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Do Tax Stamps Need Their Own Standard?

09 August 2015

Since work began earlier this year on drafting the new ISO standard for the content, security and issuance of excise tax stamps, there have been a number of interesting questions circulating in the industry as to whether such a standard is really needed, and what exactly it will cover.

Tax Stamp News™ raised some of these questions with Ian Lancaster, who is project leader for the standard.

Q: Why does the industry need a global standard for the specification of tax stamps?

A: One of the key drivers towards the standard is a recognition that while some countries/states have excellent tax collection programmes that include stamps, others have either no tax stamps at all or use much less sophisticated ones.

The standard is therefore needed to bring all countries using tax stamps (and to encourage those not using them) up to the quality of the best. It will provide guidance on many tax stamp-related issues, such as how to approach a new tax stamp project, how to upgrade an existing system, and how stamps should fit within a tax collection programme, instead of being a standalone document.

The standard is fundamental to raising the game for issuers of tax stamps. It will give them up-to-date objectives, good information on the characteristics and function of components, and guide them on how to select those components.

On the flip side, a standard will also help to level the playing field for stamp and component suppliers.

I also think it is worth going back to the catalyst for the standard, which started with John Colledge’s paper at the 2013 Tax Stamp Forum™ in Vienna, where he talked about confusion in the use of terminology. So, just at the most basic level, standards should provide a common terminology to facilitate dialogue between issuers and suppliers.

Q: Don’t enough standards already exist for physical features on security documents? Why do tax stamps warrant special treatment?

A: The published standard ISO 14298 covers the management of security printing and security foil production processes, but it does not deal with the product itself, only the processes for creating the document in a secure way.

There is also standard ISO 12931 for authentication features on branded or similar items, which undoubtedly has some relevance to tax stamps. (Incidentally, I worked on the drafting of both of these standards.)

Moreover, in the draft of the tax stamp standard there are references to ISO 12931, as there is no point reinventing the wheel.

But the requirements of a brand owner or manufacturer for an authentication solution on a product are different to those of a tax stamp issuer, where the stamp is part of a tax collection system.

To my knowledge, there are no standards specific to security documents. For example, there is no standard for banknotes. The banknote field depends on a common approach, with recognised needs between central banks and banknote printers, built up over a couple of centuries. There exists a commonality of recognition of need in banknotes.

Tax stamps, on the other hand, have also been around for a couple of centuries, but the sophisticated tax stamps of today have only been around for 30 years. So there is a substantial lack of background awareness and community of interest with regard to tax stamps compared to banknotes, or indeed to passports and ID documents.

Tax stamps are also very specific. On the whole, most security documents are either long-life or multi-use documents. Passports are long life; banknotes are multi-use with a relatively long life.

A tax stamp is really a single-purpose and single-use document. Its purpose is to show that tax has been paid, which implies certain characteristics of the document. One example is that tax stamps are designed to be destroyed upon opening the product. This feature does not exist in any other security document that I can think of, unless you count product labels and seals – a purpose which tax stamps also serve.

As tax stamps are different to other security documents, due to their purpose, standards to provide guidance of the like already described has immense value.
It is a legitimate question though, and it is important to remember that one of ISO’s guidelines for standards writers is to refer to other standards, where relevant, which is what we are doing.

Q: What about the danger of a global tax stamp standard making life easier for counterfeiters to mimic security features?

A: The standard doesn’t tell issuers what the design or security features of the tax stamp should be. It doesn’t mandate them to use any particular feature.
It will tell them what the security features are, how they can use them and why they might want to use them; but the specific features selected for any given tax stamp, as well as the design and function of those features, will be unique to that tax stamp, or at least will be related to that singular tax stamp design.

So, while a counterfeiter might read the standard to find out about security papers, holograms or magnetic codes, they won’t know whether a given feature is on a specific tax stamp, or how that feature actually works on that stamp. The standard is about providing information and guidance, not about specification.

Q: Some industry members would prefer the standard to reflect ‘pure’ tax stamp purposes only (ie. as tax collection tools) and not stray into what they call the broader ‘marketing hype’ of supply chain traceability, product recall, and product authentication. What is your view?

A: I can only give you a personal opinion here. This is something the ISO group is still discussing and as yet there is no conclusion. My basic motto is KISS – Keep It Simple, Stupid. There is a distinct difference between the requirements of the issuing authority and those of the brand owner or manufacturer, and they are best kept separate, for simplicity of purpose.

The focus of the issuing agency has to be on collecting the tax from the legitimate manufacturers, and therefore on making a distinctive tax stamp that can be differentiated from fakes, and that discourages fake tax stamps and therefore fake products. I do think there is a product anti-counterfeiting spin-off from a good stamp, but that shouldn’t be the focus of the issuing or specifying authority.

The standard will make reference to these additional uses of a tax stamp. Giving information to an issuer on what a tax stamp should be for best security should deter product counterfeiting, but it is not the focus of the tax collection agency.

Q: Lastly, could you provide an update on the status of the tax stamp standard?

A: The ISO system for drawing up standards is very well formulated and for this standard we have up to 36 months to publish the standard from the date that it was first approved as a concept. We are currently in the ninth month of that period. The group had its first meeting in March, followed by a Webex meeting with another planned in September. Then in November we will have a second round table meeting, at the Tax Stamp Forum, by which time we hope to have completed the first draft phase.

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