Blockchain - Tax Admin nyu... · Blockchain is coming • At the World Economic Forum more than 800 execuTve and technology experts were asked when a parTcular “Tpping point”

Blockchain

FTATechnologyConferencePi5sburgh,PA

August9,2016(2:45–3:45)

Agenda

•  Premise:– doweagree?– Considerthesetwoideastogether…

•  FiveFraudsters•  BlockchainviaBitcoin•  VAT•  Cigare5es

Doweagree?

•  Taxcompliancesystemsare:– Highlycentralized–singlepointoffailure– Highlysecure–area5ackedandtheya5racta5acks– Highlydatadriven–taxisnaturallydata-intensive– Concentratepower–suscepTbletointernalabuse– Slow–enforcementdoesnotworkinreal-Tme

•  LowlevelofTrust:– AmongjurisdicTons– Betweenthetaxauthorityandthepublic

Blockchainiscoming•  AttheWorldEconomicForummorethan800execuTveandtechnologyexpertswereaskedwhenaparTcular“Tppingpoint”wouldbereached…

•  Whenwouldweseeagovernmentcollecttaxwithblockchain?

•  ANSWER:2023•  73%expected“byatleast2025”.•  Whichtax?•  Whichcountry?

FiveFraudstersWhotookadvantageoftaxsystems

Couldtheybestoppedinreal-TmewithBLOCKCHAIN?

FundedbyTaxFraudHizballahSheikh

MuhammadHussein$20million/4yr.RST(Michigan)

OsamabinLaden€1.5billion/1yr.

VAT(Italy)

SamirAzizi€61,104,368/1yr.Germany

Taha“Saleh”Mutaher20,000cigare5ectn/wk=$65m(16arrested)

NorthCarolinatoNYC

September10,2001 September11,201120hoursbefore

MohamadYoussefHammoud30years(jury=155yrs)–$8mcigare5esmuggler–37yrold

VirginiatoMichigan

Blockchain/Bitcoin

WhatisBlockchain/WhatisBitcoin

•  DistribuTveLedgerTechnology&anApp•  ItallbeganwithBitcoin(2008)[cryptographymaillist]

•  SatoshiNakamoto,Bitcoin:Apeer-to-peerelectroniccashsystem(2008)availableat:h5ps://bitcoin.org/bitcoin.pdf

– Previousdigitalcurrency(1996)–  E-GOLD–  LibertyReserve

– 2001PatriotActTghtens“MoneyServicesBusiness– 2013bothareshutdown(moneylaundering)

BillionsofdollarsBuyabalancein

oz.goldorLibertydollars

DigitalCurrency(beforeBitcoin)

•  PriortoBitcoinalldigitalcurrencieshadcentralcontrol[justlikeatradiTonalfinancesystem]– AcouldnotpayBwithoutrelyingonanintermediary

•  For“A”topay“B”–  “A”asksthecentertoupdatethegeneralledgerinfavorof“B”

–  “A”musttrustthatcenterwilldoitfaithfully–  TheproblemforSatoshiNakamotowasthesystemputstoomuchpower(andmoney)inthehandsofthecentralauthority

“A”asks“C”toupdatethecentralledgerinfavorof“B”

A

B

c

SatoshiNakamoto:“A”sendsX-amountto“B”

A

B

X

ProblemswithCentralizedSystems

•  Acentralizedledgerofbalancesiscontrolledbysingle[trusted]enTty,butthesystem….– Hasasinglepointoffailure

–  Governmentcouldshutitdown(e-GOLD;LibertyReserve)–  Disgruntledemployeecoulddothesame–  Acleaningperson’saccidentcoulddoittoo<joke>

–  IspronetocorrupTon–  Embezzlement

–  Isinherentlyinsecure–  Hackers

– ButitisdesignedtostopDoubleSpending

DoubleSpending

•  Biggestprobleminadecentralizeddigitalcashsystem:– HowcanyoupreventthesamebalancesinaledgerfrombeingspenttwicewithoutresorTngtoacentralauthority?

