Blockchain will revolutionize the global tax system

Blockchain will revolutionize the global tax system

We could see the world fall to mass unemployment in our lifetime. This is due to automation and robotics, driven by artificial intelligence being able to do most of the tasks that employ us today.

Sure, there will be new kinds of jobs created, but my prediction is that employment levels will still fall significantly. We may want to look at it from a glass half full perspective, more people will have the opportunity to pursue the highest level of Maslow’s hierarchy of needs: self-actualization. A practical question then arises: How should income distribution be handled, if money per time worked does not apply?

In an earlier blog from 2012 I pondered about a universal basic income approach, and I am not alone with this thought. There are obvious challenges with this approach though. Governing and harmonizing taxes globally seems virtually impossible for a number of reasons. First of all, it would be very knotty politically and legally. Secondly, countries have very varied economic interests, maturities and situations. Thirdly, this kind of construct with current structures would probably result a bureaucratic hell, resembling planned economies somewhat.

The tax system needs to be global, because robots or AI can be located anywhere

Hence without a global tax system, there probably would be a tax war between countries to attract investment. This would be damaging to the public sectors in most developed economies due to falling tax incomes and ageing populations.

Already, we are seeing how ideas about virtual companies, built on blockchains, are emerging. These companies can be hard to define, in terms of tax regions or even their operating country. Therefore taxing them can be difficult. Looking at it from a different angle, blockchain will probably force countries to adopt global tax practices.

We would have to build a decentralized, dynamic and transparent global tax infrastructure that all economic agents would need to plug into, in order to operate. This platform would need to be standalone, decentralized and transparent. Those requirements resemble the features of modern blockchain platforms.

Blockchain infrastructures can be built to be exactly that: dynamic financial platforms that are transparent and decentralized. Modern blockchain platforms also support “smart contracts”, where legal agreements are embedded to the transaction, hence lowering the need for legal bureaucracy.

The platform would provide a universal tax system and currency, like an umbrella under which national currencies and economic transactions could operate. It is a bit of a wild idea, but if we truly need a globally harmonized tax system, blockchain based technology could provide us with the technical solution.

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