Could blockchain be what the tax world is waiting for?
February 16, 2017
There’s a buzz around blockchain technology - a distributed ledger that allows anything of value to be traded securely, transparently and without the risk of tampering.
It’s being used in all sorts of ways, such as tracking diamonds through the supply chain, and timestamping clinical trials to create proof of existence.
Looking at how blockchain could be used in tax feels like a no-brainer. The technology’s selling points, such as providing provenance, traceability and transparency of transactions, match priorities for a modern tax system.
Theoretically, blockchain has the ability to deliver real-time, reliable information to a wide group of people, and create a system where both taxpayers and tax authorities have equal confidence in the data collected. It could make it easier for people to pay tax and for governments to narrow the tax gap.
But it’s a long road from theory to practice.
We brought together experts from technology, government and the corporate world to test the thinking. It’s part of our Paying for Tomorrow programme on the future of tax, pay and pensions.
So could blockchain restore trust in the tax system? It would be naive to think it the panacea, but it would be a mistake to underestimate the potential impact.
Potential uses including verifying the judgements/ assumptions involved in establishing the profit global businesses make in different jurisdictions Likewise, giving more visibility to micro transactions of the sharing economy.
One thing’s clear – unless the tax profession starts investigating the potential, there will be no potential. There’s a risk no one takes responsibility for the exploration and experimentation that’s required, or for understanding the wider implications of the adoption of blockchain in everyday use.
PwC would like to see a Government supported working group established to identify a few key areas for initial exploration and, potentially, controlled pilots. This isn’t about solving everything at once, but making small steps which little by little could make a difference.
For more on how blockchain technology could improve the tax system, visit our Paying for Tomorrow webpage.