Philip Morris Wants to Use Blockchain for Validating Tax Stamps

Combating Fraud with Blockchain

The U.S. based multinational tobacco company intends to use a public blockchain system to keep track of issued tax stamps on cigarette boxes. During the London Blockchain Expo, The Global Head of Architechture and Tech Innovation, Nitin Manoharan said,

Valuable little pieces of paper, the stamps are worth around USD 5.5 and are used on each pack.

Modern day high resolution printing has opened up a black market in which fraudsters print out counterfeit tickets, leading to an estimated USD 100 million per year of lost revenue to the tobacco industry and governments.

Philip Morris estimates that with the use of blockchain, it will be able to save around USD 20 million in ensuring fraudulent tax stamps are not used. Using blockchain for tax stamp validation is just one of the six use cases the tobacco product manufacturer is looking into. “We view it use case by use case” Nitin said, “But this particular use case, for me it’s a public blockchain use case. I wouldn’t say public for all of them: there are quite a few use cases that are purely internal and need to go through access control etc”.

Private or Public Blockchain

In recent months, many firms and organizations have turned toward the use of enterprise level private blockchain to bring efficiency and security to their systems. Philip Morris, however, has taken a different route with its plan of a public blockchain. This means that anyone will have access to the blockchain.

This way, Philip Morris will be able to bring in more nodes on the chain than were possible with a private blockchain. “The aspiration is an industry-wide blockchain that interested stakeholders can come in and subscribe to it and benefit from it. If they see no value they can just leave” Nitin continued.

However, for stakeholders to become nodes and secure the blockchain, Philip Morris must give some kind of an incentive. “We want to make sure that the minimum viable ecosystem we put in place is attractive to all the stakeholders who participate in this particular ecosystem,” he said. “So there needs to be a value proposition, there needs to be a reason for taking part. Because if there’s not sufficient value on the table, they will not engage. So the only way to make it sustainable is to ensure stakeholders benefit from this blockchain”

Nitin further added, “Permissioned blockchains are fairly simple. The opportunity is small and you can achieve everything that permissioned blockchain does with existing infrastructure and existing tools. The real value is with public blockchains where you can have multiple players coming in and participating in a trustless manner”

Philip Morris is the largest tobacco product manufacturer in the world. It owns brands such as Marlboro, L&M, Parliament and even has a stake in e cigarette firm, Juul.