Azerbaijan should apply recording of excisable products by brands


Over the past years, Azerbaijan has applied a number of measures to stimulate domestic production and ensure effective management in the sphere of production, import and sale of excisable goods. Among such measures is the decision to introduce tax posts in production of labelled commodity.

Former chief of the Department for Regulation of Securities Circulation under Azerbaijan’s State Committee for Securities Agahuseyn Khudaverdiyev commented on the influence of such a practice on production and sale of excisable goods. By the way, in line with the legislation, the control over circulation of excise labels was carried out by the State Committee for Securities (now the Financial Markets Supervisory Authority).

- This decision can be interim or, let’s say, transitive. According to the Plan of Measures on improvement of the import and export operations control system, approved in line with the decree of the head of state, Ilham Aliyev, on June 28 of this year, a unified state automated information system will be applied in the country to ensure the state control over production and import of tobacco wares from January 1, 2019, and production, import, circulation and sale of bear and alcohol drinks from March 1.

The practice of tax posts in production of labelled commodity has already been applied in the country but time showed that it produced little effect, since it requires removal of human factor in this sphere.

As is known, two years ago, the non-tariff barriers were reduced to minimum, licensing of production, import and sale of excisable, labelled goods was eliminated and the protectionist policy was strengthened in the country.  But the working mechanisms of control over the labelled production market were not improved despite adopted measures.

Though more advantageous than the system existing before 2000, the current system of excise label application and the system of control over the circulation of labelled production has a number of gross shortcomings, which lead to inadequate control and production of unrecorded commodity, piracy and smuggle.

Major shortcomings include but are not limited to the following:

- Lack of a single database ensuring the online collection of data and control over product circulation;

- The used excise labels only help to identify the recipient (importer/producer) and, if a labelled product is imported, a group of goods or shipment in line with the provided invoice.

- Lack and impossibility of recording the labelled production by brands;

- Lack of a coordinated state regulation of the circulation of excise labels and labelled production.

The only and the correct way out of this situation would be the introduction of recording of the excisable, labelled production by brands.

That is, the excise label must be product-pegged, carry information about the product it is engraved on. This will help the state to track each product from production or import to its sale to the ultimate consumer, which will, in turn, eradicate the use of forged excise labels, illegal production, import and sale and protect the consumer from the risk of purchasing pirated (counterfeit) products.

Yes, the introduction of the new mechanism will require certain costs from both the state and business. But in the coming future the country’s budget and entrepreneurs will see a multifold increase in revenues.

The process itself is simple - during production of labelled commodity the information required by the law is engraved on the excise label as a code, further scanned and entered into a common database. All the further moves of the product are also recorded in the system.

The situation with import is a bit different, since not all producers have the due equipment and most importers purchase production from mediators or from the so-called customs warehouse. In this case, importers may scan the identification code on the label and the bar code in their warehouses before selling the product thus pegging the label to a definite product and enter the data into the unified system.

Retailers must be provided with special cash-desks with access to the central information system in order to exchange data to identify the product.

Here, we get a never-ending circle, since a product can be put on sale only if its information is already recorded in the system.

This system is applied in many countries and its effectiveness is undeniable.

Along with the mechanism of effective control, the unified automated information system will  serve the accurate planning of fiscal duties and policy in this sphere.