Electronic Invoices VS Blockchain Invoices
On March 3rd, the parking lot of Beijing Hanwei International Plaza issued the first blockchain electronic ordinary invoice in Beijing, and Beijing tax services and management officially entered the blockchain era. Before Beijing, a few other cities such as Shenzhen, Guangzhou and Hangzhou had also launched blockchain invoices. The application of blockchain in the field of invoices has become an accessible service.
In terms of disclosure time, the blockchain invoice in Guangzhou was the first to be applied. In June 2018, the Guangzhou tax department launched the nation's first electronic invoice blockchain platform tax chain. Guangzhou Gas Group Co., Ltd. joined the blockchain network and issued the first on-chain invoice to realize the storage and circulation of the nation’s first electronic invoice on the blockchain. Then, in August 2018, Shenzhen International Trade Revolving Restaurant issued the first blockchain electronic invoice. The platform has been applied to financial insurance, retailer supermarkets, hotels, restaurants, internet services and hundreds of industries, registered a total of 15,000 enterprises, issued more than 16 million invoices. In Hangzhou, March 2019, Hangzhou Metro also began issuing blockchain electronic invoices. Then a year later in March 2020, Beijing Hanwei International Plaza issued a blockchain invoice.
Shenzhen and Beijing took the lead in the field of civilian consumption, while Hangzhou and Guangzhou took the lead in the field of public consumption. The difficulty of using blockchain invoices in civil consumption, especially in private enterprises, is greater than in public consumption, because many private enterprises, especially the catering industry, have the motive for tax evasion. If a blockchain invoice is used, tax evasion through non-invoicing will be prevented.
The sources of blockchain invoice technology in the four cities are different. Shenzhen’s and Hangzhou’s are from two internet companies, while Beijing’s and Guangzhou’s are from subsidiaries of two A-share listed companies. However, on a closer look, neither of these two A-share listed companies has their own underlying blockchain technology, but uses other company technologies. This highlights the situation that China's blockchain companies that truly own blockchain technology can hardly land or receive orders directly, and they need to cooperate with companies in the related fields. The advantage is that the related companies understand their respective industries, so they are more likely to know how and where to apply the blockchain application in their industries. However, the problem is that an additional intermediary is added, which causes the cost of implementing the blockchain applications to increase.
In addition, Shenzhen Taxation Bureau, along with China Academy of Information and Communication Technology and Tencent, proposed the General Framework of DLT based invoices, a general framework for electronic invoices based on the distributed ledger of blockchain, as the international project standards. Assuming the standard is passed, then blockchain invoices in other regions will be implemented with reference to this standard.
Is blockchain really needed?
There is also a voice in the market saying that what blockchain can do, so can electronic invoices. For example, the blockchain invoice platforms have stated the advantages being that billing parties can realize on-chain invoice application, issuance, inspection and accounting; while receivers of the bills can realize on-chain storage, circulation and reimbursement; tax departments can achieve intelligent paperless tax management for the supervision on the entire process; taxpayers do not need to go through the tax reporting process, nor do they need to purchase any special hardware or professional equipment, and only need to use a mobile phone or PC client to achieve invoicing. The blockchain technology can help saving labor costs, reducing the probability of invoice management errors and avoiding credit rating deductions caused by lost invoices.
The above-mentioned advantages of the blockchain invoices can actually be achieved by electronic invoices, even the special advantages of blockchain invoices that are advertised against the electronic invoices. For example, electronic invoices can be copied and printed indefinitely, and the authenticity is difficult to distinguish; whereas blockchain invoices can ensure that invoices are unique. However, in truth, through the encryption technology, the electronic invoice can also achieve its authenticity.
Although 90% of the functions of blockchain invoices can be realized by electronic invoices, there are still some functional points that are unique advantages of blockchain invoices. For example, for the supervision unit, the blockchain invoice can track the owner and affiliates of the invoice, and the source, authenticity, reimbursement and other information of the invoice can be clearly seen. The information recorded on the chain is more multi-dimensional than current electronic invoices, and supervisory agencies can implement penetrating supervision. For users, through the smart contract of the blockchain, it reduces the hassle between enterprises, enterprises and individuals, and enterprises and taxation agencies. More importantly, after the blockchain invoice is recorded on the chain, it may be possible to produce a digital map that represents the credit of the enterprise. At present, the tax bureaus do not open data to the outside world, and it is difficult for the outside world to know the tax payment situation of enterprises. However, with blockchain invoices, some information can be opened to specific individuals or institutions if the multi-party consensus allows, then corporate tax payment information will gain circulation and even financial asset development.
CyberVein had created a blockchain-based platform for the taxation departments in Shanghai, which accurately records various accounts of invoices. Businesses use invoices to record their spending, which is reported to the tax bureau to get an accurate taxation at the end of the fiscal year. However, the process of doing so is often complex, and there needs a way to verify these invoices. Employees can use invoices to get an reimbursement from the company on any work related expenses that’s been generated, but the process can be long as the company needs to check things to prevent fraud. The nature of the blockchain technology prevents the document to be tempered with, and has helped to decease the cost for taxation departments or reimbursement companies to verify the documents. The documents are also securely protected by encryption and data isolation methods, based on blockchain and DAG technologies. It has helped enterprises to lower the cost for verification and storage for the invoice documents, increase the credits of individuals and enterprises, reduced the complexity of the process for employees to obtain a reimbursement, and has overall reduced the cost for the tax bureau for its regulation, supervision and services.
Trust is regained in the blockchain process of taxation, eliminating tax avoidance and tax evasion, achieving information transparency, traceability, penetrating monitoring and cost reduction. Although electronic invoices had help the traditional process of taxation a lot, and is able to do many of the things that blockchain can do, but the unique functions that blockchain can achieve has distinguished blockchain from the competition with electronic invoices.
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