Automated Tax Return Verification with Blockchain Technology

Abstract

One of the most important phases of the tax system is the verification process which ensures that the taxpayers are paying their proper share. In Bangladesh, the verification process is fully manual; hence, it is time consuming, tedious, error-prone and easy to manipulate. The taxpayers can file taxes with incorrect or falsified information, and manual verification can overlook that information. In this paper, we have proposed an automated tax verification system using Blockchain technology which will reduce the potential corruption in many folds. Update or deletion on any data in Blockchain system is not allowed. The inherent security feature of Blockchain makes the data secure, temper-proof and difficult to hack. In the proposed architecture, in addition to securing the taxpayers’ information on these private Blockchain systems, the taxpayers’ filed tax returns are verified instantaneously on the fly. In this verification process, the system retrieves the taxpayers’ information from the employers’, financial institutions’ and all other appropriate institutions’ private Blockchain systems. To further reduce fraudulent financial schemes, as a part of the verification process, it compares the current year’s taxable income, tax exemption, etc., of the taxpayers with their previous year’s information.