Recently we explored the challenges for the finance, tax and accounting industries, from technological disruption to the demand for transparency by governments, investors and the community. Where an “adapt and adopt” attitude is required more and more for success.
Set against this backdrop is blockchain, a technological legacy of crypto-currency and seen by some, including Ben Scull, Managing Director, Australia and New Zealand for Thomson Reuters Tax & Accounting business, as
“potentially one of the most disruptive technologies to affect the entire business world.”
But views on Blockchain are divided – from supporters to opponents, and the “why worriers?” in the middle, but regardless of how it is being judged, as Ben observes,
“It’s not a matter of if blockchain technology will become pervasive; it’s a matter of when. So it’s essential for the tax and accounting industry to become familiar with the blockchain and how it works.”
This week we look at why the tax and accounting industries need to get on the blockchain gang.
What is Blockchain?
A blockchain is a distributed, decentralised ledger that lets information be viewed but not copied or altered. There is no central version of the blockchain: it lives across a network of computers. The greatest benefit is security, as Ben relates,
“This makes it incredibly secure, since a hacker can’t access all instances of the blockchain. Blockchain stores records in groups called blocks. Each block is timestamped and linked to the previous block. It’s incorruptible and unalterable, making it ideal for recording transactions without requiring a central authority.”
So what does this mean for tax and accounting industry?
Blockchain is already being utilised by the legal industry, in the form of “smart contracts.” The banking sector is also adopting it, with Singapore Central Bank using the technology in its payment transfer project, and other banks in the US and Japan are also exploring its potential.
Consumer demand is driving the development of exciting applications in other industries, from crowd funding, auctions, music distribution and sports betting to verifying the origin of artworks and transfer of property title.
Blockchain will inevitably change the nature of jobs, and for tax and accounting, this may mean some roles disappearing entirely. Whilst it will make auditing easier and more reliable, and reduce the possibility of error, this also means that time-consuming and error-prone manual tasks could also be obsolete.
However, on the flipside, Ben notes that this will enable a greater use of employees’ time,
“Accountants can add more value by providing strategic advice than by undertaking basic bookkeeping functions and the emergence of blockchain technology should accelerate firms’ evolution away from these tasks.”
For in the case of many technological evolutions, a successful outcome is determined by how we, humans, interact with the technology. Our experience, subjectivity, and ability to apply a nuanced context remain invaluable. For example, Blockchain records transactions but doesn’t describe them, so the expert classification of the type and whether “good” or “bad”, by an auditor is a must.
There is still much to be decided in developing policy and practical application of the technology. One issue the industry is already pondering is the treatment of GST and the new digital import laws. We need to think about the residence of the supplier and customer, in relation to where the parties are when the supply occurs and also where transactions take place in the blockchain. And will the blockchain be able to be used to determine whether the counterparty is an “Australian consumer”.
Where to next?
Rather than technology alone shaping the industry’s future, we have an opportunity to shape it by getting involved in the discussion, as Ben says,
“accountants and auditors” are an essential “ part of that conversation to help drive the industry’s direction.”