On December 19, Application of Blockchain Technology Promotes China’s Tax Payment Credit Management Study published on China’s Tax Website discussed the possibility of blockchain solutions to the country’s current tax credit management issues.
It is not the first time that the digital ledger technology had been brought to the attention of tax agencies. According to Forbes in June, blockchain could help Internal Revenue Service in the U.S. to “lower costs and increase security, as well as enhance the speed in which it accesses and reviews taxpayer data.”
Evidently, blockchain’s characteristic of resistance to modification of the data, open ledger and cost efficiency could potentially makes it an underlying technology in financial services and tax credit management system. As the article posted on the China’s Tax Website restates blockchain’s definition of “distributed ledger, node-to-node transaction, consensus mechanism and cryptography” from 2016’s China’s Blockchain Technology and Application Progress White Paper, it further stresses the technology’s nature of decentralization, openness and self-governance and how it could sustain data transfer freely in a secured environment.
The four issues that blockchain could tackle in the tax payment credit management system, according to the article, include data security and information asymmetry, scientific issue behind credit ranking, constant expansion faced by credit management limit and defective Incentive and disciplinary mechanism.
Furthermore, the article proposed blockchain-based tax credit evaluation and management system design including:
1. Top design to improve tax payment credit law
2. Create big data platform for supporting credit evaluation and management
3. Actualize credit management coverage, improve credit evaluation mechanism and its implementation policy
4. Blockchain application of smart contract and incentivize mechanism to build tax payment credit active evaluation and management mechanism
5. Blockchain’s key cryptography to improve tax payment credit public record
6. Blockchain application and big data technology to improve incentive and disciplinary mechanism in tax payment credit system
As reported, integrating blockchain technology into tax payment credit system allows “tax payers to get more involved in social governance and in turn, a way for departments to join effort in incentive and disciplinary mechanism in regards of tax payment credit.”