– EssenTallytheledgerisalldata(itcanbemanipulated)…musthavea“trustedparty,”right?

•  ByzanTneGeneralsProblem

Bitcoin/BlockchainThisisallabout“consensus”

•  EveryparTcipanthasarecordofeverytransacTonthathaseverhappened

•  Example:10btctoHalFinneyfromSatoshiNakamoto(1-12-2009)•  AnyparTcipantcanusecompuTngresourcestoworkamathproblem–problem

isdesignedforthenetworktoproduceacorrectansweronceevery10minutes–Massivebruteforceguessing

•  InthemeanTmepeopleareusingthenetworktoexchangecoins,--ifyousolvetheproblemaboveyougettherighttocollectalltransacTonsintoablockandsubmitthemforabitcoinreward.

•  Everynodewillgetacopyoftheblockanddecideifitisvalidornot.•  ValidaTng=comparingtheblockw/listoftransacTonsreceived.•  Ifitisfine,addittothechain,andbeginworkingonthenextblock

•  BitcoinConsensus=ProofofWork•  Therearemanyothers:

–  ProofofStake;–  ProofofIdenTty;–  ProofofElapsedTime(POET)–  QuorumVoTng(QV)

DevelopedbyINTELfortheSawtoothLakeblockchainplavorm

ProofofWork•  First:

–  CollectunconfirmedtransacTons(maybe1,000)–  Perform“consensusrulevalidaTon”oneach

•  Listof30-40rulesforeachtransacTon•  Listof30-40rulesforeachblock.

•  Second:–  Taketheheaderofthepreviousblock–  Plusanumber(calleda“nonce”)a32-bit(4byte)fieldwhosevalueissetsothatthehashoftheblockwillcontainarunofzeros.

–  UseSHA256….10minutes….Perform500quadrillionhashespersecond…findanumberlessthanthetarget

•  Third:–  Incurcosts…announcetoworldyouhavethenextblock…waitforvalidaTon(othernodeswillcheckthe“consensusvalidaTon”)

•  Fourth:–  getareward(newBitcoin)

Re-cap–WhatisBitcoin?

•  Bitcoinis:– Firstrealcryptocurrency– Usingapeer-to-peernetwork– CreaTngadecentralizedledger– Solvingthe“doublespend”problem

Re-cap–WhatisBlockchain?•  Blockchain:

Isadecentralizeddatabase(ledger)withnetworkenforcedprocessesforupdaTngthedatabase.

Isageneralpurposetechnologythatcanbeappliedtodisrupt(i.e.,provideexciTngcomputer-basedalternaTvesto)anycentralizedsystemthatcoordinatesvaluableinformaTon

Issecureeveninthepresenceofpowerful3rdparTeswhowouldliketopreventusersfromparTcipaTng

Isespeciallyapplicabletodataintensive,ratherthancapitalintensiveindustries/acTviTes.

Blockchain“takeaways”

•  Hightransparency•  AllparTcipantscanseealltransacTons(butencrypted)

•  Highresilience/availability•  Nocentralpointtobringthenetworkdown(censorshipresistant)

•  Hightrust/security(trustthecode)•  NetworkenforcedproperTes–cannothackthenetwork

•  Highefficiency/Lowcost•  Comparedtocentralizedsystemswhichhavealotofintermediariesthatneedtobepaid:– Moore’sLaw:costofprocessingabit(halfin18mo.)–  Kryder’sLaw:costofdigitalstorage(halfin12months)–  Nielson’sLaw:costofbandwidth(halfin24months(

DataIntensiveIndustries•  Finance

–  Cash/bankdeposits…inflaTon[limitedcurrency];slowtransfers[5xfaster];expensivetransfers[WesternUnion10%fee];easeofseizure[needprivatekey];difficultyofmicropayments[easy])

–  Provabilityofreserves…noPonzischemes(Madoff)–  TrustlessP2Pmarkets…banks&marketmanipulaTon

