggling into the state, we have created
a special task force (STF) for conducting
raids across the state, with a target of more
than 100 raids per week. So far, we have
received a wonderful response to the STF.
Q: What are your plans for consumer
awareness with regard to the tax stamps?
A: At the ground level, lots of initiatives have
been taken for spreading awareness among
Jharkhand consumers. For instance,
information posters have been placed at
liquor shops and other prime locations
across the state as part of an awareness
campaign. The campaign also encourages
the public to use the smartphone app to
verify the stamps.
Liquor Taxes in The United States –
A Brief History
By Terence Hines, PhD, State Revenue Society
While it is commonly known that
postage stamps are widely collected,
readers of Tax Stamp News™ will be
interested to know that revenue stamps
also have an active collector following.
There is even a specialised collector
society in the USA – the State Revenue
Society, founded in 1955 – dedicated
to those interested in collecting and
studying the revenue stamps of the
individual states, counties, cities and
towns. The SRS publishes the quarterly
State Revenue News and, in 2013 it
published the 750-page hardbound full
colour State Revenue Catalog.
In this article, written especially for Tax
Stamp News, Terence Hines of the SRS
gives a brief history of liquor taxes in the US
and offers some insight into why tax stamps
are not currently used on liquor products,
either at state or federal level.
The use of stamps on alcohol has a
long history in the United States. Both
the federal as well as state and local
governments have used stamps to indicate
tax payment. That practice has now largely
disappeared for reasons to be discussed
later.
During the years between the end of the
War of 1812 and the start of the American
Civil War (1861-1865) liquor was untaxed.
Then in 1862 the Union Congress passed
the extensive Revenue Act of 1862 which
imposed taxes on liquor, beer, documents
of numerous sorts as well as numerous
other items and occupations. The taxed
occupations included many related to the
production and sale of liquor and beer. The
tax on liquor started out fairly low, at 20
cents per proof gallon. By 1865 it was $2
a gallon. The tax on beer was $1 per barrel
between 1862 and 1901.
It was this revenue act that ushered in the
use of adhesive tax stamps, as they are
now generally known, to evidence payment
of the liquor and beer taxes, as well as
some of the taxes on other commodities.
The first beer tax stamps were applied
directly on the beer kegs or barrels. They
were placed directly over the bung hole
so that they would be destroyed when
the container was tapped. The early
beer stamps were beautifully designed
and engraved (Figure 1). The use of beer
stamps ended in the early 1950s.
The first direct federal liquor tax was
imposed on all types of distilled spirits
in 1791 and led to the famous ‘Whisky
Rebellion’. Stamps were not then used
to indicate payment of the tax, which
depended on the proof of the liquor
produced and ranged from 9 to 30 cents
per gallon.
Although not a liquor tax per se, a federal
licence to sell liquor was required from 1794
to 1802. The licence fee was $5. Payment
of this fee was indicated by a $5 stamp
which was embossed on the licence form,
making this the first federal liquor stamp of
any kind to be used in the United States.
The second round of direct excise taxes
on liquor was in effect from 1814 to 1817.
The tax rates during this period were
more complex than were those imposed
previously. The tax per gallon depended
on a number of different factors such as
whether the ingredients were domestic or
not and the period of time the still was in
use. This tax resulted in stamps being either
printed or embossed on the appropriate
forms. Here again, the stamps were not
applied to the actual bottles of liquor,
as is the more modern practice, but to
documents regarding the production and
sale of the liquor.
At the end of the Civil War most of the taxes
imposed to pay for that war were repealed.
The taxes on liquor and beer were not. The
rates for distilled spirits dropped from the
previous high of $2 per gallon to 50 cents in
1868. However, by 1894 it had climbed to
$1.10, where it remained until 1917 and the
entry of the United States into World War I.
It was raised to $3.20 in 1917 in part to
fund the war effort.
The beer tax stayed at $1 per barrel until
1898 when it was increased to $2 to help
pay for the US involvement in the SpanishAmerican War. By 1917 it had climbed to
$3 per barrel and in 1919 it went to $6.
