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Tax and Technology

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The inexorable march of technological advancements and rapid evolutions in business models across entire industries, both in the digital and the “digitalized” economy, are challenging the traditional norms of international taxation as never before. Blockchain technology, Fintech, Cloud computing, Artificial Intelligence, 3D printing, the Internet of Things and Industry 4.0, among others, are disrupting traditional modes of operations, processes and global value chains, and pushing the existing boundaries of taxation. Yet at the same time, these technologies open up opportunities to transform the way that tax administrators operate and interact with taxpayers.

In August 2017, the Digital Economy Taxation Network (DET) was created as a new multi-stakeholder initiative to provide a platform for discussions among government, business, international and regional organizations and academia and to undertake policy-relevant research on taxation issues arising from the Digital Economy, with particular focus on the medium term potential for these technologies to transform the way in which our tax systems operate. This initiative aims to bring together leaders from government, business and research institutions from around the world to undertake collaborative cutting-edge research into the implications of digitalization for tax policy and tax administration so as to maximize the opportunities and minimize the risks associated with digitalization.

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Blockchain: A Tool for Tax Administration

Blockchain is a potentially transformational technology that could have as much impact as the arrival of the Internet in the 1990s. The ability to create a transparent and immutable record of transactions between parties that may not fully trust one another has obvious application for finance and financial regulation. Add to that the ability to automate transactions them-selves through ‘smart contracts’ and you have a recipe for slashing transactional costs and reducing the need for traditional intermediaries.

In March 2017, WU GTPC took an important first step in a pioneering initiative of bringing together tax officials with industry experts, IT solutions developers, representatives of the business and academic community in order to engage the tax policy makers and administrators in a discussion at a time when technology itself is at its developing stage. The following areas for the application of Blockchain, Robotics and AI were identified as particularly promising: payroll and VAT, customs, transfer pricing, and property taxes, which could all yield benefits from increased transparency and compliance and/or reduction of transaction costs through smart contracts.

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