Practical Economics by Nika Gilauri

Author:Nika Gilauri
Language: eng
Format: epub, pdf
Publisher: Springer International Publishing, Cham

5.4.3 Electronic Tracking and Tracing

Excised goods, such as cigarettes and alcohol, are naturally elusive. They have a tendency to disappear off the radar of the authorities and change hands as part of the tax-free shadow economy. To counter this tendency and increase legitimate tax revenue, Georgia introduced an Electronic Tracking and Tracing Mechanism (ETTM) for such goods. In cooperation with a foreign private investor, we set up a system that would cover the entire supply chain from manufacturing to retail. By the time a given product was made, it had already been assigned a code that was transmitted to the tax department. When the product was put in a box, that box was also marked electronically. The same was true for the van that was used for transportation and its destination, i.e., the particular commercial entity to which the product was delivered for sale. All codes and markings were electronically transmitted to the tax department. Now all a tax inspector had to do was to go to any of the shops and check which products actually belonged there and which ones did not, using an electronic read-out device. The inspector would proceed to investigate the origin, and intended destination, of any product that was found in a store where it didn’t belong to pinpoint the perpetrator. To avoid any corrupt deals between inspectors and shopkeepers, the devices inspectors carried were equipped with GPS. That way, the head of tax inspection knew which shop was visited by which employee. The next day, the same store would be visited by a different inspector to double-check the results of the previous day. If any of the shops that had already been inspected was found to stock unregistered goods, the initial inspector was subject to an investigation on charges of corruption and let go if found guilty.

There are many solutions available to track and trace goods in this manner. What set the particular technology we used apart from other solutions was that it assigned and applied electronic markings before a given product was even finished. This made it impossible for the producer to divert part of the production to the black market. This was a key feature. Often, the shipping of goods from factories or warehouses to retailers is the weakest link in the supply chain as far as transparency is concerned. Once the goods enter the retail network, it is very difficult to single out illegitimate batches. When some manufacturers found out about our plans to introduce ETTM, they started to increase their reported revenues by 10 percent almost every month before the system was even in place, assuming that it was better to play by the rules and stop hiding revenue before it was too late and harsh penalties were applied.

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