Technological alternative to tax compensation (ICMS credits): Case study of the feasibility of using DLT in the brazilian electronic invoice system

Abstract

Due to the importance of using the tax compensation institute, this study advocates the creation of a tax credit clearinghouse and analyzes the applicability of blockchain and DLT to the Brazilian Electronic Invoice System. Firstly it explains the technology and its different types. Next point, make a presentation regarding compensation in tax law. Following it analyzes the legal and technical characteristics of the current system identifying the opportunities and challenges arising from an eventual change of technology. And then it concludes that there are several advantages such as the curtailing of tax evasion, the optimization of tax substitution mechanisms with transparency and immediate applicability for the entire production chain and the possibility of establishing a reliable market for tax credit. In this paper, we posit the adoption of Hyperledger Composer Fabric or R3 Corda as encrypted platform able to create a secure environment for the storage and analysis of information by using DLT, as an effective solution to address the privacy and security concerns of the stakeholders. The first option is better to provide value chain assessments and the second fiscal secrecy, in order to allow the safe activity of a clearinghouse for tax credits.