The tax authority in the Chinese city of Shenzhen is attempting a novel way in fighting tax evasion, by using blockchain technology.

The internet giant Tencent and Shenzhen National Taxation Bureau have partnered together to establish the ‘Intelligent Tax’ innovation lab which hopes to foster technological innovation and adoption within the tax process.

The aim of the project is to connect research with technology, including blockchain and artificial intelligence in order to create smart solutions to the problem of tax evasion.

Shenzhen is a major city located immediately outside of Hong Kong. It is designated a ‘Special Economic Area’ by the Chinese government, due to its wealth and economic significance for the country; the city’s GDP was larger than the whole of Portugal in 2016.

It is home to many of China’s biggest companies including Huawei, as well as the Shenzhen Stock Exchange. The enormous amount of wealth which passes through the city has created a huge demand for services to aid tax evasion, with an enormous underground economy devoted to fake paperwork and receipts.

Those who purchase them, use them for many purposes including bribing or defrauding employers and civil servants and lying on tax forms. Though the practice of making fake receipts and paperwork is punishable by execution, demand is so high that they are often openly sold in public places such as railway stations.

Tencent CEO, Ma Huateng, one of the leaders of the project, has stated that the ‘Intelligent Tax’ lab is already at work on a blockchain based digital invoicing system. Using blockchain, authenticity of any receipts could be proved; this solution will be the first project to be incubated in the lab according to Ma.

According to Li Wei, deputy director of the Shenzhen tax authority, key features of the system which will be launched on Tencent’s blockchain platform are complete traceability and data security that will help “improve the invoice supervision process” and stamp out fake invoices, thereby “promoting tax modernisation” and “improving Shenzhen’s economic quality.”

Image Source: “Flickr”