In a new report, the government’s chief scientist has said blockchain should completely redefine the relationship between government and the citizen in terms of taxation, data sharing, transparency and trust.
The government’s desire to move tax collection and reporting to a more real-time basis has been well reported on AccountingWEB. And from this latest report, it seems blockchain will comprise a serious part of that vision. “The UK government digital service is developing a digital platform to deliver its services [like the personal tax account] and distributed ledgers could be at the heart of this,” reads the report by Sir Mark Walport, chief scientific advisor to the government.
In ‘Distributed ledger technology: beyond blockchain’, Walport makes the case for integrating the technology into the state’s daily apparatus. “Ledgers have been at the heart of commerce since ancient times,” writes Walport. “Now, for the first time algorithms enable the collaborative creation of digital distributed ledgers with properties and capabilities that go far beyond traditional paper based ledgers.”
It still bears asking, just what is blockchain? We’ve covered it before on AccountingWEB, but for the uninitiated, a blockchain is a type of database that takes data and places them in a block (“rather like collating them on to a single sheet of paper,” as Walport puts it). Each block is then ‘chained’ to the next block, using a cryptographic signature. This allows blockchains to be used like a ledger, which can be shared and the information within it can be corroborated by anyone with the appropriate permissions. Any change to the data cascades through to all the other copies, making any nefarious schemes a tricky proposition.
As a societal model he’d like to emulate, Walport points to Estonia. The Baltic country is one of the most digitally advanced societies on Earth. Its citizens file their tax returns, get their prescriptions, and even start businesses through their e-business register. According to Estonia’s tax authority, almost all tax returns are now filed digitally. The lynchpin of Estonia’s e-society is their smart ID cards.
Citizens and government officials use the ID cards to access the full gamut of public services. This decentralised, digitally capable society means that digital authentication is critical. To facilitate this, the Estonian government has been experimenting with blockchain tech for a few years now. Keyless signature infrastructure (KSI), developed by an Estonian company, Guardtime, allows citizens and government to verify the integrity of their records on government databases.
It also makes it pretty much impossible - given sheer computational power it would require - for someone to perform illegal acts inside the government networks. KSI’s ability to harbour citizens’ data securely and accurately has helped Estonia to launch digital services such as e-Business Register and e-Tax.
The UK is obviously far bigger, with far more complex financial foundations than Estonia, a tiny Baltic state of 1.3m people, but this next step in the digital chain isn’t as far off as it seems. The government has introduced a standards-based approach to identity assurance: GOV.UK Verify. As Walport points out, “Enhancing and linking Verify to blockchains … could add value to Verify itself. Together, in their different ways, they would contribute significantly to the UK’s digital economy, border control and its efforts to combat cybercrime.”
The government is clearly determined to move its services into the digital realm. Whether you think this is motivated by ruthless cost cutting or forward-thinking governance, a lot of upheaval is coming. As it stands now, the PTA will be in full effect by 2020. And blockchain could well further augment it beyond 2020.
“The collection of (monetary) resource through taxation of various kinds has become hugely complex and costly,” writes Walport. “This complexity may in part derive from its centralised nature.
“We are still at the early stages of an extraordinary post-industrial revolution driven by information technology. It is a revolution bringing important new benefits and risks. It is already clear that, within this revolution, the advent of distributed ledger technologies is starting to disrupt many of the existing ways of doing business.”
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.