Almost 15 years since they were first used, holograms are still an extremely relevant and important authentication device for government tax stamps – indeed the market for tax stamp holograms is the second largest after banknotes according to a soon-to-be-published report* on the holographic industry. Here, Philip Hudson, chairman of the International Hologram Manufacturers Association, explains further.

Today, tax stamps make up a significant share of the security print market. An estimated 124 billion tax stamps are issued annually for cigarettes while alcoholic drinks account for 12 billion. This is the largest sub-sector of the security print market, placing tax stamps ahead of banknotes in terms of printed documents.

And it is also a key market for secure holograms. The latest available figures show that the holographic tax stamp market is worth over $98 million (as at 2007) with cigarettes - due to the sheer volume of consumption - accounting for two thirds of that overall value. The sector for spirits is valued at $23 million while the one for wine comes in at over $14 million.
Drivers for Demand

The growth of tax stamps has been driven by increased global cigarette and alcohol consumption on the back of rapid population growth particularly in developing parts of the world. And of course as demand has grown so too has the trade in illicit products being produced by ever more resourceful counterfeiters and criminal organisations.

The demand for higher margin premium brands at lower costs is one factor behind the explosion in counterfeiting. Other factors at play include industrial globalisation, extended supply chains, lax regional law enforcement and derisory criminal penalties, as well as the impact of the internet as a conduit for counterfeit goods. Another contributor to the rise of counterfeits is the spread of and access to high quality reprographic technology that has made it so easy and affordable to copy packaging.

Indeed, it has been this last factor and the ability to reproduce top quality copies that heralded the development of security devices like holograms whose effects could not (and still cannot) be exactly replicated or simulated by normal reprographics methods.
Powerful Barrier

Holograms comprise the largest part of are part of a family of technologies known collectively as diffractive optically variable devices, which  are made up of series of microgrooves that exhibit a variety of complex images and patterns according to the viewing angle (eg if they are tilted, rotated), based on the diffraction of light. Not only can they not be copied conventional reprographic means (copiers or scanners and printers) but neither can their effects be reproduced or simulated by conventional printing or finishing techniques. The skill, technology and investment involved in their design, origination and manufacture, meanwhile, provides a powerful barrier to would-be counterfeiters.

Holograms are also highly versatile. They can be applied cost-effectively to a wide variety of substrates and products as part of conventional printing, packaging and labelling processes. And while they are essentially overt features that can be recognised and verified by the public, they can also easily be integrated with other security technologies – inks, taggants, numbering, RFID etc - to provide multi-layered security solutions combining overt and covert security with track and trace capabilities.

Holograms are mass-produced mechanically by embossing or casting the relief pattern or image (made up of the microgrooves) into a thermoplastic film or a viscous coating on a film or paper. They are coated or metallised with a reflective layer – generally aluminium, although other metals can be used such as copper and chromium - – to bounce the light back through, and hence reveal, the image.

Added security is provided by selectively removing areas of this metal – a complex technique that also enables more effective integration of holograms with the print on the document or label. They can be produces on a variety of substrates or carriers, the most common one being polyester, and produced in a range of formats including hot stamping foil, pressure-sensitive tamper-evident labels, threads, laminating films and paper.

Since the introduction of holograms on Mastercard and Visa payment cards in the early 1980s, they have become one of the most common overt or public security features on value documents and branded goods, their presence both indicating the authenticity of these items and providing a powerful deterrent to counterfeiting. Their first application for brand protection purposes was on bottles of Johnny Walker scotch whisky in Thailand in 1985. In addition to the wines and spirits sectors, they are also now widely used in the tobacco industry, particularly in the Far East, to both protect and provide brand appeal to cigarettes.

Breakthrough for Tax Stamps
The first holograms to be used on tax stamps, meanwhile, were in 1995, the point at which the use of tax stamps took off, due mainly to the programmes of Eastern Europe and the Former Soviet Union. It was here that holograms made their advent – in Hungary (see page X) and Latvia respectively. Since then, the majority of new tax stamps introduced around the world have incorporated holograms, primarily in the form of hot stamping foil which is applied to the narrow dimensions of the tax stamp as a continuous stripe. For wine and spirit banderols, this stripe usually covers an area 3-4 mm wide by 12-15 mm in length. For cigarettes the length can be up to 20 mm.  In most cases, the stamp is applied over the cap of the bottle or the hinge of the cigarette pack, although in some cases it is applied to the body of the product. The holographic stripe is applied either by the security papermaker and then overprinted by the printer, or is applied by the printer themselves either before or after the sheets have been printed.

There are, however, exceptions. Some stamps are applied to the body of the bottle, which others are produced in the form of full-face pressure-sensitive holographic labels, with Estonia, Latvia, Malta and India are notable users of this variant.

As of 2007, 68 countries used tax stamps for cigarettes and 59 for spirits. 77 used them for both. Of these, 20 used hologram on their cigarette stamps  (29% of the total) 27 on their liquor stamps (46% of the total) and 31 on both. Nearly half of these countries are located in Central/Eastern Europe and the FSU. In volume terms, 33 billion tax stamps featuring holograms were produced that year.
Continuing Growth

And the market for holograms on tax stamps is likely to continue growing - both as an additional security measure for tax stamps not currently carrying holograms and for new schemes altogether.  With respect to the latter, there are 100 countries that do not use tax stamps for either alcohol or cigarettes. These on 2007 consumption estimates alone, present a potential additional market of market of 160 billion, more than doubling the existing market without even taking into account future growth in demand and consumption. The volumes are clearly huge, representing a large opportunity not only for suppliers of tax stamps and security components, but also counterfeiters.

And there are other challenges on the road ahead, one of which will be the extent to which holograms can maintain their position in light of the growing demand for so-called ‘digital’ tax stamps. The audit trail for taxed products is a critical component of tax stamp schemes, and digital technology is now being deployed to mark stamps with unique codes and store theses on a database which can be interrogated in real time by in-field tax inspectors, and which also provides data on products marked which tax authorities can correlate with revenues received.

Serving Two Purposes
Such systems are aimed at fiscal recovery and not authentication, and hence do not obviate the need for robust physical security features such as holograms on tax stamps such as holograms. Tax stamps serve two purposes. One is to provide a record of payment of tax. The other is to provide evidence that the stamp, and hence the product to which it is affixed, is genuine.

Digital systems are just the latest delivery vehicle for serialisation that enables products to be monitored along the supply chain and out in the market, hence fulfilling the first purpose. The physical integrity of the stamp – protected with holograms, security print, taggants etc – fulfils the second. It is to be hoped that tax authorities, in a quest to reduce costs, do not confuse the roles of the two. Fortunately, examples of the deployment of digital stamps to date would suggest that they aren’t, judging by SICPA which has taken an early lead with its tax stamp system that includes not only digital track and trace but also overt features in the form of its signature optically variable ink (OVI) technology.

For other revenue authorities to ignore such examples would be a false economy. It is clear that governments and agencies have seen the value of developing effective revenue gathering strategies using tax stamps, while the cost effective and reliable anti-counterfeiting benefits have been become apparent to suppliers of components, products and systems.

The International Hologram Manufacturers Association (IHMA) is made up of 90 of the world's leading hologram companies. Contact:  www.ihma.org

* The Holo-pack•Holo-print® Industry Study and Market Report 2007-2012, published by Reconnaissance International