Tax stamps can be forged - US government report

MANILA, Philippines - Tax stamps can be forged, according to a November 2009 paper by US State of Indiana Revenue Commissioner John Eckart, who was tasked by the state’s general assembly to study the viability of adopting an encrypted stamp design.

The stamp is provided by the Switzerland-based SICPA Product Security SA (SICPA), which the Bureau of Internal Revenue (BIR) also wants to implement in the Philippines.

In his paper, Eckart—quoting the US Tobacco, Alcohol, and Firearms (ATF)—said that such stamps could actually be copied.

He cited the case in California—the only one state in the US that has fully implemented the SICPA encrypted tax stamp program—where the ATF reportedly discovered counterfeit encrypted stamps “within a month” of launching the program.

Eckart said that “federal authorities seized 3,800 counterfeit versions of the new encrypted tax stamps in April 2005, and 27,752 (of such stamps) in June 2005.”

The Indiana revenue commissioner also noted that California’s state auditor “doubted that encrypted stamps had any known impact on the state’s decrease in counterfeit and contraband activity.”

He quoted the state auditor in his report as saying that “(n)either (the Board of) Equalization nor we can isolate how much the increased revenue…was the result of the act and how much was the result of the new tax stamp.”

Eckart concluded that these stamps “do not provide a significant impact in reducing contraband cigarette sales.”

“Furthermore, what impact they may provide, which is highly unclear itself, cannot justify the minimum estimate of spending $2.9 million per year of taxpayer money to support implementing an encrypted-stamp program.”

“Nor can it justify the estimated $12.5 million to $15 million an encrypted-stamp program would cost Indiana’s cigarette distributors.”

Eckart said that they will not implement this tax stamp scheme “with only one state on record to fully implement an encrypted program, and its results showing its efficacy to be unclear.”