In July 2013, a consortium established by SGS Beograde (comprising SGS, Authentix, and Nanoinspekt) was awarded a Fuel Integrity Program contract by the Ministry of Energy, Development and Environmental Protection.
SGS designed the Program to assist the Ministry’s efforts to curb illicit fuel trade and ensure that only the fuel of specified quality enters the market.
The program was launched on Saturday, 1 February 2014 to mark all petroleum products in Serbia.The products marked are diesel and gasoline.
At outset, the Ministry estimated that annually between 5 and 10 percent of the total amount of fuel is illegally sold in Serbia, subsequently depriving the government of the correct amount of taxes due, which translates into about EUR 40 million in lost tax revenue per year.
Since program inception, after 5 months of operations, according to the Deputy prime minister Zorana Mihajlovic on behalf of Government of Serbia, the Program has achieved the the following benefits:
- The highest tax revenues ever recorded and an increase of approximately 46%
- Growth in sale of diesel and gasoline was 13.9 and 18 percent, respectively
- The Government anticipates after 12 months, program benefit will include a 50% increase in excise taxes to 60 million euros
As a result, the Government has requested SGS to extend the program to LPG in September 2014.
In addition to increasing government tax revenues, the program benefits citizens directly, as fuel of specified quality is only sold in the market. Using legitimate, high quality fuel from Oil Marketing Companies provides for more efficient operation of car engines, resulting in less wear and tear, and better fuel combustion in the engine, which reduces harmful gas emissions into the atmosphere.
SGS as the program lead, together with its consortium partners operates the program to improve tax compliance and mitigate tax evasion. This is accomplished through a comprehensive solution of SGS inpsectors marking fuels at the distribution source and testing of fuels in retail outlets to verify tax program compliance and identify sources of non-compliance.
SGS perform marking operations utilising our partner Authentix’ proprietary covert chemical markers that are professionally dosed into the fuel at very low concentrations (in parts per billion) which do not affect the fuel quality or pose any additional harm to humans or the environment. SGS inspectors using instrumentation configured and supplied by Authentix test fuels in the downstream distribution chain to determine the concentration of legitimate fuel at retail outlets, and identify sources of illicit supply.
A proprietary SGS software system is used to collate all data for the purpose of reconciliation, reporting and data analysis which provides intelligence enabling specific targeting of problem regions.
Stakeholder involment and Support
The program provides information to The Ministry of Energy who, in collaboration with the Ministry of Trade, to support their enforcement efforts to encourage compliance and curb outlets for illicit fuel sales thereby ensuring the proper use of fuels and the correct amount of taxes being collected.
The Oil Marketing Companies in Serbia have supported the program and pay SGS’ consortium directly, saving the government and subsequently the taxpaying citizens the operational cost of the program. The Oil Marketing Companies gain from the program, as they expect to increase their market share and revenue through the reduction of illicit supply channels that have been siphoning market share from legitimate channels.