The question is no longer whether blockchain will disrupt the tax system, but how far, how fast and how can you make sure your business is up to speed.
The impacts on system design, interactions with tax authorities and speed of tax return and settlement are clearly key considerations. Yet, blockchain also raises important issues in areas such as organisational culture, data confidentiality and relationships with the different parties in your business network.
So putting all the hype aside, what does blockchain really mean for tax compliance and management within your business? What are the main risks and opportunities? How can you begin preparing for the shake-up ahead?
Gearing up for blockchain
In an increasingly digitised economy, in which almost everything can be ordered at the tap of a smartphone and transactions are routinely processed and analysed in real-time, it can sometimes feel like the tax system is still stuck in analogue.
From the collation, cleansing and verification of information to the preparation, validation and submission of returns, tax processes are largely paper-heavy and labour-intensive. Not only does this bump up the costs, it also leaves tax teams and tax authorities with less time to devote to genuinely valueadding activities. The operational demands are compounded by the difficulties of reaching agreement with tax authorities on interpretation and approach, which leads to uncertainty and heightened risk of audit and legal dispute. Could a lot of this aggravation in the system be eliminated? In a previous article in our Future of tax series, we looked at how automation and artificial intelligence (AI) are bringing tax into the digital age.1 Yes, tax authorities want more information in less time – as a result, completing tax returns and settlement in the same real-time as much of the economy is running will increasing be the norm. The big digital pluses for your tax team and wider business not only include improving the efficiency of tax management, but also enabling tax teams to move to the forefront of formulating and executing strategic change. Blockchain is set to play a crucial role in the digitisation of taxation by providing the ‘wiring’ needed for real-time recordkeeping, verification and information exchange. Automatically fulfilled blockchain-enabled ‘smart contracts’ also offer faster and more efficient ways to evaluate and settle tax liabilities.
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