Blockchain and Tax Administration: A Critical Assessment

Abstract

Recent publications argue that blockchains could substantially improve tax administration. This article critically evaluates these claims and examines several proposed use cases. It argues that many of the problems that blockchains purportedly solve exist off-chain, in the real world, and cannot be addressed by a blockchain. Blockchains can facilitate the storage and sharing of tax information. They cannot, however, streamline reporting requirements or enhance cooperation between tax authorities. This article also claims that the main benefit from several use cases derives from digitalization in general, not from the deployment of any specific type of database. It remains to be determined whether blockchains are in fact superior to other digitalized systems that perform comparable functions in tax administration.

Keywords: Blockchain, Tax Administration, VAT, Digitalization, Tax Reporting, DLT

JEL Classification: K34, K42