Critical Factors in Adopting Blockchain Technology in Value-Added Tax Systems

Abstract

Blockchain technology stands at the forefront of innovation with the potential to revolutionize Value Added Tax (VAT) systems, positioning them as key components in promoting sustainable economic development. In this study, we provide an exhaustive analysis of the diverse challenges encountered in the blockchain integration process within VAT systems, addressing technical, legal, and socio-political dimensions. We address technical challenges such as scalability, compatibility, and data migration, while also highlighting potential vulnerabilities of blockchain systems. From a legal perspective, we analyze the implications of varying data protection standards and regulations across jurisdictions, with a focus on the interplay between blockchain and established legal frameworks. Socio-politically, the study discusses the fundamental shift required in the operations and collaborative mechanisms of tax administrations. Recognizing resistance from institutional stakeholders, we propose strategies for awareness promotion, capacity-building, and organizational adaptation. By considering these multifaceted challenges, the article aims to offer insights into the strategic measures necessary for effective blockchain integration in VAT systems.