Thailand’s excise department is currently collaborating with Krungthai Bank (KTB) to establish a blockchain-based tax refund system that will streamline the entire process while helping the department to combat value-added tax (VAT) evasion, which is currently difficult to monitor and prevent due to the legacy paper-based documentation system. The tax payback system is just one of three blockchain pilot projects that the Thai excise department is currently working on alongside Krungthai Bank, with the other two being an annual fee payment for the renewal of distribution licenses for playing cards, liquor and tobacco products, and e-bank guarantees. The blockchain-powered tax refund system is expected to roll out by the middle of 2020, according to a statement by the excise department’s director-general, Patchara Anuntasilpa.
Thailand’s VAT rate is currently 7% for the sale of goods and services. The country offers tax waivers for oil exporters, but under the current paper-based legacy system they are required to submit the relevant documents to the authorities in order to claim them, which is prone to errors and leakages. Admitting that the tax refund process can be improved on and made more transparent, the Thai excise department noted that the new blockchain-based system will only require the oil exporters to pay excise tax to the department, and after shipping the fuel they will be able to claim any tax refunds due to them.
The new blockchain platform will enable the excise department to vigorously check and scrutinize tax payments in a timely and efficient manner, which will also cut costs and improve performance. It is understood that oil exporters have been requesting for a more efficient, expeditious tax payback system for a while now, and that Thailand’s excise tax exemption for oil exports is currently estimated to total US$200 million a year.
The adoption of blockchain technology by Thailand’s government departments signals the country’s willingness to innovate and create new systems and frameworks that are based on emerging technologies. Blockchain is an attractive option as the technology offers many features that can help streamline processes, reduce costs, improve efficiencies and promote transparency and security.
The excise department noted that the new blockchain-based platform will enable it to quickly verify and keep track of any oil’s route from its refiner or depot of origin up to its final country of destination, thus streamlining the inspection and verification processes. As all transactions and records kept on blockchain’s digital ledger is updated in real-time, it significantly improves data management and enables the department to access real time data on demand, as opposed to the legacy paper-based documentation system that supplies data that may already be outdated by the time it is retrieved. Additionally, since all blocks of data are linked together in a chain through cryptography (hence the name blockchain), and any alteration to a given block of data would require all subsequent blocks in its chain to be modified as well, the new blockchain-based tax refund system is highly resistant to tampering which makes it a very secure and reliable system to use and implement.
According to the Thai excise department, the implementation of the new blockchain-powered tax refund system is projected to effectively increase oversight of the entire process to deter tax fraud and hasten the inspection and verification process by as much as three times. Depending on the effectiveness and success of this much-anticipated blockchain pilot project, Thailand may very well adopt the new technology in more areas of its industry and economy.