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A Blockchain-Based Approach Towards Overcoming Financial Fraud in Public Sector Services

Author

Listed:
  • Hissu Hyvärinen

    (IT University of Copenhagen)

  • Marten Risius

    (Clemson University)

  • Gustav Friis

    (Brainbot Technologies AG)

Abstract

In financial markets it is common for companies and individuals to invest into foreign companies. To avoid the double taxation of investors on dividend payment – both in the country where the profit is generated as well as the country of residence – most governments have entered into bilateral double taxation treaties, whereby investors can claim a tax refund in the country where the profit is generated. Due to easily forgeable documents and insufficient international exchange of information between tax authorities, investors illegitimately apply for these tax returns causing an estimated damage of 1.8 billion USD, for example, in Denmark alone. This paper assesses the potential of a blockchain database to provide a feasible solution for overcoming this problem against the backdrop of recent advances in the public sector and the unique set of blockchain capacities. Towards this end, we develop and evaluate a blockchain-based prototype system aimed at eliminating this type of tax fraud and increasing transparency regarding the flow of dividends. While the prototype is based on the specific context of the Danish tax authority, we discuss how it can be generalized for tracking international and interorganizational transactions.

Suggested Citation

  • Hissu Hyvärinen & Marten Risius & Gustav Friis, 2017. "A Blockchain-Based Approach Towards Overcoming Financial Fraud in Public Sector Services," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 59(6), pages 441-456, December.
    • Handle: RePEc:spr:binfse:v:59:y:2017:i:6:d:10.1007_s12599-017-0502-4
    DOI: 10.1007/s12599-017-0502-4
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    References listed on IDEAS

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    1. Pilkington Marc, 2016. "Blockchain Technology: Principles and Applications," Post-Print halshs-01231205, HAL.
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    7. Daim, Tugrul & Lai, Kuei Kuei & Yalcin, Haydar & Alsoubie, Fayez & Kumar, Vimal, 2020. "Forecasting technological positioning through technology knowledge redundancy: Patent citation analysis of IoT, cybersecurity, and Blockchain," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
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    11. Min Xu & Xingtong Chen & Gang Kou, 2019. "A systematic review of blockchain," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-14, December.
    12. Kowalski, Michał & Lee, Zach W.Y. & Chan, Tommy K.H., 2021. "Blockchain technology and trust relationships in trade finance," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    13. Søgaard, Jonas Sveistrup, 2021. "A blockchain-enabled platform for VAT settlement," International Journal of Accounting Information Systems, Elsevier, vol. 40(C).
    14. Hugo Hoffmann Christian, 2021. "Blockchain Use Cases Revisited: Micro-Lending Solutions for Retail Banking and Financial Inclusion," Journal of Systems Science and Information, De Gruyter, vol. 9(1), pages 1-15, February.
    15. Oskar Juszczyk & Khuram Shahzad, 2022. "Blockchain Technology for Renewable Energy: Principles, Applications and Prospects," Energies, MDPI, vol. 15(13), pages 1-24, June.
    16. Kyungmoo Heo & Sangyoon Yi, 2023. "(De)centralization in the governance of blockchain systems: cryptocurrency cases," Journal of Organization Design, Springer;Organizational Design Community, vol. 12(3), pages 59-82, September.
    17. Sejung Park & Han Woo Park, 2020. "Diffusion of cryptocurrencies: web traffic and social network attributes as indicators of cryptocurrency performance," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(1), pages 297-314, February.
    18. Garg, Poonam & Gupta, Bhumika & Chauhan, Ajay Kumar & Sivarajah, Uthayasankar & Gupta, Shivam & Modgil, Sachin, 2021. "Measuring the perceived benefits of implementing blockchain technology in the banking sector," Technological Forecasting and Social Change, Elsevier, vol. 163(C).
    19. Nadine Kathrin Ostern, 2020. "Blockchain in the IS research discipline: a discussion of terminology and concepts," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(2), pages 195-210, June.
    20. Wallbach, Sören & Lehner, Roland & Röthke, Konstantin & Elbert, Ralf & Benlian, Alexander, 2020. "Trust-Building Effects of Blockchain Features – An Empirical Analysis of Immutability, Traceability and Anonymity," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 120705, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    21. Goran Bjelobaba & Marija Paunovic & Ana Savic & Hana Stefanovic & Jelena Doganjic & Zivanka Miladinovic Bogavac, 2022. "Blockchain Technologies and Digitalization in Function of Student Work Evaluation," Sustainability, MDPI, vol. 14(9), pages 1-22, April.
    22. Lin, Jyh-Horng & Li, Xuelian & Lin, Panpan, 2022. "Could we rely on credit swap hedging as a substitute for insurer blockchain technology involvement?," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 266-281.

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