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TAX STAMPS A Technical Study and Market Report
TAX STAMPS:
A Technical Study and Market Report
The definitive source of data and analysis on tax stamps - including
technologies and systems that increase government revenues and reduce
or prevent contraband and counterfeits - for tobacco and alcohol.
SPONSORED BY:
Second Edition
Second Edition
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Case Study 1: Belarus
Case Study 1 - Belarus
Technology Key Across Broad
Spectrum of Consumer Goods
As was the case with most of its neighbours, the formation of Belarus as an independent state following the break-up of
the Soviet Union was followed by the rapid development of an underground (or shadow) market. This was fueled by
counterfeiting, illegal trade and product abuse to such an extent that, in the early 1990s, the government estimated that
it comprised 70% of GDP – a situation that damaged not only consumers, legitimate manufacturers and state revenues,
but also the reputation of the country as a whole as a place to do business. Matters have changed out of all recognition
since then, however, and Belarus can now boast of having one of the lowest rates in the region for counterfeit goods and
illicit trade, and one of the highest for tax collection both on excisable and non-excisable products. The solution has been
the combination of a sophisticated yet simple set of first line security features on the country’s tax stamps and control
marks in the form of the Unigram, together with an automated electronic document management system – a combination
which is used not only for alcohol and tobacco, but a wide range of consumer products too.
The first tax stamps were
introduced
for
imported
• Population: 4.7 million
tobacco and alcohol shortly
• GDP capita: US$5,770
after the formation of Belarus
• Annual cigarette consumption:
and were originally produced in
23.8 billion
Poland, before the Minsk
• Annual spirits consumption:
Printing Factory of Goznak took
133 million
over production in 1996. The
• Stamps introduced: 1996
(cigarettes), 1999 (alcohol)
stamps comprised a water
• Supplier: Minsk Printing
mark,
fibres,
microtext,
Factory of Goznak
guilloche elements, an anticopy
• Revenue agency: Ministry for
feature and UV luminescent
Taxes and Revenues
ink.
In 1999, excise stamps were
introduced for domestic alcohol, including vodka, cognac and
brandy, imported wine and domestic cigarettes. The features
remained the same. Two years later, excise stamps were
introduced for domestic wine, with additional (printed) security
features.
There were problems, however, with these stamps – namely, they
were not making a serious impact on counterfeit and illegallytraded products. A new tack was taken, therefore, comprising not
only the introduction of a new technology in the form of the
Unigram in 2003, but the development of a tracking platform that
has been subsequently expanded to cover a wide range of goods
– excisable as well as commodity products.
FACT FILE
Two-Phase Approach
The implementation of the country’s national automated
electronic document management system took place in 2002.
Developed by Goznak and managed by the Payment Centre of the
National Bank of Belarus, the management system was the first of
its kind to be introduced and successfully implemented in the
region.
The system keeps track of various types of documents subject to
fraud, including tax stamps and product labels (referred to as
control marks) throughout their lifecycle, providing electronic
support and verification at the state level. Once produced, each
document is entered onto the database and tracked when
distributed, used, discarded or invalidated for any reason by
recording the data from the end user and the product it was
allocated to.
Each document carries its own identification number, which serves
as the evidence of its legitimacy. Companies with direct access to
the database can verify any given document or its product in real
time, while consumers and retailers can do so by accessing the
system’s website or sending the relevant data to the National
Bank’s system management centre for verification. At the
consumer level, however, online verification for tax stamps is yet
to be implemented.
The second phase of the evolution of Belarus’ excise stamps was
the development and introduction, a year later, of the Unigram,
which combines two existing features and their properties into
one label.
The visual effects of the Unigram enable simple consumer
verification in two ways – tilting it will display the optically
variable effects, much like any hologram or OVD, whilst the latent
image provides an added level of both consumer and retailer
verification with the use of a simple, low cost polariser (priced at
around 20 US cents and distributed free of charge to government
officials). On tax stamps for vodka, for example, the polariser will
reveal “АКЦЫЗ” (EXCISE DUTY) on the Unigram.
