The RMIT’s newly-minted Blockchain Innovation Hub is just a month old, but is already pressing for fresh thinking on by blockchain technology, including possible regulatory considerations that could underpin the opportunity.
Christopher Berg, a fellow of the RMIT Blockchain Innovation Hub, told a parliamentary committee on tax and revenue that while blockchain represented is a “huge opportunity” for the nation, success would be dependent on a competitive tax and regulatory system.
He said government must first focus on making it easy to host the crypto-economy services in Australia.
Dr Berg also predicted that blockchain services would change existing market structures, which are currently dominated by large public companies with a central hierarchy.
Instead, he says firms would look more like “shifting networks managed by blockchains”.
“Australia is heavily reliant on corporate tax revenue. These new structures are going to be harder to tax than the monolithic firms of the 20st century,” he said.
“We’ve [watched] quite sceptically Parliament’s efforts to prevent profit shifting by multinational firms. Nevertheless, the born-global nature of blockchains will supercharge the profit-shifting trend.
“We don’t think there’s an easy regulatory solution to this, and Parliament is going to not just rethink how it taxes, but what it taxes.”
Another layer to this discussion, according to Dr Berg, is that there is a large demand for privacy protection within the existing blockchain community, which the technology is well-suited to provide. He says this would make it more difficult for government, from a transparency point of view, to track what is taxable and what’s not.
“What government is going to find, for better or worse, more things are going to be unobservable. Government is going to have to shift its activities, and taxation and revenue processes towards things it can observe,” Dr Berg said.
“It will have to accept in a world of ubiquitous cryptography that there are many things that it won’t be able to see or regulate….that’s just the world we’ll be entering,” he said.
“This is not going to happen tomorrow, it’s not going to happen in the next five years, but I suspect in decades to come those are the questions Parliament is going to have to deal with.”
On the other hand, Dr Berg added that blockchain applications have the opportunity to make real-time reporting of tax obligations possible.
Although, he points to how the Australian Taxation Office needs to develop guidelines to ensure compliancy and that it may need to rethink its internal systems to be able to facilitate such activities.
The Blockchain Innovation Hub is also in the process of working with financial regulators including ASIC as well as the government to further understand other opportunities, Dr Berg said.
“[Blockchain] provides lots of really interesting opportunities for regulators in the RegTech space and that’s what our work will be.”