Tax Stamp and Traceability Market - Forecast (2024-2030)

The tax stamp and traceability market is expected to grow at a CAGR of 8.57% during the period 2024-2029. Tax stamps are used on various products (such as tobacco, alcohol, and pharmaceuticals) to indicate that the required taxes have been paid. Traceability systems associated with tax stamps help prevent counterfeiting, smuggling, and tax evasion by providing a transparent record of the product’s journey from manufacturer to consumer. The market is being driven by the extension of tax stamp programs by governments where tax evasion or illegal trade is common. For instance, according to GOV.UK, total stamp tax receipts increased by 4% during the fiscal years 2021-2022 and 2022-2023, from £18,465 million to £19,130 million. The Conference of Countries (COP) extended its Global Strategy to Accelerate Tobacco Control from 2025 to 2030, which means that the goals of assisting countries in implementing tobacco control measures, including taxes, would remain a top priority until 2030.

 

The report “Tax Stamp and Traceability Market– Forecast (2024-2029)”, by IndustryARC, covers an in-depth analysis of the following segments of the tax stamp and traceability market.

By Tax Stamp Type: Digital Tax Stamp, Holographic Tax Stamp, Barcodes, Others

By Technology: Biometrics, Block Chain, Bar Codes, QR Codes, GPS Tracking, Others

By Application: Tobacco Products, Alcoholic Beverages, Pharmaceutical Products, Food and Beverage Products, Others

By End-Users: Government and Tax Authorities, Customs and excise officials, Manufacturers, Distributors and wholesalers, Others

By Geography:  North America, South America, Europe, Asia-Pacific

• The rise in digital tax stamps is strengthening tax compliance and is expected to propel the demand for tax stamps and traceability solutions. For example, in January 2022, Michigan and SICPA Product Security inked a new agreement for the delivery of associated services, supporting technologies, and encrypted digital cigarette stamps.

• The WHO Framework Convention on Tobacco Control is a significant driver for the tax stamp and traceability market. The illicit tobacco trade encourages revenue authorities to utilize tax stamps efficiently against counterfeiters and criminals, hence driving the tax stamp and traceability business. For example, according to the FICCI Cascade study, tax losses in India increased from $1,049 M (₹8,750 crore) in 2010 to $3,428 M (₹28,593 crore) in 2020. The government estimates a total loss of ₹13,331 crore in 2022 due to illicit tobacco markets, representing a 46% increase from 2012. 

• The increasing number of plans for new holographic tax stamps in Asia provides growth opportunities for the tax stamp and traceability market. For example, The International Hologram Manufacturers Association (IHMA) introduced a new excise policy for 2020-21 that would use holographic tax stamps as a key component of steps to preserve alcohol revenues. This would raise the total number of states in India implementing tax stamps to 25 as the nation continues to target the criminals who trade in illicit booze across Asia.

Barcodes dominated the tax stamp and traceability market in 2023. Barcodes are inexpensive to manufacture and simple to apply, making them an attractive option for product verification and traceability. Adding serial numbers and barcodes to revenue tax stamps gives each stamp its unique identification and serves as the foundation for traceability. The market for tax stamps with barcodes has expanded as traceability solutions for cigarettes become more prevalent. For example, in May 2022, Bahrain's National Bureau of Revenue (NBR) implemented a digital tax stamp and tracking system for cigarettes. Tobacco goods utilize fiscal stickers that include or provide access to product-specific information (typically via bar codes). However, more advanced solutions, such as digital tax stamps or holographic labels, are expanding the adoption of other technologies, such as blockchain and IoT, to assure compliance and defend against illicit trade in the projection period.

Tobacco Products dominated the tax stamp and traceability market in 2023. New investments in track-and-trace systems, as well as increases in excise taxes, are driving the expansion of the tax stamp and traceability market for tobacco products. For example, in March 2024, Montenegro raised the excise rate on cigarettes and smokeless tobacco products to harmonize its taxation with European Union norms. The special excise duty on cigarettes was raised to €50.50 per 1000 cigarettes from January 1 to June 30, 2024, and will climb to €52.00 from July 1 to December 31, 2024. According to WHO estimates, the percentage of tax on the price of the most popular brand of cigarettes climbed from 25% to nearly 64% between 2018 and 2020 as a result of the excise tax. This substantial increase in the effectiveness of tax policies can create opportunities for growth in the tax stamp and traceability market. The Protocol to Eliminate Illicit Trade in Tobacco Products, which builds upon Article 15 of the WHO Framework Convention on Tobacco Control (WHO FCTC), came into force on September 25, 2018, and is also a significant driver for the market to implement track-and-trace systems.

Government and Tax Authorities dominated the tax stamp and traceability market in 2023. Governments and tax authorities establish regulations mandating the use of tax stamps on certain products, such as tobacco, alcohol, and pharmaceuticals. These regulations define the requirements for tax stamp features, security measures, and serialization, creating a demand for tax stamp traceability solutions. Government authorities are often the driving force behind the implementation of tax stamp programs. They mandate the use of tax stamps on certain products to ensure tax compliance, combat illicit trade, and protect public health and safety. As the enforcers of these regulations, government authorities are the primary users of tax stamp solutions.

