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Blockchain, Regulators Coming
There has been a lot of attention paid to blockchain. But despite that, the distributed ledger system is simply another way of delivering information. It’s plumbing as far as regulators as concerned.
“Regulators don’t care what technology you are use,” says David Deputy, Vertex’s director of strategic development and emerging markets, and president of the Accounting Blockchain Coalition. “I feel like Paul Revere. I keep saying the regulators are coming, the regulators are coming.”
Vertex itself has not yet brought a blockchain-based system to the transaction tax market, but that is coming. It is testing a system and hopes to have it on the market not too far in the future. That is simply bringing “high-quality tax compliance to blockchain through automation”, says Deputy. To put it another way, doing what Vertex has been doing all along with a different generation of technologies.
Deputy’s work with Vertex and with the coalition dovetails on this. A major problem, he says, is that “If you are exchanging goods and services it’s subject to transaction tax” and that is not always happening with companies which use blockchain. “There are companies selling goods and services today and ignoring this,” he continues.
Deputy notes some refer to accounting with blockchain present as triple-entry accounting. “You have witness that is watching our debits and credits,” he notes. The blockchain network validates and preserves the transaction.
But there is a case to be made that it goes beyond triple accounting—to the dimension added by governments with government increasingly trying to get close to the transaction, with the possibility of payment to governments coming straight off the invoice.
Split payments—with part of the money paid going to the vendor and an other to an account for taxes—has been around for a while.
“Italy has some split payments,” Deputy noted. But blockchain makes it easier to track payments and make sure governments get their cut with part going to the vendor and the rest going to an account for taxes.
Italy has had split payments since 2014. It. has gone further. Under a system that went into effect this year, Italian businesses must convert invoices for private domestic transactions into a government-defined XML format and send them through the SdI exchange.