Tax stamps and secure marks: Five avenues to a strategic advantage
In one of our earlier articles we explored how difficult it can be for tax stamp and traceability programs to gain traction, which will likely become increasingly more difficult as more potential solution providers enter the market, and even as more governments begin to seek compliance with their track and trace obligations under the FCTC.
Watching from the side-lines, and particularly in the role of advising government agencies, I was struck by how many untapped opportunities there remain, to both improve the take-up rate of traceability solutions in general, and to improve individual companies’ potential success rates. Between ITSA and its members, there seem to be a number of avenues that would even better position the industry, including doing more to demystify track and trace; leveraging partnerships with untraditional partners; doing more around pre-sales marketing; creating more narratives around the successes that have been achieved through tax stamp and traceability programs; and preparing agencies to better anticipate and counter industry tactics aimed at derailing traceability programs.
The first avenue is both obvious and daunting: doing more to demystify tax stamps and track and trace. Even the simplest of concepts remain poorly understood by the officials who need to choose them, and the politicians who are supposed to fund them. There is very little real support to agencies, politicians, the media and the public in general aimed at demystifying exactly what these pieces of paper or codes are and what they do. What little is available is often highly academic and not written in an accessible style, on obscure websites that you and I may know about but that are hardly likely to feature on the average person’s newsfeed. Much of the narrative that isavailable, is critical of tax stamps and the companies that develop them (most likely driven by the very industries the tax stamps are meant to better control).
If I were a lawyer at a customs and excise agency, facing a challenge of rampant illicit trade in excisable goods or needing to urgently bolster excise revenue collections, where would I start? It’s a veritable maze, with rabbit holes and back doors. Trying to understand the options and solutions and implications is more herding cats than science. Knowing who to trust – and, by contrast, whose opinions come with a heavy dose of self-interest – is tricky.
As an industry, we tend to be so quick to jump into conversations around overt and covert security, or the difference between digital and material tax stamps, that we often forget to start at the very beginning. Agencies often literally do not understand the difference between track and trace as we know it, and GPRS tracking devices on trucks. There are no simple guides aimed at translating industry jargon into something an average excise officer can relate to. Presentations are often highly sophisticated and overwhelming, potentially leaving agencies with little real understanding of the implications of the options they choose, or the alternatives that might be available to them, and are not empowered to ask the right questions that would help them in choosing the best possible solutions for their individual situations.
Investing in a solution provider-agnostic, simple guide, that speaks to the average excise officer and their political masters, detailing what questions to ask, what options they could potentially choose from, and what the implications of those different options would be, would be a substantial strategic win for the secure marking and tax stamp industry. It would allow agencies to make more informed decisions, and in doing so, would be a sound PR win for the industry.
A second avenue, that would similarly constitute a bit of a PR triumph, perhaps lies in better leveraging partnerships with – in particular – the health fraternity. Of course tax stamps and traceability programs go far beyond just securing compliance with the FCTC, but it has the potential to be a powerful promotional driver for the industry.
Unfortunately, much of the tax stamp and secure marking industry is viewed with some scepticism by the health community, which refuses to partner or even engage with industry. At the FCTC meetings in Geneva in 2018, the MOP and COP sessions explicitly excluded securing marking industry representatives – while the tobacco industry managed to get a seat at the table through its proxies. It represents a real lost opportunity for two sectors who at least in this one regard have a common goal in mind – reducing the illicit trade in excisable products.
The relative lack of trust and engagement is a loss to both industry and the health fraternity, and something of a win for those manufacturers of excisable products out to cheat the system. We end up attending our own conferences, reading our own newsletters, preaching to the choir, and not leveraging what could be an inordinately powerful ally in better securing supply chains.
I firmly believe that the tax stamp and secure printing industry shouldhave a seat at the FCTC table, and developing a roadmap that begins to deliver on this goal would similarly be a strategic investment in even more robustly positioning the industry.
Part of developing both the simple guide and gaining more trust within the health fraternity perhaps lies in a third avenue of strategic advantage: doing more to exploit the real value that tax stamps and secure marks can potentially contribute.
We were recently asked to compile a quick list of examples of successes achieved using secure marks. As it turns out, this is quite a tricky request. The studies that are available tend to repeatedly focus on the same small number of sample countries, and don’t necessarily convincingly make the case – in a powerful and accessible way – that investing in tax stamps and secure marks goes beyond simple rhetoric or an obligation imposed by the FCTC, but actually yield real, substantive, measurable successes. We need far more substance around the success stories attributable to tax stamps and secure marks.
It is extremely difficult to sell a product or a service when there isn’t a compelling story to tell – and without a comprehensive list of country examples where secure marks made a notable difference, there simply isn’t a compelling story. Perhaps what is needed is an anonymised case study – ensuring that specific vendors or countries aren’t identifiable – detailing simply what type of security features were used, and what impact they had on excise collections, excise declarations and illicit trade in general.
A big part of this conversation should arguably expand the way in which success is measured, beyond simply the number of products marked, or an increase in excise revenues, to broader measures around a decrease in illicit trade, and strike rates of enforcement activities, and the rate of successful prosecutions – all of which should be the real reasons governments invest in tax stamp and secure marking programs.
Implementing tax stamps and secure marks should be an easy sell, but often is not. A consolidated, global study that anonymises solution provider data, whilst still detailing the nature of the different solutions (and perhaps what other supplementary solutions were implemented), together with an indication of type of successes achieved, would be a win for the industry as a whole – particularly considering the fact that agencies indisputably in practice dohave a choice whether or not to pursue what is often a contentious issue.
A last worthy investment for the industry would be very strongly investing in more robust guidance to agencies on the kind of pushback and obstacles they can expect from the industries they are trying to regulate – whether this is the tobacco industry, or alcohol, or sugar, or whatever other behemoth agencies may have in their sights.
We know from experience that these industries tend to have a somewhat generic set of tactics, arguments and rhetoric that they use to dilute, derail or delay the programs that are meant to better regulate their supply chains. And we also know from experience that much of these tactics and rhetoric is easy enough to counter or engage with constructively, but that an unprepared agency may well not be able to do so. As a result, we see far too often how even the best of programs fall by the wayside, simply not gaining traction, as the larger manufacturers flex their fiscal muscles, relying on the soft power that comes from being a significant revenue contributor; argue that they are capable of self-regulating; propose that government should instead be focusing its efforts simply on low-cost manufacturers; deflect more sophisticated solutions with concerns about costs; and on occasion even capture or corrupt agencies. And far too many agencies bend and bow and sway to this pressure, walking away from engagements which they could easily direct – if only they had easier access to facts and counter-arguments.
A simple generic guide to the reasons why tax stamp and secure marking programs fail, highlighting the type of narratives and arguments and agency is likely to be faced with, and a set of facts and counter-arguments for agencies to rely on, would go a long way to ensuring that even more programs make it out of the gate and actually get implemented.
What is needed is more generic, industry-wide efforts, that do more to simplify what is otherwise a somewhat opaque business. What is needed is far more technology-agnostic publications on the principles, options and implications of different choices, written in a simple, accessible style. What is needed are compelling stories that sell the concept, and I’m convinced we’re on the road to even greater things.