EY aims to simplify the cross-border withholding tax process through blockchain

The global professional services company Ernst & Young (EY) continues to explore the potential of blockchain technology to improve the taxation process through a new initiative.

company Announce On Wednesday, Ernst & Young completed a blockchain-based project to solve the complexity and inefficiency of the cross-border withholding tax (WHT) process, which is usually a paper-based process. Due to privacy issues, data may be affected. Lost or cannot be shared properly.

Ernst & Young pointed out: “Counterparties and tax authorities may also distrust it. They need more and more information to verify whether the correct withholding tax amount has been paid after source reduction or withholding tax recovery.”

The new WHT solution implements Ernst & Young’s blockchain-based technology to achieve secure, automated and decentralized financial information sharing between tax authorities and related intermediaries, and improve tax compliance and reduce fraud.

Withholding tax solution uses EY #BlockchainBased on technology, it is more secure to automate, decentralize and share tax and financial information between financial intermediaries and tax authorities. Learn how it works: https://t.co/h21dwnWGOe pic.twitter.com/3ALZpV0Q2w

— Ernst & Young Tax (@EY_Tax) July 28, 2021

The project involves multiple global tax authorities, including HM Revenue & Customs, a tax administration agency in the United Kingdom, the Dutch tax office, and related departments in Norway. Participating companies include French banking group BNP Paribas, US investment bank JP Morgan Chase, financial services company Northern Trust and Citibank.

As part of this project, Ernst & Young experts, together with state and industry representatives, specifically tested the TaxGrid blockchain solution, a multi-party blockchain network that connects financial intermediaries to share tax and financial data. The solution deploys smart contracts to mark investment rights and distributes them to blockchain wallets owned by various financial entities. The tool uses tokens to receive investment data and calculates the appropriate withholding tax after determining the final investor.

To ensure privacy on the TaxGrid network, the solution is implemented Zero-knowledge proof technology, A digital protocol that allows data to be shared between parties without the use of passwords or other private information.

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“Distributed ledger technology as a solution to the WHT challenge is no longer just a concept,” Ernst & Young’s WHT Distributed Ledger Report notes, And added that the project laid the foundation for the launch of global solutions to meet the various needs of taxpayers and tax authorities. Ernst & Young said: “This can support the European Commission’s proposal to start establishing a universal, standardized, EU-wide withholding tax relief system,” starting in 2022.

In recent years, Ernst & Young has been actively working on tax solutions related to blockchain and cryptocurrency.The company last year Released an encrypted tax application called EY CryptoPrep Provide fully automatic products to assist customers in filing tax returns in the United States.