Blockchain with Hyperledger-Fabric System as a Tax Transparency Solution

Did you know that tax evasion in the form of tax evasion is a phenomenon that is often done in the world, this tax evasion is carried out by falsifying tax data using modern technology. One way is to make a loan to a bank with a large nominal amount and the interest on this loan will be charged to its financial statements. However, this practice is actually very detrimental to the state because the tax is actually used to support state financing and spending in carrying out development.

However, tax violations such as tax evasion are quite common in Indonesia. One of the evidences is that based on Indonesia Corruption Watch, there were at least 13 cases of tax corruption in the 2005 - 2019 period. Now, in this corruption case, there is cooperation between the government and the private sector. The general mode is bribery with a nominal value that is not small. The total loss also does not include the value of state losses due to reduced tax payments by corporate taxpayers.

I think the right solution for this problem is to use blockchain technology because blockchain has various characteristics that can prevent the tax evasion from occurring. These characteristics are transparent, reliable, easy to track and easy to adapt to legal tax standards. The blockchain has these characteristics because blockchain is a distributed accounting system that is not owned by a particular organization and is difficult to corrupt and transactions are anonymous (Spearpoint, 2017). So that this blockchain can make transparency in tax collection.

In short, blockchain can be defined as a system that uses a set of packages called blocks and is used to store and distribute data. Then the block will be connected to other blocks in a digital chain

Well, this blockchain since 2008 has developed and is used in various fields that require 'trust' in transactions. This technology is used in various fields such as cryptography, land registration, health, education, auditing, data management, energy market, taxation, etc. Therefore, I think this technology is suitable to be implemented so that there can be transparency in tax collection.

Then how to use this technology in tax collection, especially this technology is identical to the decentralized system. In my opinion, in tax collection using blockchain, a new system is proposed, namely semi-centralized. Well, I propose this semi-centralized system combined with the Hyperledger-Fabric audit system.

The Hyperledger-Fabric system is a system that uses various peers in various channels (G. Dong and X. Wang, 2020: 246-250). In one formal channel, the transaction will be sent by the peer to unlock the chain code (smart contract in Fabric) in the repository. A smart contract is a code of the terms and agreements of the contract which can be validated by a computer regarding the terms and agreements that have been fulfilled. A valid transaction will be packaged by peers into the blockchain in the form of blocks and shared in the network and then stored in the network to form a stable ledger.

This system will be centered on the government or the Directorate General of Taxes and supervised by a third party. This third party or tax auditor helps to ensure transparency in tax collection. This semi-centralized blockchain concept in its application will provide control to the government to retrieve data from tax subjects.

With the application of this concept, in my opinion, a scheme will emerge, namely tax data from taxpayers will be sent directly to smart contracts and the Directorate General of Taxes. The Directorate General of Taxes acts as a cloud storage provider for public data, which then sends the data into smart contracts and tax auditors. The tax auditor here can check the data that has been provided with the data in the smart contract. Well, the tax auditor in this system must of course have sufficient processor power in order to be able to audit taxpayer data.

So it can be concluded that this semi-centralized blockchain technology can help realize integrated tax transparency. For example, administration in the form of local files, master files, and country by country reports with blockchain technology systems will be easier to analyze. This can also assist in the examination of tax evasion cases through transfer pricing schemes to make it easier.