•  Gaming–  Provablyfairgambling…[Bitzino.com–verifiablecardgame],[ChanceCasino–fullcasinofullyvirtual]

•  CommunicaTons–  Censorshipresistant…[Bitmessage…P2PdecentralizedencryptedmessagemimicsBitcoin…anonymous&

broadcasttowholenetwork,withproof-of-work];DomainNameService–InternetICANNcanpulldomainnames(WikiLeaks)&internetcouldbea5ackedhereatRootDNSServerstotakedownthenet…NameCoin(.bit)]

–  P2Pcloud–becausethecloudishighlycentralized…couldbehacked(STORJ.IOallowsyoutoshareexcesshard-drivecapacityforcapacityinthecloud…paidinSTORJcoins)…filesarecutintosmallchunksandspreadacrossthenetwork…noadminprivileges…onlyyouhavekeys)

–  Shareeconomy–Uber;Ly};AirBNB[ripefordisrupTon,becausethevalueinnotinthetechnology,butthenetwork–seeLaZooz…adecentralizedUber–adecentralizedautonomousnetwork;notataxilikeUber,butmakeuseofridesalreadyunderwayinexchangeforLa’ZoozTokinsearnedlikeBitcoinbygivingothers’rides]

•  Future–  P2Penergynetwork(solarbought&sold)–raterigging&overfinancializaTonincreasingprices.–  P2PCommunicaTonsnetworks(alternaTvetotheInternet)…basedonrewardsforsharingbandwidth–  P2PLogisTcsNetworksdeliverytechnology(drones,etc.)–  BackbonetoafutureIoT(seeIBM)buildingchipsforthetoaster&refrigeratorwithsharedbandwidthpaid

inmicrobitcoins

•  NoonemenTonstaxaTon

TwoKindsofBlockchainDisTnguishedbytheconsensusmechanism

•  Permissionless–publicorun-restricted– Bitcoin– Bitzino– LaZooz– Bitmessage

•  Permissioned–privateorrestricted– EuropeanCentralBank– BankofCanada

VAT

IntheEUMTICfraudisa€100billion/yr

problem

TheProblem

•  MissingTraders•  MTICfraud•  MTECfraud•  Bankruptcy

•  EsTmatedlosses•  €100billionfraud(annually)Europol,SOCTA(SeriousandOrganizedCrimeThreatAssessment)March2013.•  €193billion(in2011)$258billionVATgapStudytoQuan?fyandAnalyzetheVATGapinthe27MemberStates(TAXUD/2012/DE/316)(July2013).

