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Fact or fiction? breaks down common myths and misconceptions about digital transformation, while showcasing KPMG leaders’ perspectives on related topics such as artificial intelligence and blockchain, and the impact of these emerging technologies on the workforce, businesses and society.
Through its still largely untapped potential, blockchain can help business executives mitigate inefficiencies throughout their organization. KPMG's David Jarczyk explains blockchain’s potential when it comes to streamlining tax and finance activities.
By David Jarczyk
Businesses often find themselves entangled in a web of tax policies, financial regulations and legal considerations, which may seem to continually change.
These fluctuations may have a dramatic -- and often immediate -- impact on business revenues, cash flows, and tax positions, especially for multinational corporations that regularly conduct business and move goods, services, and intellectual property across borders.
To adapt to and implement these sometimes frequent and unexpected changes in tax regulations, tariffs, subsidies, quotas and more, some CIOs, CFOs, and even chief tax officers are exploring an innovative technology: blockchain.
Blockchain is being used to streamline tax and finance activities in ways that may have an immediate impact on cash flows, revenues, and income.
Initially made popular by cryptocurrencies like Bitcoin, blockchain establishes a single ledger that can help track and trace numerous, interconnected transactions and their business implications. It’s not surprising that blockchain can be an especially useful tool in the world of corporate tax and finance.
By helping senior finance leaders diagnose tax, tariff, and finance implications in real time and assist in the automation of certain processes, blockchain has the potential to optimize the time that working capital is tied up for a transaction. And blockchain can help to lower or even eliminate transaction fees and errors by reducing reliance on third-party support.
If a CIO or CFO is considering blockchain for tax, finance, or any other business purposes, it would be wise to begin a pilot program that allows teams to learn and experiment with the technology, manage risk and measure its effectiveness. Given the cultural impacts that result from such vast technical change and the need to rework existing processes, a small and easily-controlled pilot program can be critical before considering a wide-scale implementation.
To get started, assemble a cross-sector team of blockchain, tax, IT, finance and business leaders who can collaborate to create a blockchain strategy that properly addresses auditability, risk and compliance and tax and finance areas to drive overall success. The blockchain journey is not a rip and replace solution: It requires a significant transformation of procurement, supply chain, financial and other core operations that reach far beyond the tax and finance organization.
Businesses willing to experiment with blockchain applications could ultimately claim a first-mover competitive advantage in their industry and begin solving decades-old problems -- and few functional areas have greater potential for immediate, bottom-line impact than tax and finance. When approached as a thoughtfully planned, enterprise-ready solution, blockchain has the potential, for the right company, to cut through this multilayered, complex web of transactions to streamline processes, improve margins, and even grow top line revenue.
This article was adapted from, “In Taxing Times, Blockchain Systems Could Minimize Disruption,” which originally appeared in Information Week. For more information or to arrange an interview, please contact Stephanie Trefcer.