Article: Blocking the Gap: The Potential for Blockchain Technology to Secure VAT Compliance

Abstract

This article aims to demonstrate that blockchain technology is the most optimal solution to tackle the significant challenge that Value Added Tax (VAT) non-compliance poses to the European Union (EU). VAT non-compliance, particularly evasion and fraud, is a complex and costly challenge to EU tax authorities and nations as a whole. Current compliance mechanisms fail to sufficiently ensure the collection of VAT in an effective and truly secure manner, leaving VAT and associated data open to misreporting and exploitation, posing a risk to both individual and national security. Focusing on the design aspects of security, transparency, and efficiency, it will be argued that blockchain provides the opportunity to tackle non-compliance whilst achieving a balance in both taxpayer’s wants and tax authorities’ needs. Utilizing current examples of blockchain implementation, as well as a specific VAT Coin proposal, it is demonstrated that a blockchain solution can come in many forms; be it a public, private or consortium blockchain, with each type respectively achieving compliance whilst prioritizing different aspects of data security and privacy. Ultimately, it is indicated that a blockchain-based VAT system has the potential to enable a significant reduction in the risk of non-compliance, whilst streamlining taxpayer obligations and protecting valuable datasets. blockchain, VAT, tax, cryptocurrency, MTF, VATCoin, fraud, non-compliance, security, EU