In its 41st edition, CATA, or the Commonwealth Association of Tax Administrators gathered to debate what are the current concerns to member tax administrations and partner networks.
This entity, established in 1978, is dedicated to help its 47 country members through conferences, training programs, publications and knowledge sharing to develop effective tax administrations that promote sustainable development and good governance.
One of the most important events that this organization regularly holds is the annual CATA Technical Conference, during which important policy and technical issues of current concern to member tax administrations are debated by subject matter experts in the fields of digitalization, compliance, and legislation.
The main topics that were discussed during the three-day session, this time held in a virtual format due to the Covid 19 situation, were the following:
- global tax reforms, simplified tax systems
- the use of technology to simplify tax systems,
- managing SME compliance through tax simplification,
- inter-revenue agency cooperation and
- benchmarking and revenue mobilization post-COVID.
Representatives from India, the United Kingdom, Mauritius, Canada, Kenya, Malaysia, Uganda, Malta, Nigeria, and Barbados contributed to the event with their presentations.
Data Tech International had the honor to participate once again in this annual event (the last one was held in the wonderful Fiji Islands, see our other article) and its intervention was scheduled for the second day of the meeting under the title of: Simplified Tax Systems.
Goran Todorov, managing director of DTI, was the speaker from DTI, and in his presentation the utilization of the blockchain technology in taxation was the key aspect to future solving of the revenue gap that comes from underreporting, electronic sales suppression, and other fraudulent malpractices used to deceive the tax authorities. DTI’s TaxCore solution has already embraced this methodology as part of its core features. Main prerequisites for the use of Blockchain, which TaxCore brings to reality are:
- Records need to be digital – Blockchain is ostensibly immutable, so it is important to make sure that any existing data that is transferred onto the blockchain is accurate;
- Digital identity needs to be in place – to establish a strong connection between a person and their business operation;
- Laws and regulations – in case it doesn’t exist in the country, must have acceptance of electronic signature and establishment of Public Key Infrastructure;
- Digital literacy.
The need for digital literacy, laws and regulations, or political decisions might be more challenging for a digitalisation process than the technology itself.
Regarding this, the TaxCore solution can be deployed today in any country, implemented in phases, systematically transforming and preparing the environment for the upcoming technology revolution such as Blockchain.
Once implemented, TaxCore collects data from four different channels to perform audits on the invoices as per mini blockchain audit methodology.
Among its data collection processes there is the remote collection which is instant and needs an internet connection; the local collection allows audit packages upload when there is no internet connection available; the QR scan sends the information by scanning the invoice’s QR code (used by the customer to check their purchase and transmit the information to the TA) and the SE audit, that serves for the offline mode and it is the last resort in case there is the need to collect data that never left the merchant’s premises.
All of this data, which is always encrypted, serves to form counters that accumulate. The result of mini blockchain audit methodology becomes most valuable when a taxpayer’s premise goes offline and the data is not coming, in that case if any customer simply scans the QR code of an invoice provided by seller, the gap will be shown. This example shows that even without a visit to taxpayer’s premise, in a seamless and comfortable way and from its desk, a tax authority officer can monitor and control the tax gap that is produced between the transition from online to offline intervals, and what is more important, to determine the tax liability for a particular taxpayer. Moreover, every kind of transaction issued has its own counters for every single taxpayer, ensuring that business is never disturbed in any way.
Finally, the speaker addressed the fraud detection by every customer by scanning each invoice’s QR code, which is yet another proposal to tackle the revenue gap and revenue collection issue.
In all these matters, the blockchain technology is centered on the audit process and assumed by the TaxCore as one of its main working philosophies which can definitely help the tax authorities to discover all unreported taxes and know their taxpayers better.