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Ignacio Hernández | Public Sector Director | everis Argentina

Blockchain: advances and coverage

We first heard of the term Blockchain because of bitcoin. Bitcoin was created nine years ago and since, crypto currencies have been evolving and showing the potential of blockchain. We are talking about an ascending technology that has been drawing the attention and investments from governments, companies, startups and universities.

What does blockchain have to offer and how it can explain such a phenomena? Blockchain is based on three main principles:

Value decentralization: any person or entity may make a transaction (using money, assets, goods, or services, etc.) to another person without the need for central or intermediary authorities.

  • Immutability: reliability generated by transactions or records that cannot be changed or deleted after writing.
  • Transparency: transactions not be changed, and they are visible and verifiable by all participants of the network; third parties are unnecessary, creating a reliable context.

The use of this technology is not restricted to economy. It may also be used in politics, with decentralized decision-making and participation systems, and in the legal-administrative area, favoring the relationship between citizen and public administration.

Another innovation based on blockchain is smart contracts, which allow parties to establish self-executing contracts and regulations. For instance, when two people reach an agreement, they write down their conditions and incorporate this agreement to Blockchain; then the contract will be automatically executed in a decentralized, fully auditable and reliable manner.

The use of disruptive technologies, such as blockchain, artificial intelligence or Big Data, offers a unique opportunity to transform the way taxes are managed. Blockchain is able to innovate the way information is analyzed, transferred and stored in tax agencies. It may also assist in reducing expenses, improving safety, and speeding the access and revision of taxpayer data.

Besides, Blockchain could help improve some deficiencies in Latin American tax administrations, such as high levels of compliance.

failures (low tax evasion and delinquency), low levels of the collection system and lower revenue collection compared to countries that belong to the Organization for Economic Co-operation and Development (OECD).

For governments that seek to modernize to reduce the tax gap, increase fraud detection and make operations more efficient, Blockchain will be the key to such disruptive changes. Potential application cases are: a digital accounting book platform for real-time access by the organs for collecting and auditing information from individuals and companies; the use of smart contracts for the payment of royalties, from real-time records of the extraction of natural resources, such as oil and gas; companies would no longer intermediate the calculation and withholding of taxes for the payment of wages; to transform the way VAT is collected, using the traceability of transactions and reducing fraud.

A debate on legal and regulatory aspects is extremely necessary and fundamental, since the legitimacy through regulations will allow greater investments, the evolution of technology and consequently, will encourage real applications in the private and public spheres. Thus, it is possible that from the technology potential, many other uses will allow reducing bureaucracy, collecting costs and reducing the fiscal gap.

However, it does not mean that blockchain will solve every problem nor is it the solution for every modern tax system issue. Blockchain is a new technology still under development. For example, bitcoin is the largest blockchain network and is able to process only a small portion of transactions of a private system per second, such as VISA’s.

Governments must be able to face the new challenges and demands of society quickly and efficiently, always following the law and transforming the way services are provided, embracing new technologies for their operations.

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