An ongoing issue of concern to the tax stamp world has recently resurfaced. It refers to the use of the term ‘tax stamp’ to describe security features that have nothing to do with tax collection.
In particular, confusion continues to reign over the difference between the tax stamps and authentication labels used under the EU Tobacco Products Directive (TPD).
While most EU member states use tax stamps to comply with the security feature requirements of the TPD (given that they were already using tax stamps anyway, before the TPD came along), five member states plus the UK (which do not use tax stamps) use authentication labels instead to comply with the TPD – with no link to any excise tax collection function. Indeed, the individual tobacco manufacturers contract directly with the various label printers for the provision of the labels, rather than going through the national tax authorities.
The difference between tax stamps and non-tax-related authentication labels should therefore be clear. And yet, some solution providers in the industry continue to describe these non-tax labels as tax stamps. But they are not tax stamps.
One concerned member of the industry even told us that using the wrong terminology in this way not only creates confusion, but could also contravene international standards and even water down the stringent recommendations of some of those standards – in particular ISO 22382:2018, ‘Guidelines for the content, security, issuance and examination of excise tax stamps’.
So let’s go back to Tax Stamp & Traceability News™, April 2020, when we tried to clarify what is what.
What is a tax stamp?
ISO 22382 defines a tax stamp as a ‘visible stamp, label or mark placed on certain types of consumer goods to show that the applicable excise tax has been paid’. This identifies the key and unique function of a tax stamp, which is to show that the required tax on the item that the stamp is affixed to has been paid. In other words, the stamp acts as a receipt.
ISO 22382 also recognises that stamps may have other functions, including those relating to legislative compliance – such as complying with the security feature provisions of the EU TPD.
There is another unique facet of tax stamps, which is that they are specified and issued under the authority of the appropriate tax authority, defined in ISO 22382 as: ‘a government (national, provincial, state or local) agency that has responsibility for the collection of applicable taxes and for the specification and design of tax stamps’.
What is an authentication label?
The key differences between tax stamps and authentication labels pertain to functionality and the specifier/issuer. As explained above, tax stamps fundamentally serve a tax purpose and may fulfil other functions, while authentication labels should do what their name suggests – authenticate!
While tax stamps are issued by a state authorised organisation, authentication labels are normally specified and issued by the brand owner. The TPD is the exception to this in that it requires authentication labels to conform to an agreed national design and security specifications, with at least one security element on the label issued by an authorised and independent third party.
So, the bottom line as far as the difference between tax stamps and authentication labels is concerned is that the latter do not provide proof of tax paid, while the former certainly do.