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Blockchain Sends Taxes Back to Basics

Posted by Jeff Pelliccio on Dec 21, 2018 9:00:00 AM

In ICS insights, hiring trends, Job Trends, IT, Accounting and Finance, client

Cryptocurrencies have become increasingly popular due to a number of factors, including the security benefits. Cryptocurrencies use what is known as blockchain. Blockchain is a form of data security that works like a series of combination locks. In order to access the currency, it's necessary to unlock a series of "blocks" found within a security "chain." While blockchain has been routinely used with digital currencies, it's not exclusively available for these monetary transactions. In fact, blockchain has a number of other potential uses, including the ability to simplify tax problems.

Cutting the Paperwork Headache

For a single transaction, both the buyer and the seller generate paperwork. For the buyer, it comes in the form of a receipt. For the seller, this likely comes in an updated invoice, plus information sent out to credit card processors. For large corporations where items are bought and sold several times over, this creates a massive paper trail. For example, if a retailer sells a product on Amazon, paperwork occurs for the buyer, for Amazon, and for the retailer. If drop-shipping occurs, which is the practice of a third party listing a retailer's product on an e-commerce storefront, such as Amazon, it adds another layer of paperwork.

For massive corporations, that might make thousands, if not hundreds of thousands of sales a day, attempting to stay up on taxes becomes a substantial headache. For companies like Walmart, Target, Amazon, and others, it's a non-stop process of sifting through digital files and sales reports to attempt to generate tax returns for multiple local, state and federal levels. This becomes even more of a problem when dealing with international corporations.

In other words, the tax filing process for massive companies is anything but simple. It also likely means, despite best efforts, tax returns are not 100% accurate, at no fault of the companies.

Easing the Tax Headache

This is where blockchain has the potential to come in to play. Blockchain organizes all the information from thousands of locations and creates not just an individual file stream but a secure file as well. This has the ability to deliver two substantial benefits to both the employer and the consumer.

First, by simplifying the file storage and delivery method for a business it reduces the required manpower to monitor the information and to keep track of it. This cuts down expenses for the business, which in turn allows the company to put these financial savings back into the company, toward higher salaries for workers, or to pass the savings on to the consumer. It also ensures a more accurate tax filing, which means local, state, and federal tax returns are accurate and governments are not short-changed.

On the consumer side of the spectrum, blockchain provides added security. This means credit card numbers and other forms of payment receive additional security, which in turn will help prevent data leaks. It will not completely stop possible potential credit card loss as some hacks come at the processing level and not with how the data is stored, but it should substantially reduce the threat to consumers.

International Tax Headaches

Dealing with taxes for a large domestic company is already difficult. It becomes a much larger problem when dealing with an international corporation. Often times products are purchased in one location, then sold in another, which, depending on federal laws of the given countries, can change tax requirements on a nation to nation basis. Blockchain has the ability to ease this problem.

Simplified Potential

Most major corporations will benefit from the implementation of blockchain. For example, a shipping company such as UPS, which deals with a mountain of paperwork, records, damage reports, loss of packages, tracking information and other kinds of data continually coming and going would see corporate analytics improve, making it easier for the company to operate, which will make it easier for a consumer to track packages.

Building on Its Success

Blockchain has more of a future than just in cryptocurrency. It has the ability to improve business functionality across the board, both nationally and internationally. The larger the company the more impactful blockchain may prove. Companies are only scratching the surface on the benefits of blockchain. While it is almost only used in cryptocurrency as of right now, it has the ability to boost security features and make everything from maintaining records and processing taxes that much easier. In all reality, blockchain will become an increasingly important staple in corporations around the globe. In time, it will also make it down to the consumer level for added protection on personal data as well.

 If you are looking to see what you can do further with this tech, click below. ICS will help you find the right people to complete a team that uses blockchain to its full potential. Start reaching out now to see where the future can take you. 

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