VAT

FranceVAT=20%

ASeller

FrenchTax

Admin

Input=€100,000+VAT=€20,000

Output=€110,000+VAT=€22,000

Return

OutputVATCollected….€22,000InputVATpaid………….<€20,000>Net…………………………......€2,000

1-3monthsto1yearlater

NoTce:Valueaddedby“A”is€10,000andrateis20%,sonetdueis20%x€10,000=€2,000

CrossBorder1/4

FrenchVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

SupplyChain

VATInvoice

31 2 1 2 3Goods

€

CustomerChain

CrossBorder2/4

FranceVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

VATInvoice

31 2 1 2 3Goods

OutputVATCollected…....€0InputVATpaid………….<€20,000>Net…………………………...<€20,000>

€100,000+VAT€20,000

€110,000+VAT€0

Refund

CrossBorder3/4

FranceVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

VATInvoice

31 2 1 2 3Goods

€125,000+VAT€26,250

€110,000+VAT€0

€23,100<€0>€23,100

€26,250<€23,100>€3,150

&

CrossBorder4/4

FranceVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

SupplyChain

VATInvoice

31 2 1 2 3Goods


€100,000+VAT€20,000

€125,000+VAT€26,250

€110,000+VAT€0

€23,100<€0>€23,100

€26,250<€23,100>€3,150

Refund

&

MTIC

FranceVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

SupplyChain

VATInvoice

31 2 1 2 3Goods


€100,000+VAT€20,000

€125,000+VAT€26,250

€110,000+VAT€0

Refund

X

€26,250

Carousel

FranceVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

VATInvoice

31 2 1 2 3Goods X

VIES

FranceVAT=20%

NetherlandsVAT=21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

VATInvoice

31 2 1 2 3

VIESVATIDofbuyer&sellerTotalvalueofgoods/services

perrecipientAlladjustmentsmade

BUTNOTEVIESis:Notinvoice-specificRequest-based2monthsorlonger

X

SoluTon(s)•  CentralcollecTonofB2Cdata:

•  Quebec(CGI),Ontario,Sweden(R/I),Germany(INSIKA),

•  CentralcollecTonextendedtoB2B–DICE•  Real-Tme,encrypted,sharedpublickey(cross-border?)•  Rwanda(DTI);Ceará,Brazil(SmartCloudInc.);CroaTa;GCC;EAC•  ModeledonBrazilian(federal)SPED

•  Decentralizeddistributedledger–BlockchainDICE•  Proposal(only)…sofar•  Leastexpensive;mostsecure;hightrust•  Permissionedblockchain

–  FollowEuropeanCentralBank;BankofCanada…

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

VATInvoice

Export100Autos€10,000each

VATBlockchainwith75%consensusthreshold[1/7]

Mfg.10Autos€11,000each

Import

Dlr.

AI

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin

VATInvoicew/Consensus


VATBlockchainwith75%consensusthreshold[2/7]NotjustaVATInvoice,wewantaVATInvoicewithCONSENSUS


Import

Dlr.

AI

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin





Import

Dlr.

Block1 Block2 Block3+ +

AI

Block4 Block5+ +

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin




Mfg.

cloud cloud

10Autos€11,000eachImport

Dlr.


AI

Block4 Block5+ +

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin




Mfg.

cloud cloud


Dlr.


AI

Block4 Block5+ +

FrenchGDP€2,183.6billion

DutchGDP€678.5billion

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin




Mfg.

cloud cloud


Dlr.


AIAI AI

Block4 Block5+ +

[21nodes] [7nodes]

France20%

Netherlands21%

ASeller

BBuyer

FrenchTax

Admin

DutchTax

Admin




Mfg.

cloud cloud


Dlr.

Consensus

75%+ 75%+


AIAI AI

Block4 Block5+ +

Audits/InvesTgaTonswillchange

•  ConsensusforcescloserdomesTcexaminaTonsofbusinesses:

•  Le5erboxenTTes•  Hijackedbusinesses•  Financialcapacitytoacceptrisk•  Paymentssentoff-shore

•  Example:DeutscheBankinvolvementinCO2MTICfraud(2009-2010)

•  Afghan,Pakistani,UK,French,UAEinvesTgaTons•  On-goingliTgaTonin2016

To“get”theexamples,youneedtoknow…

•  CO2permit•  EU-ETS[EuropeanUnion–EmissionsTradingSystem]–thisis“cap&trade”– Notataxsystem–justdigitalrecord-keepingoftradesinreal-Tme

– NopricesofCO2permitsrecorded,noVATamountsrecorded,justvolumesofsales(seller&buyer)andpreciseTmeofsale(downtothemillisecond)

– Andthespecificnumberofthepermit

Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Jan Feb

10JuneFrenchexempTonw/odeducTon

1AugustUKzero-rate

4-9JuneBlueNext

ClosedduetoCO2fraud

Time-line:CO2MTICfraudcasesandlawchangesconsideredbefore&a}ercollapseoftheBlueNext

SandeepDosanjh

CITI

DeutscheBank

2009 2010

19AugustDosanjharrested

Mar Apr

28AprilPoliceRaid

DeutscheBank

15JulyDutchReverseCharge

18NovemberRodStone(HMRC)Visits

DeutscheBank

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

May Jun Jul Aug Sep Oct Nov Dec Jan Mar Apr Oct Nov Dec Jan Aug Sep Oct Nov Dec Jan Feb Apr

