The International Tax Stamp Association (ITSA) has responded to criticism of tax stamps in a new report on the impact of blockchain technology on excise duty payments.
The study by Deloitte highlights the potential benefits of using blockchain to digitize tax stamps and make it easier for revenue authorities to recoup excise duties on tobacco and alcohol products.
It also raises security concerns over current tax stamp use – particularly the procurement, transportation, and pasting of physical tax stamps onto packaging – and claims that blockchain could increase supply chain efficiencies and traceability of products, cut costs and reduce the risk of fraud.
ITSA said the study contained many “disingenuous statements” about the current use of tax stamps while ignoring established industry best practices and glossing over deficiencies in blockchain technology.
Juan Carlos Yañez, ITSA chairman, said, “It is deeply concerning that this report has entered the public domain. Not only does it misrepresent the role of tax stamps in excise duty collection, it highlights a broader lack of understanding of tax stamp programs in general.
“The report contains many unjustified, sweeping, and potentially damaging statements without necessary qualification. For example, the declaration that the use of physical tax stamps is “a costly process” is made without any supporting data or a careful comparison to other options to regulate tax compliance.
“While we recognize the potential benefits of blockchain, the report overlooks many limitations of this technology, including its inability to authenticate a physical product. Blockchain cannot help us to ensure that the digital record, however immutable and verifiable it may be, is linked to the right object, which is why a combination of physical security and digital traceability is needed. This is something that can be provided by a combined tax stamp and secure track and trace system. Indeed, many effective track and trace programs currently in operation include tax stamps – programs that have already recouped excise duties worth millions of pounds for revenue authorities across the world.