EY Creates Blockchain Solution To Address Global Tax Challenge
EY, working with government and industry representatives, has created a high-profile blockchain solution to address the challenges of the cross-border withholding tax process.
Currently, there are certain inefficiencies and complexities with the international withholding tax process with respect to dividend distributions. TaxGrid’s goal is to solve these problems and improve near-real-time tax compliance, to the benefit of investors, financial institutions and tax authorities.
âBlockchain technology as a solution to the withholding tax challenge is no longer just a concept,â Hank Prybylski, EY’s global vice president of transformation, said in a statement. âThis project shows that in the near future, industry and governments may be able to reconcile legal and technical issues, adapt to disparate demands from taxpayers and tax authorities, and promote digital transformation.â
TaxGrid is also designed to help financial intermediaries coordinate the rapid exchange of investor information across a network to meet contractual obligations and, potentially, regulatory requirements, while protecting confidential investor information.
The solution uses blockchain technology to automate, decentralize and share tax and financial information more securely between financial intermediaries and tax authorities by creating a kind of shared ledger of all dividend transactions, in order to facilitate the taxation of dividend income at source. TaxGrid is designed to simplify the process of obtaining the proper tax treatment while reducing governments’ exposure to fraud.
To protect the privacy and privacy of data, TaxGrid uses privacy technology to help protect sensitive investor information and business confidentiality. Proof of zero knowledge is a key feature of blockchain technology, allowing a party to prove that they know certain information or value, without revealing the actual information.
TaxGrid has been developed in collaboration with government tax authorities including UK HM Revenue & Customs, Dutch and Norwegian tax authorities, as well as companies such as BNP Paribas Securities Services, Citibank, JP Morgan Securities Services, Northern Trust, APG Asset Management, PGGM Investments, and the EY teams, as well as two visiting academic institutions: the Vienna University of Economics and Business, and the Tax Administration Research Center at the University of Exeter in the UK