Asia Pacific dominated the tax stamp and traceability market in 2023 due to the region's various economies, big population, substantial industry, and trade activity. The Southeast Asia Region, which is one of the leading consumers and manufacturers of tobacco products, has 1.6 million fatalities per year as a result of tobacco-related health issues. The frequency of smokeless tobacco is high in this region, and youth tobacco use is a major cause of worry. According to a WHO report released in September 2023, south Southeast Asian region has the highest average tobacco usage prevalence rates among adults worldwide. Out of roughly 1245 million adult tobacco users worldwide, around 411 million (33%) live in the Region. As a result, strong tobacco control techniques must be implemented to speed the reduction in total tobacco use prevalence.

The Asia Pacific area is distinguished by substantial cross-border commerce and supply chain networks, which provide issues in tax evasion, smuggling, and illicit trade. For example, Australia is still fighting a never-ending campaign against illegal tobacco use. The Australian Border Force (ABF) reports a considerable rise in attempted illicit tobacco imports at the Australian border. Between January 1 and December 31, 2021, the ABF found 878.8 tonnes of undeclared loose-leaf tobacco and 712.7 million undeclared cigarette sticks, a 45% rise over the previous year. Tax stamp and traceability solutions play an important role in guaranteeing transparency, accountability, and compliance throughout these complex supply chains, boosting market demand.

In many regions, governments mandate the use of tax stamps on tobacco products as part of their efforts to control the illicit tobacco trade and protect public health. Increasing implementations in track and trace systems, and rising excise taxes are expected to drive the tax stamp and traceability market growth during the forecast period.

Governments lose a lot of money as a result of illicit commerce since tobacco goods are not subject to excise taxes or customs charges. For example, 2023 estimates by the WHO Framework Convention on Tobacco Control (WHO FCTC) indicate that the elimination of trade in illicit cigarettes could potentially yield annual global revenues of about US$ 47.4 billion. Tobacco is one of the world's leading avoidable causes of early mortality, accounting for almost 8 million deaths and costing the global economy $1.4 trillion every year.  Illicit trade makes tobacco products more accessible and affordable, which fuels the tobacco pandemic and undermines tobacco control initiatives. The most vulnerable groups, such as low-income persons and young people, are disproportionately impacted by greater access to typically lower-cost tobacco products. The need to protect revenues and deter illicit trade continues to drive the tax stamp and traceability market.

The development of tax stamps and their expansion into new market sectors will drive the tax stamp and traceability market during the projected period. Tax stamps are being utilized on items other than their 'traditional' application on excisable tobacco and alcohol products. These include soft drinks (including bottled water), cannabis, fuels, and tobacco substitutes. For example, cannabis such as theseedpharm.com and fuel marking, among other items, have been recognized as new markets for tax stamps and tax marks, where they may be used successfully to guard against the threat of counterfeiting and secure revenues lost to criminals and other nefarious behavior.

Governments are looking for methods to regulate and tax the cannabis sector as demand increases. For example, Malta became the first European country to allow restricted production and possession of cannabis for personal use in December 2021, establishing a precedent that others are anticipated to follow. FTA Director-General Khalid Ali Bustani stated in 2020 that the adoption of a 50% excise tax on carbonated beverages and 100% on energy drinks and tobacco goods was a remarkable achievement in the UAE by all measurements and indications. The Standing Committee on Finance in Canada suggests making changes to the way the duty is applied, such as mandating that cannabis items include an excise stamp. These stamps are necessary for licensed manufacturers to get, and their acquisition helps fund tax revenue, leading to tax stamp and traceability programs.

Digital tax stamps involve sophisticated technologies such as RFID, blockchain, or encrypted QR codes, which require expertise in implementation and management. Ensuring interoperability, data security, and system integration across the supply chain can be challenging, particularly in multi-stakeholder environments with diverse IT infrastructures.

Despite its good intentions to reduce illicit commerce, the government's proposal to deploy digital tax stamps has received little support from industry. Most manufacturers' product packaging is not intended to accept digital tax stamps. As a result, investment in packaging and labeling is necessary to adapt to the new design requirements for compliance. Following the introduction of new packaging, significant expenditure in marketing and education about the new product is necessary, otherwise, customers may not identify the goods and hence swap local items with imports that appear familiar.

Continuous innovation in the style and sophistication of tax stamps, as well as incorporating the newest, cutting-edge technology, provide technological challenges for the tax stamp and traceability business. Ensuring interoperability and standards is critical. While some businesses are already considering digital options, others emphasize the need for physical tax stamp aspects. For example, Baldwin Technology would like to see more consideration given to space around serial numbers and barcodes during the design stage to improve readability, while Luminescence Sun Chemical Security saw the potential for 'hidden layers' that would take advantage of the limited amount of space available. Balancing regulatory needs with privacy considerations is difficult. Given the limited real estate supplied by most tax stamps, it is critical to have numerous levels of security to provide the best protection.

Technology launches, acquisitions, and R&D activities are key strategies adopted by players in the tax stamp and traceability market. Major players in the tax stamp and traceability market are Holostik, NanoMatriX Technologies Limited, Manipal Technologies Limited, Arca Labeling & Marking, Holoflex Limited, Spectra Systems Corporation, Sicpa Holding Sa., Suzhou Image Technology, Holoflex Limited, Leonhard Kurz Stiftung & CO. KG among others.