The introduction of value added tax (VAT) in Bahrain next year is an excellent opportunity to build a unique and optimized tax system and blockchain technology will be a safe and effective tool for its management , an IT industry expert said.
Blockchain accelerates government access to tax revenues from the final consumer of the service or article, and also accelerates the reimbursement process of the trader and the tax supplier, said Yaqoob AlAwadhi, managing director of NGN International, a full-fledged systems integrator and IT consultant based in Bahrain.
With the help of the blockchain, we can shape a cautious structure even in the early stages, taking advantage of all the best that innovations can give us, said AlAwadhi.
"This technology would help reduce the costs of managing VAT and accelerate its collection of 80%," he added.
Al Awadhi stressed that Bahrain had a good opportunity to be a pioneer in the GCC using the blockchain in the collection of VAT as this technology eliminates the role of intermediaries such as accounting firms or banks between the trader and the government.
"There are estimates that this tax will contribute to increasing the state budget of BD 300 million ($ 793 million) a year, thus contributing to 1.6 percent of GDP, but nobody wants the cost to collect this tax is greater than its revenues through the recruitment of more personnel and expenses for consulting companies, or for intentional or involuntary tax evasion, "said Al Awadhi.
According to him, blockchain technology has expanded its influence in recent years.
"Since 2008, when the blockchain has appeared to ensure highly secure cryptocurrency transactions, this technology has evolved dramatically and is now used in multiple areas, such as network administration, copyright and ownership, digital identity, energy, electronic voting and private and public sector management We believe that blockchain is a great help for the tax system, "he added.
The key strength of Blockchain, he said, was its secure and transparent nature. "Anyone interested can see a chain of blocks with transaction details, but changing, adding or removing any block is not possible," he added.
Unlike electronic tax invoices, which are stored in a database and can be exposed to third party interference, blockchain is exempt from these vulnerabilities. The system is able to track VAT-related financial flows and monitor the fulfillment of taxpayers' obligations in real time, with no possibility for fraudsters to hide any transaction or obtain an illegal VAT refund or compensation.
Blockchain is intensively adopted for the collection of VAT in Kazakhstan, where the government has decided to move the entire tax system to blockchain by 2020 to combat the various tax evasion schemes. For some taxpayers, the system will start operating as early as 2019, Al Awadhi said.
In addition, the Ministry of Finance will establish a single company account for each company to be used for tax and customs payments. This corporate blockchain will allow the government to monitor business activities and obtain information on expenses, profits and budgets.
In this scheme, the blockchain nodes will be located in banks and government agencies. These banking nodes will retain a limited amount of information that is not sufficient to identify the details of the transaction, while the nodes held by government agencies will obtain the details of the transaction in full.
"However, there are other advantages," said the chief IT consultant. "Blockchain is fast (hype of the digital transformation of the mind) and can reduce VAT administration costs by eliminating the need for third-party intermediaries: agents, trust funds, reputable banks and many others that slow down. entire transaction process ", he explained.
"Blockchain can do the job as quickly as possible and without contractors, compared to any digitization initiative, the blockchain prevails thanks to its highly secure transactions," he added.TradeArabia news service