2009 2010 2011 2012

VolumeofPurchases(ByMonth)-SVSSecuriTesPLC(SVSTrading)-GB

Total

Post-BlueNextcollapse(June)&Pre-Zero-rate(August)UKfeedercompanysellingtoUKDeutscheBank(thenexportforUKrefund)

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR FR

Apr May Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec Feb Mar Apr May

2009 2010 2011

VolumeofSales(ByMonth)-HURST(DeutscheBankAGLondonBranch)-FR

Total

WhatdoesDeutscheBankdowiththepurchasesfromSVS?SellinFranceUKrefund

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Jul

Aug

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

May

Jun

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

2008 2009 2010 2011 2012

VolumeofSales(ByMonth)-CITIGROUPGLOBALMARKETSLTD(CGML1)-FR

Total

CITIBank(UK)–Doesthesamething(NoteJune&JulyacTvityUKsalestoFrance(fromFRaccount)–UKrefunds

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Jan Feb Mar Apr May Aug Sep Oct Nov Dec Jan Feb Mar Apr May Aug Nov Dec

2009 2010

VolumeofSales(ByMonth)-DeutscheBankAG(1973-DeutscheBankAGPersonenkonto)-DE

Total

ReversePlumbingDeutscheBankGermansalestoDeutscheBankUK–Germanrefunds

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

Jan Feb Mar Apr May Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Aug Sep Nov Dec

2009 2010

VolumeofPurchases(ByMonth)-DeutscheBankAGLondon(1974-DeutscheBankAGLondonPersonenkonto)-DE

Total

SeenfromtheothersideDeutscheBankUKPurchasesfromDeutscheBankGermany(internalDeutscheBank)

UKcanseehugeGermanrefunds–UKiszero-rated

WhodidtheGermanDeutscheBankpurchaseCO2from(a}ertheUKzero-rate)?

DEaccountConvicted&sentenced

Convicted&sentenced

LiquidaTon/insolvency

Dr.Pilgrim“mystery”camefromexchangesinfiltratedCO2marketsConvicted&sentenced

DKaccountConvicted&sentenced

Cigare5es

$5billion/yr–USStates$50billion/yr–global

CommercialChain[1]

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

CommercialChain[2]

Mfg

FederallyBonded

Warehouse

Cigare5es StampingAgent

ImportedCigare5es

ExportedCigare5es

CommercialChain[3]

Mfg

FederallyBonded

Warehouse


ImportedCigare5es

ExportedCigare5es

Non-StampingWholesaleAgent

CommercialChain[4]

Mfg

FederallyBonded

Warehouse


ImportedCigare5es

ExportedCigare5es


ChainStoreRetailer

IndividualRetailer

Consumer

Fedtax

Mfg

FederallyBonded

Warehouse

FederalTax$1.01/packNostamp

BasedonbulkTobacco

PriortoMfg.

$


ImportedCigare5es

ExportedCigare5es


ChainStoreRetailer

IndividualRetailer

Consumer

StateTax

Mfg

FederallyBonded

Warehouse


BasedonbulkTobacco

PriortoMfg.

$


$ StateTax$0.07(SC)to$3.46(RI)

City&countyNYC=$4.25

Chicago=$3.66

ImportedCigare5es

ExportedCigare5es


ChainStoreRetailer

IndividualRetailer

Consumer

PrimarysourceofSmuggledCigare5es

Mfg

FederallyBonded

Warehouse


BasedonbulkTobacco

PriortoMfg.

$




Chicago=$3.66

ImportedCigare5es

ExportedCigare5es


ChainStoreRetailer

IndividualRetailer

Smuggler

Smuggler

Consumer

SecondarySourcesofSmuggledCigare5es(2)AcquireImportsbeforefederallybondedwarehouses

(3)Acquire“exports”thatneverleave

Mfg

FederallyBonded

Warehouse


BasedonbulkTobacco

PriortoMfg.

