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The advancement of digital solutions based on blockchain technology will lead to the end of the income tax return, says Hartwig Hoffmann, from EY’s international tax area. “This is guaranteed, the question is when,” he said. And he added that this will happen sooner than one might think. The statements were made during a presentation at the CryptoValley Festival 2020.

However, for this to happen, countries must be at level 5 of the tax administration model. This is the maximum level on the scale that measures the digitization of income tax information exchanges.

At level 1, there is a standard annual form, mandatory or optional, with income data. At level 4, the authorities cross-analyze the information. At this level, taxpayers receive feedback from the government on the analysis and have time to respond. Level 5 allows governments to capture data on their own, without filling out forms.

According to Hoffmann, Poland is at level 5; countries like Brazil and Russia, at level 4; while the USA is at level 1. This difference is explained by the profile of these markets. According to the expert, as Brazil and Russia have problems with the shadow economy, greater government control is important.

With blockchain, charging tax on transactions would be easier

For Hoffmann, blockchain technology facilitates this shift towards greater control of operations, thus preventing tax fraud. He cited asset tokenization as an example. If it receives the token blockchain key, the government could already generate the tax collection.pandemicThe blockchain also helps to ensure clear identification of VAT, value added tax, mainly in transactions with people from different countries. Noting the negative aspects of Covid-19, he assesses that “the pandemic had a positive result in the adoption of digital platforms”.

Digital solutions allow one to automate report creation

Thus, he sees a trend of companies wanting to go digital. But remember that, in this context, it is important to understand how technology can “better serve us”. In addition, with the pandemic and, consequently, more remote assistance, it became even more relevant to understand how to better serve the customer and improve their experience.

Digital services, however, go beyond the relationship with the customer. They also involve internal company processes. One of KPMG’s solutions allows, for example, automating the creation of reports that managers need to generate periodically with product information. They need to include legal data and performance history, among others. There are also digital solutions that enable the company’s central control to keep up with differences in regulation in each region in which it operates.