Fundamental Elements of a Blockchain-Based Tax System – When to Use Blockchain for Tax?
This article, which is the first of a series of two, aims to explore the fundamental elements of a blockchain-based tax system by approaching the research question of when to use blockchain for tax. The authors, after introducing the basics of blockchain technology, address the conceptual theoretical perspective by identifying the preconditions under which blockchain can concretely represent a valuable opportunity for tax. In this respect, the analysis starts from the systematic literature review and also covers the different points of view from which to consider the development of a blockchain-based tax system, including the tax administration’s perspective, the taxpayer’s perspective, and the ecosystem perspective. Furthermore, the article addresses the empirical analysis of the current blockchain pilot projects in the tax domain; in this respect, the objective is to verify whether and how each use case concretely addresses the above preconditions. The authors also discuss some future possibilities for more blockchain-based use cases having regard to revenue sourcing rules under the OECD Pillar One proposal and transfer pricing control. In the conclusions, the authors argue that, to comply with the principle of tax efficiency, blockchain-based use cases for tax should always comply with the preconditions identified under the present study.