Digital tax stamps crucial for curbing counterfeit products

-fakes or unauthorised replicas of the real product. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product. The word counterfeit frequently describes both the forgeries of currency and documents as well as the imitations of items such as clothing, handbags, shoes, pharmaceuticals, automobile parts, unapproved aircraft parts (which have caused many accidents), watches, electronics and electronic parts, software, works of art, toys, and movies.  

Counterfeit products tend to have fake company logos and brands, which results in patent or trademark infringement in the case of goods. They also have a reputation for being lower quality, sometimes not working at all, and sometimes containing toxic substances such as lead. This has resulted in the deaths of hundreds of thousands of people, due to automobile and aviation accidents, poisoning, or ceasing to take essential compounds (e.g., in the case a person takes non-working medicine).  

The counterfeiting of money, mostly paper money, is usually attacked aggressively by governments worldwide.

In an effort to increase revenue collection, the Tanzanian  has in recent years emphasised the use of technology to strengthen tax administration and compliance. Recently, part of those efforts has involved the introduction of the Electronic Tax Stamps Regulations, 2018 (the Regulations). These require the use and application of Electronic Tax Stamps (ETS) on excisable goods.

The regulations define an ETS as an adhesive label that uses advanced digital coding technology and is printed or affixed directly on the product packaging of excisable goods.

The purpose of the ETS is to help stamp out counterfeiting and tax irregularities such as under declaration of taxes. The ETS does this by facilitating the tracking, monitoring and authentication of stamps and excisable goods along the supply chain, so that all excisable goods can be properly accounted for and taxed accordingly.

The ETS replaces the former paper stamp system, which was cumbersome and prone to human error, allowing certain tax-related malpractices to slip through the cracks.

The Regulations require each manufacturer to install an electronic tax stamp management system. A Swiss-based firm SICPA has been contracted by the Tanzania Revenue Authority (TRA) to install and enroll all manufacturers, producers and importers onto the system.

The system enables the ordering of stamps, application of stamps on excisable goods, storing of information, authentication of products and production monitoring, among other things.

Manufacturers are obliged under the regulations to install the system on all production lines of production facilities, while importers must do so in custom-controlled areas. Each packaging and labelling machine must have a corresponding stamp.

An interesting component of the regulations in terms of Intellectual property is the requirement imposed on manufacturers and importers to declare to the TRA packages and labels of new products manufactured, produced or imported (including those for export and duty free). Further, manufacturers and importers must, at least 30 days in advance, declare the commencement of production of new products or any change in the graphic design of existing ones, together with the corresponding packages and labels.

Core to the regulations is the duty imposed on various persons involved in the supply chain, such as manufacturers, producers, importers, distributors and retailers, to verify and authenticate the stamps or excisable goods before allowing these onto their premises or handling them in any manner. A mobile application that will enable companies and individuals to verify the authenticity of the tax stamps on products is in the final stages of development.

In light of this, it is evident that authentication is now central to the system, in contrast with previous years where the focal point was only on revenue collection. The spirit of the Regulations is in line with the Minister of Trade and Industry’s comments that the war on counterfeit ought to be fought by one and all, including umbrella bodies.