Blockchain helps prevent VAT fraud
After a brainstorming session that included external fraud experts, we have developed a (blockchain) tool that makes money “smart” and thus prevents VAT fraud.
What’s the problem?
Despite extensive compliance rules, the current tax system is still very vulnerable to fraud. European tax authorities miss out on a lot of revenue especially when it comes to VAT. One common form of fraud is “carrousel fraud”. This involves businesses reclaiming VAT but not remitting it to the tax authorities for goods that circulate within a chain of companies. This is frequently done by means of cross-border trading. It is estimated that the European tax authorities are losing around EUR 160 billion a year in revenue due to VAT fraud. The European Commission therefore started a major initiative last year which is ultimately intended to lead to an 80% reduction in fraud.
So what’s the solution?
After a brainstorming session that included external fraud experts, our Blockchain Experience Lab has developed an automated system that labels transactions and makes money “smart”. For each payment, using blockchain enables us to distinguish between payments for the product – payments which accrue to suppliers – and the amount of VAT, which ultimately has to find its way to the tax authorities.
And what’s the result?
By using the new tool, governments are in a better position to combat fraud and the tax authorities gain real-time insight into money flows. At the same time, companies experience less administrative pressure and can be assured that parties within the chain are not acting fraudulently.
Contact us
