On November 16th, 2022, IDSt held a conference on the topic of „Digital Transformation in VAT." In one of the sessions, a discussion on use cases for blockchain in VAT was held.
Namely, it was noted that there was a need to build a new, digital infrastructure for the exchange of tax-relevant data between companies and with the tax authorities in the future. This would include the use of blockchain platforms to transform and automate tax processes, reduce administrative costs and paperwork, and fight tax fraud.
Blockchain could be used in VAT to digitalize the exchange of tax data between businesses and tax authorities
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Metaverse
Author: Kristina Dosen
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Content accuracy validation date:
02.12.2022
Content accuracy validation time:
10:13h
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One potential use case for blockchain in VAT was highlighted for document evidence used for intra-community supply tax exemption. As tax exemptions can only be claimed if accounting and document evidence are properly kept, and the current EU model of document evidence management is too complex, the use of blockchain in this field would ensure:
- Unique proof of transport for the tax authorities upon the arrival of goods, through the use of GPS tracking.
- The authentication of tax data validates the identity of information using blockchain technology.
- Sharing of data on a need-to-know basis, instead of sharing too much unnecessary fiscal data with the tax authorities.
- Read the authorization of the tax authorities, to avoid denial of tax exemption by tax audit, years after the movement of goods.
Ideally, the supplier would send the necessary data to the customer via blockchain via ERP.Once the customer gets this document, they will fill it out and send it back. This data will finally be stored on the blockchain, where the tax authorities can read it.
Unfortunately, it was also noted that tax authorities across the world are, as of now, too slow to react to technological developments such as this one. Moreover, they’ve expressed disinterest in hosting such a system, as they don’t want to take responsibility if the system goes down. For this reason, it is more likely that economic stakeholders will have to create this blockchain-based tax system on their own.
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