Blockchain for Tax Compliance

In the third and fourth publications of this whitepaper series (this time also together with Vertex Inc.) our vision is given on the Blockchain for Tax Compliance.

The papers explore how emerging blockchain technology allows tax administrations to:

• Reduce the cost of tax compliance using smart contracts to write the compliance rules directly into the digital ledger, which gives businesses faster VAT refunds and simplifies tax audits;
• Improve how taxes are collected by providing visibility into transactions, such as tourism levies;
• Encourage tax compliance by creating trust and reducing fraud concerns for companies, which helps governments promote economic growth— especially for small businesses.
  

Implementing blockchain for tax

The first part of the publication ‘Blockchain for Tax Compliance’ covers considerations for implementing a government blockchain. It discusses the five key functional attributes of the technology relevant for implementing a blockchain solution for tax compliance:

• Secure identity of people and things

• A distributed database for information exchange

• A real-time payment mechanism

• A means of distributing tax rules and regulations

• A means of continuously monitoring compliance verification

Together, these five capabilities enable a pre-packaged and more secure solution for tax compliance.

The key components of a successful digital transformation journey for implementing blockchain-based tax compliance infrastructure were discussed in the first publication “Digital Transformation of Tax Administration”.

Two practical cases of blockchain for tax compliance

The second publication zooms in on two tax compliance scenarios that can benefit from blockchain technology:

• VAT Fraud Prevention and Blockchain: how can we prevent fraud and decrease costs of VAT compliance for tax administrations while building trust in the system and making VAT infrastructure transparent?

• The journey to a sustainable, blockchain enabled tax infrastructure for stimulating (eco)tourism development in countries.