The economic arm of Germany is making decisions to adopt blockchain technology as the ultimate combat weapon to ouster tax fraud and tax evasion schemes.
According to reports on Thursday by local news outlet WirtschaftsWoche, The German Federal Ministry for Economic Affairs and Energy (BMWi), is considering the introduction of the unconventional technology in a bid to overcome the poignant problem of tax evasion in the country, thereby making the German tax system more effective.
Combating Tax Fraud with Blockchain
This decision would come after the notorious Cum-Ex-Files case in 2017 which saw a host of top European countries swept by a huge and well-organized tax fraud scheme. The elaborate tax evasion plan which included a network of stockholders, lawyers and banks would see the cumulative stolen funds approaching $100 billion. Given that Germany was the most affected victim of the lot with a staggering $36.2 billion lost through treasury funds, it is, therefore, no surprise that the country is seeking foul-proof ways of securing its taxes amidst the constantly evolving malicious ways of attack.
BMWi has subsequently proposed the implementation of distributed ledger technology (DLT) into its tax system as it sees it as the most efficient method that would be anything from manipulative. The report says of blockchain:
“. . . The core is the digital assignment of property or access rights. Transactions are stored encrypted in a database – not centrally, but on users’ computers. Because all copies of the file are on the same level, information is considered tamper-proof.”
Blockchain; A Solution to Tax Frauds?
With more than $5 billion escaping via Germany’s tax regulation ‘loophole’ even before 2012, the blockchain technology is expected to fix all loose ends, because with DLT there are absolutely no loose ends to be exploited. This way, the subtle method employed by most stockholders in 2017 by deceiving agencies they were not owners of their shares through calculated loans would not be possible in an ideal blockchain system. Christian Hirte, BMWi’s State Secretary, says that implementation of the blockchain technology would make sure tax shares are “traceable at any time.”
“This would ensure that it is always easy to understand who owns a share.”
“Regulatorily, we are not quite ready for the new world,” Hirte admitted. With “Cum-Ex”, investors could reimburse the once withholding tax paid at least twice with the help of their bank. For this purpose, they shifted shares around each other on the dividend record date and without dividend entitlement.