The Unigrams are produced by the Minsk Printing Factory of
Goznak under a licensing agreement with five other Belarusian
collaborators who also own this technology – Light Magic Ltd, JSC
Holography Industry, BI Stepanov Institute of Physics of the
National Academy of Science, ATB-LIT and RUE Cryptotech of
Goznak. The agreement, as well as the original patent, thus
includes all Belarusian companies working in the field of secure
document production, making any alternative mass production or
simulation of the feature in the country virtually impossible. To
date there has been no evidence of forgery of the Unigrams.
The Technology
Unigrams are not, in themselves, unique – since latent polarized
images have been developed in other parts of the world too,
notably in Russia, Japan and Australia. However, a particular
feature of the Belarusian technology, as opposed to the
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TAX STAMPS A Technical Study and Market Report - 2nd Edition
An example of a 2005 alcohol
stamp (above) and viewed
under the polarizing filter
(left)
over every stage of the process with the minimum effort. The price
of the tax stamps and control marks is fixed by the government.
At present, it amounts to 70 Belarusian Rubles (around 1 US cent)
for control marks and tobacco tax stamps and 170 Belarusian
Rubles (just over 2 US cents) for alcohol stamps, making them
among the cheapest in the region. This is paid for either by the
manufacturer or importer, and may be added to the retail price of
the goods.
Non-Excisable Products
The new Unigram with
barcode (above) and
viewed under the
polarizing filter (left)
alternative methods of production, is that the image has high
contrast when viewed through the polariser and no contours or
traces when viewed in normal conditions. It retains high thermal
stability and remains resistant to UV radiation.
It also offers a unique method of integration with the hologram,
comprising four layers of which the hologram serves as a
reflective layer, with the polymer layer containing the latent
image, an adhesive layer and the base PET layer.
The nationwide scale of implementation of this technology on
alcohol stamps, product labels and other valuable documents is
simply unprecedented says Goznak Belarus, making the country a
text book example of its success and usability.
Issuing and Marking Procedure
The issuing and marking system for both excisable and nonexcisable products is underpinned by a regulatory framework,
devised by the Ministry for Taxes and Revenues in collaboration
with Goznak Belarus and designed to ensure government and
consumer control over the sale of marked products.
The procedure consists of a number of steps providing
transparency from the point tax stamps and control marks are
manufactured to the point the products reach their intended
consumer.
Manufacturers and importers file their applications for tax stamps
or control marks to their appropriate territorial inspectorate under
the Ministry for Taxes and Revenues. Inspectors from the Ministry
consider each individual application and give permission to issue
tax stamps or labels, recording their own steps and associated
data in the electronic database.
Once processed, Goznak Belarus receives the orders for
production of stamps and labels, produces these and then
distributes them as appropriate (ensuring that the quantities do
not exceed manufacturing quotas). Each action is again recorded
in the database. Under the relevant legislation, one manufacturer
or importer cannot transfer tax stamps or control marks to
another. When the tax stamps or control marks have been
received, the manufacturer or importer applies them onto the
products.
The marking system enables the authorities to exercise control
The introduction of the technology for products other than
tobacco, spirits and wine started in 2005. Known as control marks
rather than excise stamps, these were initially applied to two
products only – malt beer and engine oils – based on the large
volume of sales in the grey market for both. The result was that
the overall volume of legally-imported beer increased almost
threefold, while beer imported from Russia, Belarus's largest
supplier for many products, increased over four times. Following
the introduction of the system in 2005, imports of Russian beer
represented 90% of the market, compared with just 50% in the
previous year. A twofold increase in domestic beer production was
also witnessed, with tax revenues increasing by 220%.
Similarly encouraging results were obtained from the marking of
engine oil, and in 2006 it was decided to extend the scheme to
vegetable oil, canned fish and caviar, water, mild alcoholic
beverages and synthetic detergents. The following year, the
control marks were added to tea and coffee, food supplements,
footwear, audiovisual storage media and mobile phones.
Production of marked goods and tax revenues kept increasing,
and in 2008 control marks were introduced for watches, antifreeze, vinegar and TV sets. Over 20 products lines are now
marked.
Five years after its introduction, government revenues from taxes
paid by manufacturers and importers of marked goods increased
by more than $1 billion. The number of legitimate manufacturers
increased from 210 to 250, and the number of importers from
6,600 to 9,800 for the product lines concerned.
The programme initially met with opposition from the
manufacturers and importers. But the results from the first goods
to be marked soon overcame this, and it was the manufacturers
themselves that suggested subsequent categories of consumer
goods to be marked, as a means of protecting their status as
legitimate suppliers and protecting them from unfair competition
from the grey market.