Starting in 1866 taxes were imposed on
wines. Initially the tax rate was based on
the size of the container. The rates changed
in complex ways during the rest of the
19th century. In 1916 the tax on the most
common type of still wines, having 14% or
less alcohol content was set at 4 cents per
gallon (one gallon = 3.79 litres). At present
that has increased to $1.07 per gallon.
Wine stamps were first issued in 1914 and
eliminated in 1954. They were not applied
to wine bottles but to documents related to
the production of wine.
Prohibition in the United States went into
effect in 1920 and lasted until 1933. It
may seem paradoxical, but the taxes on
alcoholic beverages continued in effect
through the prohibition years as an added
measure to discourage illicit production.
The tax on distilled spirits was raised
to $6.40 starting in 1919 and this rate
extended until 1934. Following the end of
prohibition, the rate dropped to $2. Today it
stands at $13.50 per proof gallon.
Figure 1 – beer stamp.
Taxes on other types of liquor were paid
with larger forms commonly referred to
as ‘stamps’ but which more resembled
certificates of licences. An example of
such an item, a series of 1878 ‘distillery
warehouse stamps’ is shown in Figure 2.
Following the end of prohibition there was
a significant change in the way stamps
were used to collect distilled spirits taxes.
For the first time strip stamps were applied
to individual bottles over the bottle top.
This was to ensure that the stamps would
be broken and could not be reused when
the bottles were opened. The use of such
stamps ended in the 1980s although
several manufacturers continued to use
look-alike labels as part of their packaging
strategy.
Continued on page 8 >
Figure 2 – distillery warehouse ‘stamps’.
SPECIAL FEATURE | VOLUME 8 – NO 5 | MAY 2016
7
Liquor Taxes in The United States - A Brief History (continued)
The end of prohibition also caused many
states to levy their own taxes on liquor,
beer and wine. Individual counties, cities
and towns also jumped on the bandwagon.
Almost all of these states and localities
used some type of stamp to evidence tax
payment. These stamps, whether postage
stamp-like paper stamps, decals or, more
rarely, metre stamps, were affixed directly to
the taxed bottles. Figure 3 shows a number
of examples.
A look at the history of the use of stamps to
indicate payment of liquor taxes suggests
a pattern. At the national level affixing
stamps to individual bottles appears to
have been most common when it was
easiest to integrate the affixing process
into the production process. That is, when
the stamps could be affixed by machine.
This accounts for the lack of stamps on
individual beer and wine bottles as well
as their lack on liquor bottles before the
1930s.
In the future, if bootlegging concerns
increase, the use of individual stamps on
bottles may again become a viable method
of blocking such illicit trade. Until the 1960s
the individual states and localities that
taxed liquor found application of stamps
to individual bottles an efficient way of
collecting taxes and preventing illegal sales
of liquor.
Figure 3 – some examples of stamps fixed directly to
the taxed bottles.
The elimination of the federal liquor bottle
strip stamps in the 1980s probably reflected
the greater ease with which taxes could
be collected without the need for stamping
individual bottles, perhaps driven by
reduced concerns over bootlegging and
stamp counterfeiting.
It is interesting in this regard to compare the
stamping of cigarette packages with that of
liquor bottles. Individual packs of cigarettes
and boxes of other tobacco products were
individually stamped starting after the Civil
War. Stamping of individual cigarette packs
at the state level continues to this day. No
doubt this much more widespread use of
tax stamps on tobacco products reflects
the much greater ease of stamping the
smaller packages and the ease of illicit
trade in the small packages of cigarettes
compared to the larger bottles of alcoholic
beverages.
Events
20–22 JUNE 2016
Publisher: Reconnaissance International Ltd.
Editor: Nicola Sudan.
Contributors: Terence Hines, Chander Jeena, Ian Lancaster.
Advisors: Sven Bergmann, Pierre Bertrand, John Colledge, Chander Jeena,
Ian Lancaster, Glenn Wood.
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