Banking Legal and IP News

Thailand testing blockchain to reduce VAT fraud

Bankgok Thailand

Thailand’s Revenue Department is testing using blockchain to track VAT payments. Because invoices will be verified, it will help root out fake invoices for fraudulent VAT refunds, the Bangkok Post reports.

False invoicing is a significant problem in Thailand. Two weeks ago the Revenue Department posted a notice on its website highlighting a 4-year prison term for fraudsters. In that case a buyer and seller jointly committed fraud by issuing fake tax invoices.

Mr. Pinsai Suraswadi, a spokesman for the Revenue Department, said: “Buyers of false tax invoices shall be charged with civil and criminal penalties. The fine is twice the tax amount on the invoice and the surcharge is 1.5 percent per month or a fraction of the month of the tax amount. The criminal penalties include prison sentence of three months to seven years and fine of 2,000 to 200,000 Baht.”

When a company sells goods to a buyer company, the seller will issue a VAT invoice that will be logged on a blockchain. The buyer can use the blockchain to confirm the transaction. That way there will be a clear trail. The only problem is it won’t prevent collusion because the blockchain merely logs the transaction.

On Thursday the Revenue Department announced the blockchain project and plans to launch an Innovation Lab. To combat tax evasion and fraud, the department intends to adopt machine learning and artificial intelligence to analyze tax payments.

Other invoice anti-fraud blockchains

To date, much of the blockchain work targeted at invoice fraud has revolved around trade finance. These aim at preventing businesses from presenting the same invoice multiple times to raise funds. Monetago and the World Blockchain Trade Consortium both target this segment, and many of the other trade finance platforms have these checks built in. The platforms require as many financier participants as possible. Otherwise, the trader can raise fraudulent finance from a bank that is not participating in the blockchain.