Excise
stamps- who should pay for proof of duty paid?
Dr. Nadtara
Bott
Krisdika Officer,
Office of the Council of State
There is nothing certain in life,
except for death… and tax.
Anyone who has ever purchased a
product subject to excise duty in Thailand will have seen a quaint strip of
paper over the lids of alcohol bottles, or one attached to the opening of a
cigarette packet. Personally, I find these intriguing and reminiscent of a bygone
era of imperialist bureaucracy. I viewed them as a sign of legitimacy, and a
guarantee of the authenticity of the product. That was my view until I learned
that the Thai Government is due to incinerate 27 million Baht’s worth of these
stamps in their plan to reform the existing excise stamp system and replace
them with a new design. Surely, this shouldn’t be a burden on taxpayers? How do
other countries approach the system of excise stamp collection?
A short history of the
use and purpose of excise stamps
The use of “stamps” or a seal to
denote tax paid has existed since the dawn of civilisation. Archeologists have
found ancient Egyptian artefacts originating from the time of 3000 BC in the
form of ivory labels to attach to goods and at times, hieroglyph inscription on
pottery containers to denote that tax had been paid. The origin of tax stamps in
the form of paper adhesive labels dates back to 1637 when Spain first
introduced stamped paper. The first and main purpose is
proof of payment of tax on goods. Use of excise stamps became widespread in the
19th century as a method of streamlining bureaucratic measures. In time, the second purpose
of excise stamps came to be that consumers could be assured of the authenticity
of the product. This second purpose became instrumental for some Governments
such as those of Russia and Brazil to control and limit the existence of
counterfeit goods as well as tax evasion. Thirdly, an underlying
purpose for excise taxation and the accompanying use of excise stamps is to
provide a measure of health control to dissuade consumers from indulging in
consumer goods considered bad for health.
In the 21st
century, the use of physical stamps has become less common as computerization
has become a more popular means of tracking excise tax payments. Tax stamps are
used by regulators in approximately fifty countries globally. For
countries that retain their use, physical excise stamps have evolved to become
more sophisticated. Use of holograms, UV- only visible ink is used to prevent
counterfeiting for avoidance of tax. Anti- counterfeiting print technology such
as barcodes and serial numbers have also been issued for the purpose of
tracking and tracing. Data processing capabilities and mobile
communications have allowed products to be marked in-line during production
with their own unique codes, recorded in a database. The codes may then be used
to verify the product in remote locations and provide key data on source,
destination and authenticity. As an example, Spain
implemented the digital management of excise stamps allowing producers and
traders to “activate” and “deactivate” excise stamps remotely. Thus, use of
technology such as serial numbers has given a fourth and final purpose for the
use of physical stamp duty for producers of taxable goods to accurately track
and predict supply chain data.
The Thai excise stamp
system.
The levy of excise tax in in Thai law
is governed by the Excise Tax Act, B.E. 2560 (2017). The modern legislation
consolidates all previous pieces of legislation governing excise tax on goods and services
which the State deems that consumption must be controlled as such may cause
damage to human health or impact the morality of the people. This includes such
obvious goods such as alcohol and tobacco, as well as less obvious goods
such as playing cards, and also non-essential goods, and goods and services that
receive special benefits from State businesses.
Section 4 defines “excise stamps” simply as “a stamp prepared or
procured by the Government for use in the collection of tax under this Act”.
The excise stamp system in Thailand is
administered according to Ministerial Regulations and Rules enacted under this
main legislation, and the design of the stamp is legislated by ministerial regulation,
with colour – coding to identify the type of products and are equipped with a
watermark and incised printing. The new Ministerial Regulations were proposed
to consolidate and simplify the categorization of taxable goods, as well as to
improve security features and to provide a system for tracking and tracing
goods via QR code and barcodes. In practice, manufacturers of goods obtain
stamps upon payment of tax and affix these Government- issued stamps on their
products prior to removal from the bonded warehouse. Section 67 of the Excise
Tax Act provides that “No person other than the Excise Department shall make or
procure excise stamps or official tax payment marks” thus putting the onus
solely on the State revenue to pay for and manufacture physical excise stamps. With
the issue of the newly- designed stamps, the previous versions will, in the
interest of tax collection and accountability, need to be destroyed. - All
using Government funds, footed by tax payers. What about other countries? Who
foots the cost of proving that tax has been paid?
Who bears the cost of
producing excise stamps in other countries?
A brief research of World Health
Organisation (WHO) data has
found the use of paper excise stamps still prevalent in Southeast Asian
countries including Cambodia,
Indonesia,
Lao PDR,
Malaysia,
Thailand and Vietnam. Other
countries still using physical tax stamps include Canada,
Colombia,
Russia,
Turkey,
Ukraine,
and Spain.