Examples of the 2005 version of alcohol stamps
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Case Study 1: Belarus
Belarus produced the first ready-forapplication samples of Unigram with
diffractive barcode and Unigram with
demetallisation. The former is of
particular interest, adding another
feature to the existing technology.
The diffractive barcode is integrated
in the hologram and contains an
encoded 8-10 digit number read with
a reader connected to a PC, providing
in effect an additional authentication
tool. This feature is now used in
Belarus on commercial invoices
(waybills) and has been proposed by
the developers for use on tax stamps
both in Belarus and abroad.
The demetallised version of the
hologram, meanwhile, has been in
use on cigarette stamps since 2010.
The growth of excise duties on alcohol and cigarettes in Belarus – 2000-2010
Results for Tax Stamps
System Functionality
Similar successes have been recorded for excise stamps on
tobacco and alcohol. According to the Ministry for Taxes and
Duties, in the 16 years since the introduction of the tax stamps
and, later, the Unigram with the data management system,
budgetary tax revenues have totaled $6 billion – an impressive
achievement given that Belarus is a small country with under 10
million people. In 2004 alone, tax revenues totaled almost $30
million, while sales of legal alcohol products were boosted by
70%. More recently, from 2008-2010, budgetary tax revenues
from alcohol and tobacco totaled around US$120 million.
In percentage terms, from 2000-2010 the growth rate of excise
taxes paid on alcohol products was 950% and on tobacco
4,400%. According to the latest government figures, the shadow
market in the country is now represented by no more than 1015% compared with 60-70% before, whilst the overall amount of
counterfeit stamps uncovered in 2009 was only 50,000. Goznak
Belarus annually produces and distributes over 2 billion tax
stamps.
Belarusian tax stamps and control marks do not incorporate
variable data apart from identification and serialisation numbers.
There are no sophisticated system-generated codes with track and
trace capabilities. This, however, does not seem to have affected or
limited system functionality.
Over the years the system has performed efficiently, giving the
government control over its alcohol, tobacco and consumer
markets and helping it increase the cash flow from its tax
revenues. With recent emphasis in the industry on digital
technologies and real time traceability functions, Belarus is a good
example of continuing success by combining digital and
conventional features on tax stamps.
Further Developments
The success of Unigram in the country has paved the way for
further developments. In 2010, in collaboration with JSC
Holography Industry and the Belarusian State University, Goznak
Demetallised on cigarette tax stamps, c. 2010
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Table of Contents
Table of Contents
CHAPTER 1:
Introduction to the Tax Stamp Report
Page 9
CHAPTER 2:
Why Countries Use Tax Stamps
Page 11
CHAPTER 3:
How Tax Stamps Curb Illicit Trade
Page 15
CHAPTER 4:
How Tax Stamp Programmes Work
Page 19
CHAPTER 5:
Tax Stamp Production and Authentication
Page 25
CHAPTER 6:
Tax Stamp Formats and Application
Page 41
CHAPTER 7:
The Digital Revolution
Page 45
CHAPTER 8:
International Regulations
Page 49
CHAPTER 9:
Compliance and Enforcement
Page 53
CHAPTER 10:
Global and Regional Use of Tax Stamps
Page 59
CHAPTER 11:
Africa
Page 65
CHAPTER 12:
Asia and Far East
Page 69
CHAPTER 13:
Eastern Europe and CIS
Page 73
CHAPTER 14:
Western Europe
Page 77
CHAPTER 15:
Latin America and the Caribbean
Page 81
CHAPTER 16:
North America
Page 83
CHAPTER 17:
The Road Ahead for Tax Stamps
Page 85
APPENDIX 1:
Tax Stamps in Practice – a Selection of Case Studies
Page 89
APPENDIX 2:
Worldwide Alcohol and Cigarette Consumption
Page 127
APPENDIX 3:
Definitions of Authentication Terms and Technologies
Page 131
APPENDIX 4:
Contributors and Acknowledgements
Page 135
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TAX STAMPS A Technical Study and Market Report - 2nd Edition
TAX STAMPS
A Technical Study and Market Report
Second Edition
Published by
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© Reconnaissance International Ltd 2012
ISBN: 0-9524583-2-2
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