Blockchain as Government’s Ally in Driving Tax Compliance

  • December 4, 2020
  • Jennifer Moore
Blockchain as Government’s Ally in Driving Tax Compliance

The government is responsible for tackling huge social issues throughout the globe, such as demographics, climate change, work practices, and many more. Efficient tax compliance systems allow the government to optimize the available resources and also come with a bigger impact on the country, along with the citizens they serve. Read on to find more.

Blockchain is Much More than Bitcoin

While Bitcoin has glorified blockchain over the last decade, governments worldwide are discovering processes to track and build more trust in the prevailing processes. Blockchain can be referred to as a ledger that cannot be modified, thereby making it secure and safe for transactions. Every entry is protected within a block of entries and every new block is connected to the earlier one. Historically, blockchain technology was recognized as the central part of the digital currency, bitcoin, but now it can be utilized for any transaction of value.

Blockchain Helps Build Trust Between the Public and Governments

Transparency, security, and trust are some of the primary objectives of utilizing blockchain, thereby making it suitable for tax compliance. Blockchain technology mutually agrees upon the record of transactions. Various parties can authenticate each step of the procedure. Moreover, blockchain is gaining traction as it encourages member-states to explore the possibilities of plans. Therefore, to place cross-border transaction information on the blockchain. Moreover, utilize a secure digital currency for VAT payments.

Apart from these, blockchain helps in saving money and reducing fraud in tax payments. This technology offers immense possibilities for governments to not just reduce the cost of tax-collecting operations but also facilitate peer-to-peer transactions, thereby reducing the price of third-party transaction intermediaries.

Also Read: How the Emergence of CBDCs will Impact Global Economy and the Financial Sector

By enabling the use of smart contracts, blockchain assures authentication and verification. A smart contract is a set of rules between parties. It would not allow intermediate steps within a procedure to happen until the authentication process is complete. Therefore, for instance, an organization automatically lists events like salary payments and purchase transactions. As well as pay tax bills according to the scenario, rather than hire accountants to drive a figure from millions of records. It leads to a substantial reduction in time for both organizations and governments.

Blockchain Beyond Taxation: Facilitating Eco-Tourism

Blockchain can help provide tax infrastructure for stimulating eco-tourism. It is an infrastructure that would particularly be relevant to areas with historical, natural sites that attract tourists, thereby giving a boost to the emerging national and local economies. However, in this case, visitors can lead to unwanted side effects. These may include noise pollution, and air pollution, in extension to contributing to social and economic inequalities in destination nations. By imposing tourism taxes on services, by utilizing blockchain, governments could raise funds. Thereafter, reduce the negative influences of tourism, while promoting and sustaining it.

Also Read: Why Shouldn’t Retire Americans Overinvest in the Market?

Blockchain is a secured process of ring-fencing the collected tax. With the help of smart contracts, blockchain technology increases the accountability and transparency of the whole eco-tourism sector. Within the nation, thereby facilitating the visitors to be capable of witnessing where their tax contributions land up.

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