Out of these countries, only in Indonesia, Thailand and Vietnam does the
Government solely bear of costs of manufacturing stamps. In remaining countries
such as Cambodia, Lao PDR, Malaysia and Canada for example, licensed
manufacturers and importers are either solely or partially responsible for the
cost of excise stamps and to affix them onto their products. In recent years,
the main argument for strict Government involvement in the design and issue of
excise stamps is the sophistication and technology used in their design. This
is to prevent the counterfeiting of stamps in avoiding the payment of tax and therefore,
to ensure that the State maintains effective collection of tax revenue.
Additionally, it is argued that the State should also maintain control over the
manufacturing of excise stamps to prevent the counterfeiting of goods on
products themselves, to protect consumers from harm.
Alternative excise
stamp schemes.
The United Kingdom:
Label incorporation.
In the United Kingdom, two types of
excise stamps exist by virtue of Schedule 2A of the Alcoholic Liquor Duties Act
1979 and the Duty Stamps Regulations 2006. The implementation of tax stamp technology
was subject to an EU tender process and the supplier is supervised by the Her
Majesty Revenue and Customs (HMRC) procurement section. A traditional stamp may
be attached directly to the bottle, or alternatively, the “UK DUTY PAID” mark
may be incorporated into bottle labels and printed by the industry’s own label
printers. As of July 2020, the latter is found to be more prevalent in the UK
market. The producers or manufacturers of payable goods register with the HM
Revenue and Customs (HMRC) to receive the design and printing specifications of
the excise stamp mark that is to be incorporated onto the product label. Producers
and manufacturers also receive serial numbers based on the forecast of the
amount of goods to be manufactured and bear the costs of both types of excise
stamps.
Singapore: cigarettes
For proof of duty paid for cigarettes,
the Customs Act of 2009 of Singapore prescribes that individual sticks of
duty-paid cigarette are marked with the letters “SPDC” (Singapore duty-paid
cigarettes) with a ring of vertical bars underneath. Importers and
manufacturers of cigarettes are required to obtain approval from Singapore
Customs before importation or manufacture of new brands or variants of
cigarettes meant for sale and consumption in Singapore. The costs of marking
that duty has been paid is thus borne either by the manufacturers or importers.
Denmark: ‘fiscal cap’
Excise tax stamps for wine were
abolished in Denmark in 2001, with excise tax stamps for spirits to follow in
2015. Prior to this time, a traditional paper strip- type stamp was applied
over the top of the lid of taxable alcohol, and an optional method was a
specially stamped “fiscal cap” where manufacturers and producers, like in the
United Kingdom, register with the Danish tax authority to receive the design
and printing specifications of the excise stamp mark that is to be incorporated
into the design of a secure cap. It was argued that in practice, the “bespoke
complexities of operating the fiscal capping machinery meant that the vast
majority of imported products used the paper strip version.”
Conclusions for
Thailand
From a brief study of data on the
usage of excise stamps, it is found that some countries have abandoned the use
physical excise stamps due to a sense of antiquity, and the overburdening of manufacturing
and production industries such as Denmark while others such as countries in
Southeast Asia have come to revive the use of excise stamp to ensure efficient
collection of payable tax, authenticity of goods and the protection of public
health. Another country that has come to revive the use of excise stamps is the
United Kingdom, which in 2006 introduced the stamp duty scheme for alcohol
products in response to counterfeit goods, but unlike Thailand, the burden of
cost of the stamps are placed on producers of taxable goods. Would it
therefore, be better to let the manufacturing industry foot this cost?
Studies on the cost- effectiveness of
the use of excise stamps has shown varying conclusions. In a
2018 study by Godden and Allen on the development of modern revenue controls on
alcoholic beverages in 2018, the
use of excise tax stamps makes only a limited contribution to intended policy
use goals of 1. Curbing tax avoidance and 2. Reducing the consumption of
alcohol. The study concluded that the use of excise stamps should only be made
alongside an efficient tax policy and regulatory enforcement framework.
Additionally, in this study of 7 different countries including Denmark, Turkey,
South Korea, UK, Kenya, Colombia and Morocco, the biggest concern was the costs
involved that are borne by the alcoholic beverage industry itself.
With a current lack of alternatives,
it may be suggested therefore that in the case of Thailand, there is still
perhaps a justification for the use of a system of excise stamps. The main
reasons for this are to ensure the collection of payable tax and to maintain
the State’s role in deterring the production of and policing counterfeit goods.
It could be suggested that the cost of physical stamps might be shared by
producers and manufacturers of taxable goods. However, there exists a concern
that shifting the cost of manufacturing excise duty stamps to goods
manufacturers may in turn, result in increased counterfeiting and/or shifting
the burden of costs in turn to consumers. To counter this concern, if tracking
technology can be incorporated into excise stamps and be shown to benefit the
manufacturing industry, there could be more incentive on their part to share
the costs of manufacturing excise stamps.
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