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TRADE BODY CALLS FOR EU TPD IMPROVEMENTS

Date

12 Dec 2021

Sections

Trade & Society

The International Tax Stamp Association (ITSA) is calling for improvements to a directive that controls the manufacture, presentation and sale of tobacco products in the European Union.

ITSA believes that while the EU Tobacco Products Directive (TPD), which is currently undergoing a mandatory review, has been very effective in some areas, lessons can and should be learnt from it that authorities may adopt as best practice as they move forward with their own plans, including implementation of the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products.

ITSA’s call for improvements echoes a 2021 report* by the European Commission (which identifies the need to more effectively implement the Directive on a national level and take into greater consideration current market developments), and follows a recent seminar for ITSA members and industry stakeholders on the tracking and tracing of tobacco products.

The seminar** presented research studies on successful approaches adopted by tax authorities around the world to fight the illicit tobacco trade through the use of tax stamps and track and trace systems. It also provided a critical review of Article 15 of the EU TPD, which prescribes the application of a unique identifier onto each pack of tobacco products so that they can be tracked and traced throughout the supply chain, as well as a review of Article 16, prescribing the application of authentication features on each pack.

Regarding Article 15, ITSA praised the establishment of an interoperable system for traceability information across member states. Compliance with the FCTC centres around data that can be easily transferred between countries and throughout complex global supply chains, and the TPD has paved the way for the agreement of a standard practice, and a single repository with defined application programming interfaces to communicate that data.

Several weaknesses have however been identified, namely the delegation of a large number of responsibilities to the tobacco industry and the unnecessary disaggregation of the system, split into multiple roles for multiple suppliers.

Regarding Article 16, the fact that 22 member states decided to comply with this article via their tax stamp was also praised, however several member states delegated the responsibilities of Article 16 to the tobacco industry, which goes against the best practices identified by prior research.

Looking to the future, a revised version of the EU TPD should include ‘significant’ improvements, according to ITSA. A more prescriptive approach would lead to greater clarity around the choice of security features, thereby avoiding countries adopting too many different features, which only creates confusion.

And responsibilities assigned to the tobacco industry should be limited to ordering, applying and reporting the use of tax stamps, with all other responsibilities reassigned to independent providers selected by government authorities.

ITSA also recommends that the importance of tax stamps be recognised in the legal language of the EU TPD. Therefore, any new version of the directive should encourage the adoption of legal instruments to introduce tax stamps by those member states that currently don’t use them, as well as introduce, as a transitional measure, a security label designed and procured by the issuing authority.

Another recommendation is for the language used to describe tax stamps in any revised TPD to explicitly require them to have traceability functionality. This is an essential tool for the security of the system and complements the unique identifier (UID) directly printed or marked on the product pack. It also improves tracking of the issuance of the tax stamp, secures tighter controls and limits the impact of any fraudulent activity.

Juan Carlos Yañez Arenas, Chairman of ITSA, said: “Now, more than ever, the time is right for us all to come together as a united force over illicit trade and lost tax revenues. Also, with the tobacco traceability requirements of the WHO FCTC Protocol entering into force in 2023, countries that are party to the Protocol have two years left to implement these systems, and we can help them with this by offering practical guidance based on proven best practice. We have identified the best features of the EU TPD, as well as those that can be improved on, which can be taken and used to deliver world class programmes that everyone involved in the tobacco sector stands to benefit from.”

ITSA’s recommendations for secure tobacco traceability systems to issuing authorities outside of the EU are:

  • Tax stamps are the foundation of a tobacco control programme and should be the basis of any programme implementing the FCTC Protocol provisions. Prescribe tax stamps featuring an appropriate quantity and strength of authentication features, as well as a unique barcode.
  • Start implementing a partially compliant FCTC Protocol gradually for the sake of expediency. At this stage it’s not necessary that every single item in Article 8 of the Protocol (pertaining to tracking and tracing) is actually implemented as long as the process gets going and the foundations are put in place to build a long term, effective solution.
  • Prepare to ensure connectivity with the Global Information-Sharing Focal Point (GISFP) prescribed under the FCTC Protocol, and review current FCTC guidance on this***. The GISFP will provide a platform linking to a variety of national systems, without prescribing particular models. Such a platform requires the use of standardised data fields and a common dictionary of terms to allow the exchange of data between countries with different systems and languages.

Current figures indicate that the trade in fake tobacco is worth upwards of $50 billion annually worldwide, according to a 2020 World Bank report**** and accounts for approximately 600 billion illicit cigarettes per year.

*https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52021DC024...

** More at https://tax-stamps.org/

*** https://untobaccocontrol.org/downloads/mop2/main-documents/FCTC_MOP2_6_E...

****http://pubdocs.worldbank.org/en/377251548869371433/WBG-Tobacco-IllicitTr...

ENDS

Note to editors

ITSA was founded in 2015 by several leading industry companies and stakeholders to ensure better understanding of the benefits of tax stamp programmes and to promote the highest professional standards within the sector. More than 150 revenue agencies (national and state governments) globally use 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 a key role in product authentication, anti-tampering and track and trace applications. Details of recent ITSA webinars can be found at https://tax-stamps.org/events/

 Media enquiries: Andy Bruce at MHW PR Ltd. Tel. +44 191 261 2773 or email andy@mhwpr.co.uk

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