No, we are not hardened naysayers. Not – when it comes to technology-led progress. Specially as GST rounds off one year and able minds are suggesting how we need a complete and totally transparent audit trail as well as assessment of transactions and their chain of sources in real-time- by using blockchain.
Incidentally, way back in May 2016, a report from OECD also talked of emerging technologies that could be best used by tax administrations; and here, the problems of the scale and detail of data that is required by tax authorities was also dwelt upon.
This is a real issue, more so when we see how front office systems are generally information-oriented or department-led and not, necessarily, compliance-oriented. To capture the same tax data from different angles – that too with guaranteed and error-free tax remittance, thanks to smart contracts – who wouldn’t want that? But can we do that with moth-eaten systems?
If we look at a PWC UK report too, we can pin our hopes on Blockchain readily suiting transactional taxes, such as VAT, withholding tax, stamp duties and insurance premium taxes.
The report, although, also stares at the big question of relevance of old-world tax systems of physical goods in today’s digital and sharing-economy era. It also admits that blockchain is not the cure all for the tax systems, even if it could be applied in some areas to reduce the administrative burden, to collect tax at a lower cost and in cutting VAT fraud.
A Deloitte report, on the other hand, looks into examples like SAF-T in Europe or real-time electronic invoicing in South America; cites how at the World Economic Forum in Davos in 2016, the expectation of tax administration and blockchain coming together was slated at as far as around 2023 or 2025.
Of course, we also have experts leaning on examples like the United Arab Emirates’ implementation and the HMRC (UK tax authority)’s digital tax system shaping up strong by 2020.
So what’s the problem? Nothing. Except that all this – pros and cons- would need experimentation and courage to try different applications and at a new scale altogether. As industry watchers like Nemitari Ajienka rightly remind, the representation of fiat currencies as tokens on a blockchain network would be an alien change too. There would be other consideration-points like privacy of the details of tax transactions and the possibility that taxpayers may be able to keep an eye on what their taxes are used for. Would governments be ready for that visceral a change – in their policy rooms and in the trenches down there?
Unless they are, blockchain will stay great on paper. But in reality – well, hmmm?