The next big thing in tax

in #ico3 years ago

The next big thing in tax is tax automation powered by blockchain. Let's first have a look at how this would look like and then which steps need to be taken so that this is a reality.
This article is based on discussions I had with major audit company representative and tax authority representative in Switzerland.

Tax automation powered by blockchain

In the future, the accounting software will transcribe all transactions directly on a blockchain managed by the state, government or the tax authority. The tax authority will then have access to each company's data under specific rules (when and under which circumstances the tax authority can unlock the details of transactions of a company). The tax authority will have an algorithm taxing or checking the tax declaration automatically. Under specific rules of the algorithm, cases will then be picked up and work by the tax representatives.

By having that level of details, the cost for the tax authority and for the company will decrease. When the tax authority has a question, it can directly access the data without having to ask the company to provide it. Furthermore, this will also allow the tax authority to make a fingerprint of the company. The fingerprint is a map of all the transactions. The tax authority will then be able to compare fingerprints of companies to find similarities or discrepancies making the audit of tax much more effective and cost-efficient.

For example, if a company has proven wrongdoing by paying politicians to receive public infrastructure orders, the tax authority can check if other companies have similar fingerprints. These companies receive then a deeper audit for similar charges.

Benefits of such a situation: Increase tax revenues, decrease tax costs, either more money for the government or lower tax rates for everybody.

Risks of such situation: The rules under which the tax authority is allowed to assess the transactional data of each company need to be clearly defined to minimize a "big brother" risk.

The steps to tax automation

First, the laws must change to allow the tax authority to ask for the digital transactional transcript of accounting. This is not the case in Switzerland and definitely not in all countries.
Then EZYcount needs to cooperate with tax authority to develop our blockchain technology and support all accounting software to build connectors to the blockchain.
The rules about accessing the blockchain, especially by the tax authority, need to be clearly defined (by the politics) and then implemented in the code - the code is the law.

Tax automation on the blockchain decrease the costs of tax for the government and help fight corruption and the black market.

What is your opinion about tax automation?