Ian Lancaster says adoption of the new ISO 19998 standard, which is supported by the International Tax Stamp Association, could be in 2017.
The proposed introduction of a new international tax stamp standard (ISO 19998), which is supported by the International Tax Stamp Association (ITSA), has moved a step closer with plans to publish an initial draft for public consultation in the second half of 2017, followed by adoption before the end of that year. Ian Lancaster, project leader for the standard, reports on the latest developments. There are over 250 revenue agencies (national and state governments) around the world using tax stamps to collect valuable tax duties and excise payments, involving the worldwide production of some 140 billion stamps annually. As well as providing visible proof of tax payment and revenue collection, tax stamps have also taken on product authentication and anti-tampering applications.
So while some countries or regional states have stamp programmes for collecting tax, there remains large parts of the world where there are little or indeed no tax stamps. This is driving the requirement towards a global standard (ISO 19998) for the specification of tax stamps – an unequivocal standard that would bring all countries using stamps, and encourage those not using them, to have programmes that are line with the very best and most effective on the market.
A new standard would provide guidance on a number of related issues: how to approach a new tax stamp project, how to upgrade an existing system and how stamps could be integrated into a tax collection programme rather than being a standalone device. The standard would be fundamental to raising the game for issuers of tax stamps, giving them up-to-date objectives, good information on the characteristics and function of components, and guiding them on how to select those components. It would also help to level the competitive playing field for stamp and component suppliers and provide a common terminology that would facilitate dialogue and engagement between those involved in the sector.
The scope of the ISO 19998 standard is currently agreed as ‘This international standard provides guidance for the content, security and issuance of tax stamps (physical or non-physical) used to indicate that the required excise duty or revenue tax identified with an item has been paid and to signify that the item is legitimately on the intended market.
‘The standard will cover, but is not limited to: the functional content of a tax stamp; substrate material for physical stamps; the design of the stamp (physical or non-physical); the security of the artwork files and materials; inks and other materials used to print the stamp; overt and covert security features; serialisation and track and trace systems used; the issuance systems; finishing processes and testing’.
However, while this is the draft scope as it currently stands, it is felt by those involved that as well as providing guidance for the content, security and issuance of tax stamps, the standard also needs to provide guidance on the examination of tax stamps, because if authentication devices are used, they need to be examined. Too often, there are very sophisticated devices and protection systems on the stamp, but they are not examined, and the 19998 working group is proposing to ISO that the scope be amended to include examination of the tax stamp.
Also the ‘physical or non-physical’ portion of the standard has been the subject of strong debate recently, and the exact meaning of those words is still being considered regarding the extent to which the standard covers both physical and non-physical tax stamps.
Open definitions
As far as definitions are concerned, the fundamental need in getting them right is to make them ‘open’ definitions, not ‘closed’. If the standard is going to be successful and work for the foreseeable future, open definitions will need to accommodate, not exclude, new technologies and/or developments. The current drafted definitions for tax stamps are:
– Tax stamp: a visual or electronic device placed on certain types of consumer goods to show that the appropriate tax has been paid; these devices may be in the form of a label, closure seal, indicia or mark applied to, or included in the package or container of the taxable item. These devices are a tool within a government’s system for the collection and protection of the applicable taxes.
– Applicable taxes: excise and other revenue taxes on products as defined within national, state, provincial or local law. (Of course, no standard can override national law.)
– A tax stamp is an official document that, because of its security characteristics, must allow for the verification of its authenticity. The verification process shall provide information on who paid the tax related to the product and when this transaction occurred.
Work around definitions relating to issuance is more of a work in progress than the tax stamp definitions but these are:
– Production of the tax stamps should operate in compliance with recognised security management standards, specifically ISO 14298 ‘Graphic technology – management of security printing processes’. (This also covers management of security foils production processes.)
– Tax stamp issuance should operate under recognised security practices and procedures relative to the security risk associated with the various production, distribution and issuance processes. These procedures should provide security adequate to prevent the unauthorised reproduction, release or theft of tax stamps and provide a system to detect any such release, reproduction or theft in a timely manner. Issuance personnel should be trained in security practices and procedures and where allowed, screened through criminal background checks.
The key words worthy of drawing attention to in this definition of issuance systems are ‘security’ and ‘risk’. The underlying approach being taken with the standard is to try to guide authorities to undertake security risk assessments. Every element in the production, distribution and issuance of tax stamps has a risk associated with it, so authorities are urged to assess risk at each stage and implement appropriate security procedures.
There is clearly a lot more work to be done on the standard in the next 18-24 months, and those who would like to join the working group are being urged to do so and provide their contributions.
Recent moves have highlighted the need for a more balanced approach to representation on the editorial board responsible for drafting the ISO 19998 standard for tax stamps. Comprising 19 individuals, mainly involved in the supply of tax stamps and related components, the process could benefit by including specifiers and issuers, as well as companies physically applying tax stamps to products, to remedy the bias towards suppliers.
However, because ISO has very set procedures, any specifiers, issuers and appliers wanting to become part of the working group, would first need to contact their National Standards Body (NSB). They would, simultaneously, have to ensure that their NSB is a participating member of ISO’s Technical Committee 292, titled Security and Resilience and, if so, the NSB can nominate them to be a member of Working Group 4, Fraud Countermeasures and Controls, for 19998.
What are the next steps? The ISO has established timetables for the writing and adoption of the new standard to allow adequate time for writing and consultation at different stages of the draft. Working within these ISO procedures means that the tax stamp standard will be published for public consultation in the first half of 2017 with the aim of adopting it before the end of that year. The next full meeting of the ISO 19998 writing group will be in May.
For more information contact Ian Lancaster at [email protected].
