mintBlue is streamlining VAT collection in the Netherlands

mintBlue, a Dutch blockchain company specializing in data authenticity, is working with the local tax agency to save businesses time and money when paying VAT (value-added tax or sales tax). mintBlue’s system can automatically deduct taxes owed at point-of-sale, sending the funds directly to the authorities in real-time.

Ordinarily, business owners must sit down at the end of every quarter and manually calculate the VAT amounts they owe from invoices and receipts before transferring the final amount. Automating this process as each transaction happens would be a huge relief, especially for smaller enterprises working with limited resources.

Dutch newspaper “De Telegraaf” recently looked at Belastingdienst’s (Netherlands Tax and Customs Administration) trial of the mintBlue system, which began in January. The trial includes several private companies using it as a plug-in to their regular accounting software.

Claire Arens, innovation advisor at the Netherlands’ Tax and Customs Administration (Belastingdienst), said automatically collecting VAT is the “holy grail of taxation.” mintBlue credited Arens with driving the initiative and said it would allow the agency to be at the forefront of modernizing taxation.

The Organization for Economic Cooperation and Development (OECD) has been looking for ways to automate tax collection in real-time for a while now. However, Arens said, this is the first time the Netherlands authorities have found a potential solution that matches their needs.

A better deal for everyone, in the end

Most of us might not refer to anything regarding streamlined government revenue collection as a “holy grail” and may even groan at the thought. That said, it does represent a net money-saver through efficiency gains, at least for businesses.

There’s also a privacy issue with the amount of information the government collects—whether it wants this information or not. Increasingly, European governments are requesting invoice and payment receipt information in digital form. However, since there isn’t a widely accepted standard format yet, some businesses resort to sending digital facsimiles of entire invoices as photos or screenshots. This frequently transmits other private information contained within the transaction to the government.

“All kinds of information ends up with us that is not meant for us,” Arens said.

mintBlue’s blockchain-based solution means only relevant data from the transaction, i.e., regarding taxes due, gets sent—along with the money owed.

Belastingdienst insists this is still just an exploration of different automation methods and that no business will be obligated to participate. Working effectively across borders would still require some level of coordination between national governments. However, the simpler and more data-secure the solution, the more likely governments will make this effort.

For those governments, it would also mean less revenue lost due to mistakes or omissions. While calculating VAT on local sales is time-consuming but relatively simple, international transactions have always been murkier.

Technically, paying VAT is a burden that falls on the purchaser. However, this is generally done by adding VAT to the final sale price and having the seller calculate and pay it. For example, you purchase something online from a foreign seller who removes the VAT since you’re in a different country—technically, this means you’re still supposed to pay that amount… somehow. In the large majority of cases, buyers don’t bother to pay, and governments rarely, if ever, pursue the issue.

This has also been an issue with online sales in federations like the United States, where such taxes differ from state to state. More recently, state and national governments have begun to arrange with larger merchants to charge and collect sales taxes for online purchases. For smaller sales and businesses, though, it’s still too much of a hassle to do this.

Automated tax payments are likely coming to a jurisdiction near you whether you prefer to have it. Given this, it’s best to find solutions that maximize privacy and security. Businesses and governments definitely see the benefits, and even individuals may come to appreciate the process if it all happens in the background. It’s yet another problem blockchain is here to solve, so long as someone builds the system to handle it—and mintBlue is getting closer to that grail every year.

Watch: mintBlue & NoWatch team up not to tell time but to track vitals