Pakistan: FBR Receives Presentation on ''Codentify'' System Fighting against Illicit Tobacco Trade

Source from:  Business Recorder  02/19/2014

The Federal Board of Revenue has received a presentation on a modern, fully digital volume control, tracking & tracing and authentication system, innovated by a representative of the Digital Tracking and Coding Association to promptly detect and fight against illicit trade in Pakistan.

Sources told Business Recorder here on Tuesday that the company is a representative of the Digital Tracking and Coding Association, the entity created by 4 biggest tobacco multi-national companies with the aim to implement globally recognised new standards to fight against illicit trade.

Sources said that the company has made the presentation to both the tax authorities in the FBR as well as Directorate General of Intelligence and Investigation Inland Revenue (IR). The system, called Codentify, is a complex coding technology able to guarantee tax verification and authentications tools to protect fiscal revenues and support authorities in tackling illegal business. Any single pack of cigarettes will be provided with a unique code encrypting all the information required by the WHO Anti Illicit Trade Protocol (Pakistan adhered to the WHO's Framework Convention on Tobacco Control in 2004). The code is not replicable and will be generated during the production of any single pack, carton and shipping case, so as to constantly keep a track by the authorities along the supply chain.

According to the sources, the system is applicable to any other legitimate product affected by the illicit trade and represents a convenient and effective alternative to traditional or complex papers stamps, such as the one recently offered by the Swiss based company. The last, indeed, collected a number of failures in the countries in which has been implemented in the last years in terms of results and political scandals linked with Swiss company's lobbying activities.

During the presentation, directorates' representatives put a number of questions on the reliability and the independence of this system as well as on the risk of interferences with tobacco companies. DCTA replied that the technology will be fully controlled and managed by FBR or by Pral, so as to guarantee complete transparency and integrity of the system.

A duplication of a valid code, as also stressed during the meeting, will be immediately spotted since the code on each pack is unique. This will help authorities in quickly identifying and blocking fake products, also with the help of several authentications, such as a web portal, an SMS service as well as a mobile application developed for IOS and android smart-phones.

Consumer activation has also been presented as a new way of fighting illicit trade. Indeed, smokers will be also allowed to check their products with the same system, giving them a complete assurance on the authenticity of their cigarettes, sources maintained. As a consequence, no paper will be wasted to keep producing tax stamps, while all the legitimate factories providing cigarettes to the Pakistani's market will be electronically linked and monitored by FBR.

The solution is in line with the newly introduced amendments via Section 40C of the Sales Tax Act 1990 and Section 45A of the Federal Excise Act 2005 allowing the FBR to electronically monitor production and distribution of all taxable goods. The solution can be used for digital coding and tracking of all taxable products including beverages, textile, cement and other commodities - a facility not available with any other technology. The technology requires manufacturers to register their manufacturing units and machines with the FBR to enable them to run production, a means which will enable the FBR to have full control on production capacity of manufacturing units and will also help FBR in forecasting revenues with more accuracy.

Additional details must be assessed by FBR experts, but it looks clear that a digital and innovative initiative, such as Codentify potential implementation, could refresh government efforts to eradicate illicit trade in tobacco or other taxable products, with no cost for the citizens, since the technology will be offered free of charge by the tobacco industry, sources added. Enditem