Identification technology company Semlex has globally launched its track and trace service combined with highly secured stamps for goods.

Services such as track & trace are crucial for optimizing tax collection and exercising effective control over the production and importation of high-value products, especially those subject to excise taxes. By employing secure Track and Trace technology, governments can enhance revenue collection and combat tax fraud, which is essential for maintaining public order and the functioning of the state.

In the current economic conditions, preventing tax fraud becomes even more critical. The International Monetary Fund has highlighted the importance of addressing downside risks and global economic recovery stalls. To tackle tax fraud, Track and Trace technology serves as a valuable tool for governments, both in customs operations and excise taxation.

Over the past decade, Track and Trace technologies have significantly improved their efficiency worldwide, particularly in assisting governments in enhancing tax collection. The impact of this technology can be seen in three key areas. Firstly, it helps capture the undeclared market, leading to an immediate increase in tax collection. Secondly, it provides ongoing benefits by supporting tax policy and reducing the incentives for under-declaration. Lastly, there are non-tax benefits associated with this technology, including public health policies and combating organized crime.

Governments face revenue losses due to both non-declaration and mis-declaration. To estimate the tax lost through these fraudulent activities, Semlex, a provider of secure Track and Trace services, has developed a tax remediation model. The accuracy of this model relies on four key inputs: market volume, tax scheme, undeclared market estimate, and the undeclared market recovery rate. The enforcement level and efficiency are critical factors in determining the recovery rate.

Implementing Track and Trace technology alongside changes in customs and excise duty rates has proven effective in managing government tax policies and planning. When tax rates increase, the price of taxed goods rises, impacting consumption and potentially reducing the market volume. However, by utilizing the tax remediation model, governments can determine an optimum tax rate that considers the expected volume reduction while maximizing tax receipts.

The use of advanced and secure Track and Trace technology ensures the maximum benefit from tax increases by addressing the higher incentive for under-declaration resulting from higher tax rates. This comprehensive system, developed by Semlex, provides multifunctional platforms for product authentication, tracing, and production monitoring. Its benefits are twofold: capturing the undeclared market and reducing tax fraud, as well as leveling the playing field for legitimate producers and combating organized crime. It has been proven that the introduction of track and trace systems can lead to an increase in tax revenue by 20% to 40%.

The four essential pillars of secure Track and Trace technology are marking, tracking and tracing, auditing and authentication, and consolidation of excise trade data. Marking involves applying means to authenticate products as genuine and record production details. This can be achieved through secured tax stamps or direct marking with unique codes. Widely deploying marking ensures reliable tracking and tracing of products throughout the supply chain, preventing under-declaration by manufacturers.

Tracking and tracing functionalities enable the reliable monitoring of excise products from production or importation to the point of sale. It involves capturing events such as transfers of ownership, monitoring excise stocks, and aggregating products. All data associated with unique product marks are captured in a central database exclusively owned by the government. This system incorporates data on authorized economic operators, enhancing control and transparency within the excise supply chains.

Auditing and authentication tools play a crucial role in detecting valid marks or stamps on excise products. These tools, operated by law enforcement agents, can detect covert security features and connect to central databases in real-time to retrieve product and production details. Retailers can also utilize authentication tools for quick identification of genuine products. The aggregation of field evidence through auditing devices reinforces the visibility and credibility of distribution chains, providing assurance to law enforcement and retailers.

Consolidating excise trade data derived from marking, tracking, and tracing systems provides valuable business intelligence, risk profiling, and reporting. Semlex, is forecasting several of their partners that already utilize their service to adopt their track and trace systems.