Journal article · 2021
A blockchain-enabled platform for VAT settlement
Summary
Governments need VAT revenue to flow reliably, and to secure it they often push administrative work onto companies — digital invoice stamps, extra reporting, periodic settlements. Small and medium-sized companies feel that burden the most.
Working with the Danish Business Authority and following a design science approach, the paper builds a prototype platform where invoices between companies are recorded on a distributed ledger. When buyer and seller both confirm an invoice, a smart contract holds the VAT, and the authorities can follow the flow without asking companies to report it separately.
Alongside the prototype, the paper formulates general design principles for building distributed ledger platforms that link accounting systems, technology and public governance.
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Key findings
- A working prototype shows that VAT can be handled at the moment an invoice is agreed, rather than reported and settled afterwards.
- Two-way confirmation of invoices creates a shared, trusted record for both companies and the tax authority, and narrows room for VAT fraud.
- General design principles help practitioners and non-technical leaders shape a distributed ledger project from the start.
- The case gives governments a model for reducing the burden on small companies while keeping tax revenue secure.
How to cite
Søgaard, J. S. (2021). A blockchain-enabled platform for VAT settlement. International Journal of Accounting Information Systems, vol. 40, 100502.