Beijing to Test Blockchain Platform for Fighting Fraudulent Invoices

Following a successful rollout in Shenzhen last year, China’s blockchain invoicing system is being introduced to the capital.

On March 2, the Beijing Municipal Office of the State Administration of Taxation announced its decision to launch a city pilot for the blockchain-based system, with immediate activation for taxpayers in selected industries.

The platform is a tool for the Chinese tax bureau to tackle the underground “fapaio” market, where fraudulent receipts have been used to evade taxes, defraud employers, or claim falsified expenditures for reimbursement.

In China, “fapiao” is a term for official invoices issued by the Chinese Tax Bureau for goods and services purchased in the country.

The system ensures traceability and modernizes tax processes 

As the Beijing authorities outline, electronic invoices using the blockchain make use of smart contracts and encryption algorithms to secure the issuance, storage, transmission, security and anti-counterfeiting resilience of documents.

The system reportedly offers complete traceability and tamper-resistance — ensuring that data cannot be modified after the fact. 

Using a private or public-private hybrid chain, the system mediates between the tax department, invoice issuer and recipient, providing oversight on the circulation, reimbursement and reporting process.

While this month’s announcement does not refer to any private sector partner in the initiative explicitly, the system launched in Shenzhen was developed in collaboration with Tencent, the developer of the 1 billion-user social media platform WeChat.

Users require little more than a cell phone or personal laptop to interface with the system, which keeps operational costs low and will foster “a healthy and fair tax environment” in Beijing’s eyes.

The municipal office noted in the announcement that President Xi Jinping has been presiding over a collective study on blockchain technology conducted by the Central Politburo of the Communist Party of China since October 2019. 

Those at the very top of the state apparatus have judged the technology to have had “very good applications across all walks of life.” The Beijing pilot is therefore presented as part of a series of reforms dedicated to the decentralization of state services using blockchain.

Beijing’s blockchain program

Earlier this week, the Chinese state blockchain strategy saw further development, with China’s central bank earmarking a further 30 million yuan into its blockchain trade finance platform. 

The fresh investment ostensibly forms part of the People’s Bank of China’s efforts to ensure that small and medium-sized firms are able to access as broad a range of financing options as possible during the coronavirus epidemic. 

Beyond trade financing, the Chinese government and medical agencies have been swift to spearhead new technological solutions to tackle the coronavirus crisis, with over 20 new blockchain applications launching in the first two weeks of February alone.