A recent report noted that the Revenue Department of Bangkok, Thailand is testing blockchain to track value-added tax (VAT) payments in its innovation lab, putting Thailand on the path to becoming the first country to use the distributed ledger for tax probes if the technology is adopted.
The department wants to use blockchain technology to prevent VAT refund fraud, according to the director-general.
The blockchain is expected to help verify VAT invoices, he had said, which would help root out fake invoices for VAT claims.
For example, when a company buys products from a second company, the former will issue VAT invoices to the latter and both firms can use blockchain to confirm the transactions.
To prevent tax evasion and fraud, the Revenue Department has set its sights on adopting machine learning and using artificial intelligence to learn and study tax-cheating practices to efficiently examine tax payments and compel more people to enter the formal tax system, the director-general stated.
Adoption of new technologies like big data and a digital tax collection system is a priority for the director-general who aims to use innovation to boost efficiency and enlarge the taxpayer base.
In related news, the director-general confirmed that the Finance Ministry’s requirement to use financial accounts submitted to the Revenue Department in commercial banks’ loan approval process for small and medium-sized enterprises (SMEs) will be enforced as scheduled on 1 January 2019.
Under the single account scheme, the central bank requires banks to give greater consideration to financial statements submitted to the Revenue Department when considering SME loans.
But the requirement has stoked concerns that the single account scheme will lessen access to finance for most SMEs, which tend to use more than one financial account and submit the account with the least value to understate or avoid tax while turning in the best one for loan applications from financial institutions.
The president of the Federation of Accounting Professions, said recently that the central bank was considering whether to let banks demand additional collateral for loans extended to SMEs that are unable to fully comply with the single account scheme.
In an earlier report by OpenGov Asia, the Thai government had stated that it would be using blockchain to tackle tax avoidance.
The Director-General stated that the Revenue Department intends to use blockchain to verify whether taxes were said correctly and to speed up the tax refund process. He added that the use of disruptive technologies such as blockchain and machine learning for the purpose of improving the tax collection system was his priority.
Thailand has shown an open-minded approach to blockchain technology and cryptocurrencies throughout the years. Tax-wise, the government of Thailand collects 15 per cent capital gains tax levied against profits made from the buying and selling of digital tokens, according to a new tax legislation.
There is also a 7 per cent value-added tax, but according to the government’s Finance Minister, most investors are exempted from it.
The Securities and Exchange Commission (SEC), the country’s financial watchdog, has announced a regulatory framework for initial coin offerings (ICOs) taking effect from July 16, 2018. Digital token issuers must be registered with the Thailand SEC before putting digital assets on sale.
Following the new ICO rules, the SEC has reported that around 50 prospective initial coin offerings have shown interest in securing a license from the regulator and 3 of them have followed through with an application.
The SEC’s secretary general also said that around 20 companies were seeking to operate officially as a digital asset exchange. And one of the world’s largest cryptocurrency operators has announced that it successfully obtained approval from the regulator.
Thus, it is clear that Thailand’s Revenue Department is working towards employing blockchain technology in their governmental operations in various forms.