Leveraging Blockchain for excise duties in the tobacco and alcohol industry
Excise duties are indirect taxes on the sale or use of specific products, such as alcohol, tobacco and energy products. Different from customs duties, the revenue from these excise duties goes entirely to the country in which they are paid. EU Member States have agreed on common EU rules to make sure that excise duties are applied in a uniform way across the Union, by imposing a requirement to apply at least a minimum rate of excise duty on a number of products, such as tobacco products. This aims at preventing trade distortions in the Single Market, while ensuring fair competition between businesses, and reducing administrative burdens for companies. Nevertheless, the applicable rates, the products in scope (to an extent), and the means through which excise duties are collected are decided on a national level.
Blockchain is a distributed ledger technology that records a transaction’s occurrence, when it occurred and whether it occurred correctly. It is a decentralised network based on cryptography that uses peer-to-peer consensus to validate transactions. Accuracy, traceability and trust are key Blockchain benefits.
This technology is based on a series of interconnected blocks, with new blocks added to the end of the ever-lengthening chain. Each block can contain transactions, data and a reference to the previous Blockchain (creating the so-called chain). For blocks to be added to the chain, it must be achieved through consensus. Every transaction is recorded chronologically and cannot be changed once added to the chain.
Consequently, Blockchain is a solution that can be implemented to mitigate risks related to the complexity of today’s supply chains.
