How blockchain can be used in tax compliance | Vertex Exchange Europe 2019 | World Finance


David Deputy: So blockchain can be used in
I think three areas that stick out for me. One is you’re seeing financial instruments,
physical interest-earning assets, and cash flowing assets: they’re being put onto the
blockchain as a system of record. So when these assets are transferred, there’s
obviously tax involved. The second is use of blockchain for the automation
of approaches. So we’re seeing blockchain being a great way
to store identities, to understand who the taxpayer is, for moving information – it’s
a great data management system. But concurrent with the movement of information,
there’s the potential to move the actual tax payment at a very granular level. So you can get immediate compliance with no
audits, no returns, certified compliance through use of the blockchain, which is one area we’re
exploring. Real-world examples of tax authorities using
blockchain: there’s many in the income tax space, where they’re trying to understand
who’s not paying on gains and losses in crypto. But to bring it into the transaction tax space,
we’ve seen China take a leadership position. Shenzhen province did an e-invoicing experiment
on blockchain, along with Tencent, who we had conversations with. It seems to have been successful. Questionable whether it will roll out more
broadly, so these are still experiments. You’ve also seen here in Europe, DG Tax, they
asked for blockchain to be explored to reduce the VAT fraud – there’s $150bn roughly of
VAT fraud in the European Union – so they’re actually funding grants with technology companies
to explore how blockchain could be applied in the European context. What we’ll see in the future for blockchain
– at least our hope – is that blockchain can be the basis for automated compliance. So immediate certification – as soon as
the transaction occurs – that you’re in compliance with the government regulations
that are applicable. So we feel there’s a great opportunity for
us to collaborate, not only with the taxpayers but also with the governments, to become a
trusted authority that provides the ability to file your information as necessary. Or better yet, prove to the government that
you’ve used the right information to get to the right result, without sharing it with
them. But also to pay your taxes due immediately. That removes the opportunity for fraud in
the minds of the government. And in return, to get a certificate of immediate
compliance on a transaction-by-transaction basis. Removing returns, removing audits – absent
finding of fraud, there would be no hassle. It would just be a seamless system where money
is flowing to the government, and there’s no hassles for the business. Thanks for watching. Click now for more videos from Vertex Exchange
Europe 2019, and please subscribe for the latest international business insights from
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