Abstract
The global economic environment presents fertile ground for international trade and the movement of capital, labour and business. This has supported the growth and success of multinational enterprises (MNEs) whose operations span tax jurisdictions. The result has been a globally integrated marketplace. However, a downside of this has been crossborder tax evasion and avoidance through base erosion and profit shifting (BEPS) activities, including the use of impermissible transfer-pricing practices. Transfer-pricing refers to the price of products globally traded between parties that are connected to each other. This area of taxation is particularly vulnerable to abuse due to the close relationships amongst the entities of the MNE and the complex and intricate nature of the transactions amongst them. The use of technology solutions, with blockchain technology in particular, is becoming increasingly popular in the tax arena for use in combatting harmful tax practices, but also in providing tax administrations with the ability to better service taxpayers, ease their compliance burdens and improve their own administrative capabilities. The purpose of this study is to determine whether the inherent features of blockchain are suitable for use in easing the transfer-pricing compliance burden of taxpayers and in improving the administration of transfer-pricing for the South African Revenue Service (SARS). The study sets out to determine the benefits of using blockchain for transfer-pricing compliance purposes for taxpayers in South Africa, as well as the challenges and practical considerations of adopting the technology in their businesses. The benefits of using blockchain for streamlining and simplifying the administration and auditing of transfer-pricing cases for SARS are also considered, followed by determining the challenges and practical considerations of introducing and implementing blockchain by SARS. The research took the form of a qualitative study which involved the review of relevant existing literature. It was found that blockchain provides numerous benefits for taxpayers in easing compliance for transfer-pricing and other tax types. Blockchain may also be used to simplify other business operations including financial reporting and supply chain v management for MNEs. The technology holds numerous benefits for SARS, particularly for use in transactional taxes like transfer-pricing. The study further revealed that the most suitable type of blockchain for transfer-pricing purposes would be a permissioned consortium blockchain. With regard to implementation of the technology, consideration needs to be given to the cost of implementation, training of personnel who will use the platform, the development of governance principles and regulation, as well as the roles and responsibilities of all parties on the network. Key Words: transfer-pricing, blockchain, tax technology, tax compliance, tax administration
M.Com. (South African and International Taxation)