Global professional services house Ernst & Young (EY) continues exploring the potential of blockchain technology to improve tax processes with a new initiative.

The company appear Wednesday that EY completed a blockchain-based projection to address complexities and inefficiencies in the cantankerous-border withholding tax (WHT) procedure, generally a paper-based procedure where data could be lost or not shared properly due to privacy concerns.

"It also may not be trusted by counterparties and tax authorities who require more and more data to validate that the correct corporeality of withholding tax has been paid either by relief at source or after a withholding reclaim," EY noted.

The new WHT solution implements EY's blockchain-based technology to enable a secure, automated and decentralized sharing of fiscal data between tax regime and related intermediaries to improve taxation compliance and reduce fraud.

The project involved several global revenue enhancement authorities including the Great britain'southward revenue enhancement drove agency HM Revenue & Customs, the netherlands Tax Administration and ​​relevant authorities in Norway. Participating companies included French banking group BNP Paribas, American investment bank JPMorgan, fiscal services company Northern Trust and Citibank.

As part of the project, EY experts, alongside country and manufacture representatives, accept specifically tested the TaxGrid blockchain solution, a multi-party blockchain network connecting financial intermediaries to share taxation and finance data. The solution deploys smart contracts to tokenize investment entitlements and distributes them on blockchain wallets owned by diverse financial entities. The tool uses tokens to receive investment data and summate the appropriate WHT in one case final investors are identified.

To ensure privacy on the TaxGrid network, the solution implements zero-cognition proof technology, a digital protocol that allows sharing data between parties without using passwords or other individual data.

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"Distributed ledger technology as a solution to the WHT challenge is no longer merely a concept," EY's WHT distributed ledger report notes, adding that the project has provided a basis for enabling a global solution to address diverse demands of taxpayers and tax regime. "This could support the European Commission's proposal to begin building a mutual and standardized European union-wide system for withholding revenue enhancement relief at source," starting in 2022, EY stated.

EY has been actively working on blockchain and cryptocurrency-related revenue enhancement solutions in recent years. The company terminal year released a crypto taxation app called EY CryptoPrep to provide a fully automatic product to aid clients with tax filings in the The states.