The application of blockchain technology to improve tax compliance and ensure transparency in global transactions

Abstract

The digital transformation of global commerce has fundamentally altered the landscape of tax administration, presenting unprecedented challenges for tax authorities worldwide. This comprehensive review examines the transformative potential of blockchain technology in revolutionizing tax compliance and enhancing transparency in global transactions. Through systematic analysis of existing literature, case studies, and implementation frameworks, we investigate how blockchain's core attributes of immutability, traceability, and decentralization can address critical challenges in contemporary tax administration. The review synthesizes evidence from multiple jurisdictions, demonstrating blockchain's capacity to reduce tax fraud, streamline compliance processes, and facilitate real time tax collection. Our analysis reveals that blockchain implementation in tax systems can potentially reduce tax gaps by 75-80% in VAT schemes and decrease compliance costs by 40-50% for businesses operating across multiple jurisdictions. The paper also explores critical challenges, including scalability issues, regulatory frameworks, and implementation barriers, providing a balanced perspective on both opportunities and limitations. Furthermore, we examine emerging trends in blockchain based tax solutions, including smart contracts for automated compliance, cross border information sharing protocols, and real time reporting frameworks. This review contributes to the growing body of literature on digital transformation in tax administration by offering a comprehensive framework for understanding blockchain's role in creating more efficient, transparent, and equitable tax systems. Our findings suggest that while blockchain technology presents promising solutions for tax administration challenges, successful implementation requires careful consideration of technical infrastructure, legal frameworks, and international cooperation mechanisms.