TX++: Triple Entry Accounting System
Transparent on execution, private on data
Summitto is building the world’s first blockchain based, real-time, decentralised, and most importantly confidential triple entry accounting system in order to fight VAT fraud.
Each year, EU governments miss around 151.5 billion EUR of VAT income. This "VAT Gap" has been around for many years, and shows no signs of disappearing. Large causes are "Missing Trader Intra Community" fraud and "Suppression" fraud. A fundamental problem in our current post-audit world, is that tax authorities have to trust companies that they file their VAT report correctly. Existing proposals to adjust the VAT system or the method of reporting have the potential to reduce fraud, but all come with severe downsides and none have seen agreement from all EU member states.
The European Commission has put forward various measures to reduce VAT fraud in their latest proposal for a definitive VAT system. These measures have not been accepted by all EU member states yet, partly because it will lead to a large increase of the administrative burden imposed on businesses. Meanwhile, Spain and Italy have introduced the SII and SdI systems. These "central clearance" systems enforce companies to register all invoices directly at their respective tax authority. Although this may give tax authorities enough information to prevent fraud, the collection of so much data poses an enormous security threat and is not solving the problem in itself.
We see a better path forward by building on the insights of existing proposals. Only by making use of a privacy-by-design philosophy can we guarantee the creation of a secure system. A confidential blockchain protocol allows companies to remain in control of their data and to register their invoices in a confidential manner. Using these registrations, tax authorities will be able to detect all VAT fraud without collecting any confidential data. Tax authorities will also be fully transparent about their data usage. Our system also allows for legislation to be simplified and enables VAT returns to be pre-filled.
Furthermore, by registering every invoice in a publicly verifiable network, society will progress from a double-entry to a triple-entry accounting system. The integrity and authenticity of invoices is guarded by the public registration, which makes companies automatically compliant and eases access to services like audits, archiving, reporting and factoring for businesses of all sizes.
Summitto’s mission is simple: to end VAT fraud. To achieve this, we are building an open-source blockchain protocol for invoice registrations. We are ready to make this vision a reality, contact us if you want to join us in this journey.