Blockchain may be the most important invention since the internet, and the potential for tax is huge. Blockchain may be best known today as the technology that underpins the digital currency bitcoin, but it can also be used for transmitting data securely. It’s set to transform financial transactions and reporting and, in turn, tax as well.
Essentially a blockchain is a digital ledger of verified transactions shared among a distributed network of computers. A blockchain allows us to transfer data, currency and other assets in an efficient, trustworthy manner among partners that may not naturally trust each other.
The ability to implement smart contracts can automate the process of payments, transfer of assets and recording of these transactions in a way that can revolutionize everything that we’re doing and has major impacts for tax.”
The components of blockchain that involve encrypted identity and transparency of transaction data are fundamental elements to a new type of relationship between tax administrations and tax payers. “We’re thinking through how blockchain might revolutionize what they do. “We can look to a future in which a ship enters into a new territory and just by tracking its GPS system, we can automate the process of closing out payment of insurance, marine and shipping costs, entry duty fees, other tax payments.”
The savings could be tremendous, and the speed and accuracy with which these transactions happen could be unlike anything we’ve seen before.