In the era of digital advancements, the government faces significant challenges in curbing revenue leakage from tax evasion, both direct and indirect. However, blockchain is emerging as a potential solution to tackle these issues and transform various sectors of the economy that rely on trust and transparency.
According to the 2019 statistics, tax revenue accounted for over 85 percent of the total revenue to the government of Rs 14,35,233 crore in the financial year 2017-18. Despite this substantial revenue collection, the fiscal system faces loopholes, leading to significant revenue leakage at different stages of value or income generation.
Blockchain, a decentralized method of storing data or information, has emerged as a highly competent and efficient technology in the digital age. It creates immutable blocks of data, secures them cryptographically, and chains them on a transparent peer-to-peer network. With its inherent security and transparency, blockchain has the potential to revolutionize multiple sectors and contribute significantly to a country’s GDP.
For the government, which heavily relies on tax collection for revenue generation, blockchain presents an opportunity to transform the current scenario of revenue leakages into 100% revenue collection. By integrating land records with blockchain technology, the government can ensure confidence in recognizing real property owners and track any transfer of ownership. Smart contracts built on blockchain can automate the collection of stamp duty, registration fees, and capital gains on property transactions, leaving no room for evasion.
The potential of blockchain extends to other sectors as well. For example, in the logistics industry, blockchain can enable the collection of GST and direct taxes at various points of the supply chain. The transparency of blockchain records reduces delays and costs for intermediaries while ensuring tax compliance at each stage.
With the implementation of blockchain technology tailored to each industry and integrated with smart contracts, the government can achieve its dream of an umbrella tax levy and automated regulatory compliance. Every point of value addition or transaction will be recorded, leaving no room for manipulation or malpractice. However, as with any new technology, there are challenges to overcome, and careful implementation and governance will be crucial to fully harnessing the potential benefits of blockchain in RegTech.
