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Blockchain solving taxation issues

With the recent introduction of TaxGrid - a global tax withholding solution that leverages blockchain technology to automate, decentralize and securely share tax and financial information while maintaining data privacy between financial institutions and government agencies. EY has started this in the early 2020 when the pandemic hits the globe, EY used a permissioned Ethereum network across multiple cloud providers including AWS, Azure and IBM Cloud to build Tax Grid. EY hosted some nodes on behalf of some partners while other participants hosted their own nodes. The same software ran across all nodes. TaxGrid has the potential to replace a manual and paper-based tax refund process that costs investors’ money and creates fraud headaches for tax collectors. It uses fungible and non-fungible tokens to track dividend income. This makes it easier for tax agencies to apply the appropriate tax rate to transactions.

The shared ledger carries the information in real-time as to who owned the stock at the time of sale, the type of entity, the country of location and the appropriate tax rate. It's the first time that we know that an application like this involving multiple government and financial institutions was built using zero-knowledge proof. It also provides a complete and detailed picture of a transaction for tax agencies while protecting individual investor privacy and confidentiality. An expert claims, without the zero-knowledge proof, everyone would be able to see all the information from the transaction. With the zero-knowledge proof, everyone can have the cryptographic assurance that whatever transaction they were relying on was done correctly. TaxGrid is a new solution to the familiar problem of withholding tax rates on dividend income from global investments.

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