A taxation system has a direct impact on the social and economic activities of nations. It is core to the social contract and represents a powerful tool to reduce inequalities and to reinforce the state’s treasury, which utilizes tax revenues to implement social development programs and provide public services. Conceptually, taxes provide social equity, reduce poverty and increase the welfare of the poor. In Islam, Zakat is one of the main pillars and was referenced 32 times in the Quran. Yet, in all countries, developed or not, some citizens and corporates find ways to reduce their obligation or evade paying any tax.
For long-term strategic planning, blockchain can be a driving factor in implementing real-time, automated tax processes for individuals and for small and large enterprises. Dr. Husam Yaghi had previously published a blockchain-based solution to simplify the management of value-added tax (VAT), see Figures 1 and 2. The solution was proposed to local corporates to track and document the VAT they pay
on purchases of goods that would be resold, then receive a credit for the VAT paid on the tax return, ie the process of reconciliation.
In this article a Blockchain based system is presented. Though, Blockchain is not a magic bullet to all the woes of inefficiency; it is a tool to improve efficiency and the public perception of the Zakat system.