Making Tax Smart: Feasibility of Distributed Ledger Technology for Building Tax Compliance Functionality to Central Bank Digital Currency

The latest advancements in distributed ledger technology (DLT) and payment architectures such as the UK’s New Payments Architecture present opportunities for leveraging the hidden informational value and intelligence within payments. In this paper, we present Smart Money, an infrastructure capabilit...

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Bibliographic Details
Published in:Applied system innovation 2024-12, Vol.7 (6), p.106
Main Authors: Louvieris, Panos, Ioannou, Georgios, White, Gareth
Format: Article
Language:English
Subjects:
Access control
Actuators
CBDC
Central bank digital currencies
Central banks
Compliance
Control equipment
Currency
Design specifications
Digital currencies
Distributed ledger
DLT
Electronic data interchange
Feasibility
Information management
Payment systems
Politics
programmable money
Public policy
Real time
tax compliance
Taxpayer compliance
Value-added tax
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Summary:The latest advancements in distributed ledger technology (DLT) and payment architectures such as the UK’s New Payments Architecture present opportunities for leveraging the hidden informational value and intelligence within payments. In this paper, we present Smart Money, an infrastructure capability for a central bank digital currency (CBDC) which enables real-time value-added tax split payments, oversight, controlled access, and smart policy implementation. This capability is implemented as a prototype called Making Tax Smart (MTS), which utilises the open-source R3 Corda DLT framework. The results presented herein confirm that it is feasible to build an MTS capability which is scalable and co-exists with the current payment systems. Smart Money CBDC has the potential to mobilise payments data, transforming the role of money from a blunt instrument to a government policy sensor and actuator without disrupting the existing money system. DLT, smart contracts, and programmable money have a crucial role to play with benefits for government departments, the economy, and society as a whole.
ISSN:2571-5577
2571-5577
DOI:10.3390/asi7060106