China introduces blockchain to increase tax revenues and e-invoicing efficiency

China introduces blockchain to increase tax revenues and e-invoicing efficiency

The Chinese government has attached great importance to the emerging blockchain industry and listed it in the “Thirteenth Five-Year”National Information Plan (the macro-economic plan of the Chinese government). Meanwhile, several provincial and local governments have promulgated relevant policies in support of blockchain enterprises.

Recently, the Chinese government announced that it will utilize blockchain technology for social taxation, increased tax revenue and electronic invoicing.s. The blockchain network is currently in development  and will be fully operational in October of this year. The name of this blockchain will most likely be GACHAIN: Government Affairs BlockCHAIN

There are several reasons why China is taking this step:

  1. China’s current tax collecting procedures feature slow tax reporting times and insufficient coordination.
    “By taking advantage of GACHAIN’s ability to regulate, trace back, and circulate documents easily, prevent falsification, high rate of concurrency, and external interface benefits, we can cover the entire process workflow from electronic invoice generation through the end of the process without increasing costs for those involved.”
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  2. In 2016, China reported a tax revenue of RMB 16 trillion (approx. USD $2.4 trillion), ranking no. 2 in the world (the USA topped the list with approx. USD $6.5 trillion). Tax evasion is expected to be combated by applying blockchain technology to tax collection and electronic invoices.
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  3. Online stores of China’s e-commerce powerhouses such as Taobao (com), Tmall (tmall.com) and WeChat still have not been incorporated into China’s taxation system to date. Once blockchain technology realizes the ability for electronic invoices and tax agents, the aforementioned online stores will then be subject to taxation, contributing to a huge sum in tax revenue.

The difference between GACHAIN and existing blockchains

Shenzhen ChainHold Technology Investment., a blockchain tech firm with widespread cooperation with research institutes both at home and abroad, is developing GACHAIN. It has test-run a network and is expected to launch v0.01 in October of this year.

ChainHold CEO Lin Wan remarked:
“The difference between GACHAIN and existing blockchains lies in its unique algorithm of Smart Law, which migrates existing policies, laws, and regulations to GACHAIN and has a hierarchy of administration. All smart contracts are administered within the framework of Smart Law and developed separately in accordance with the needs of government bodies. The business of the government bodies is handled separately as part of an integrated organism. It’s safe to say that GACHAIN is a sovereign blockchain that puts the decision making and regulatory rights into the hands of the government, meanwhile enabling every citizen to control his digital assets in GACHAIN. This will facilitate Chinese government control over blockchain projects and ICO.”

With regards to blockchain’s feature of complete decentralization, which has been lauded by anarchists, Lin Wan said:

“Existing blockchain projects are disconnected from reality, and how to link the blockchain network to reality is an issue for deep consideration. I think that the key is to have government bodies acknowledge what’s in the blockchain, such as copyright ownership, the attributes of business organs, and property transactions, but with the prerequisite that they must conform to laws and regulations. When these two points are fulfilled, the blockchain and real world can be linked seamlessly. GACHAIN is designed and developed with this concept in mind. In other words, GACHAIN is – Blockchainn as Government Affairs. But meanwhile, GACHAIN has the attributes of decentralization, where smart contracts can be compiled, and one can protect his digital assets from being stolen by any organization of power and issue ICO. Of course, ICO must be approved by the regulatory body in GACHAIN.”

The design of GACHAIN is no doubt a trail blazer for effectively linking the real world with the blockchain community and a bold effort for taxation authorities to use blockchain technology in social tax collection and electronic invoice issuance.


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