$




Chicago=$3.66

ImportedCigare5es

ExportedCigare5es


ChainStoreRetailer

IndividualRetailer

Smuggler

Smuggler

Consumer

[1]

[2]

[3]

Problem

•  EnforcementisneededbyjurisdicTonsthatwillnotbenefitfinanciallyfromit:

•  Enforcementresources:–  USFederal–  Virginia–  NorthCarolina–  SouthCarolina

•  Revenuebenefits:–  NYC–  Chicago–  RhodeIsland

Carload=$23,000(10cases)Vanload=$90,000(50cases)Smalltruckload=$465,000(200cases

PrimaryLegalTools(federal)StateStatutesApplyAlso

•  IRC(26USCCh.52)•  ContrabandCigare5eTraffickingAct(CCTA)(18USCCh.114,2341-2346)

•  JenkinsAct(15USC375-378)•  PreventAllCigare5eTraffickingAct(PACTAct)(amendsJenkinsActandCCTA)

•  FamilySmokingPrevenTonandTobaccoControlAct

CCTA

•  Federalcrimetoship,selltransportorpossessmorethat10,000cigare5es(500packs)permonthnotbearingthetaxstampofthejurisdicTonwherefound– 5years– Seizure– PredicatecrimeforRICO

JenkinsAct

•  Requiresinterstatecigare5eretailer:– RegisterwithstatewhereitsellsoradverTses– Fileareportwithstate

•  QuanTty•  Name&Address

– Federalmisdemeanor•  $1,000•  6months(increasedto3yearsunderPACT)

•  LimitedeffecTveness–retailersignore

PACTAct

•  Internet-basedevasion– Requiresinternetsellerstocollectstateandlocaltaxes

– Bans(most)USPostOfficedeliveryofcigare5es•  Stateagreementswithmajorprivatecarriers(also)blockinternetsellersfromshipment.

– PenalTes•  3years•  Civil&monetaryfines

BlockchainSoluTon

•  Federalplavorm•  MandatetransmissionoftransacTondata(ateachstageofthecommercialchain)tocloud

•  Adoptaconsensusmechanism:a)  Permissionedconsensus(limitedtostate&

federalenforcementagencyemployees)b)  Permissionlessconsensus(includepublic)c)  Hybridconsensusispossible

Step-by-Step•  STEP1:putsecure“trustedbarcode”oneachpack(inside&out)

–  RegulateunderIRC§5741–  See:USPatentUS2013/0001291A1(Jan.3,2013)

•  STEP2:requireessenTaldataofallcigare5etransacTons(B2BandB2C)tobeencrypted,andsenttothecloud(freeapp)–  License(mandatoryregistraTon)ofresellers(naTonally)–  Driver’slicensescanforallB2CtransacTons–  CondiTontobacco-relatedbusinesslicensesoncompliance;–  Adopt“smartcontract”enforcement.

•  STEP3:secure/validatethecommercialchainthroughablockchainconsensusmechanism(private/public/hybrid)

•  STEP4:requireretailtoinstallpublic“taxpaid”verificaTonscanners(free&availableonnetalso)

•  STEP5:allowpublicaccesstotheblockchainandreward“miners”whofindinstancesoffraudundervariousFalseClaimstatutes–FindAFraudGetARewardcampaign.

IRC§5741-Recordstobemaintained•  Everymanufactureroftobaccoproducts,processed

tobacco,orcigare5epapersandtubes,everyimporter,andeveryexportwarehouseproprietorshallkeepsuchrecordsinsuchmannerastheSecretaryshallbyregulaTonprescribe.TherecordsrequiredunderthissecTonshallbeavailableforinspecTonbyanyinternalrevenueofficerduringbusinesshours.

•  [RegulateuseofasecuretrustedbarcodeunderIRC§5741](Aug.16,1954,ch.736,68AStat.715;Pub.L.85–859,TtleII,§ 202,Sept.2,1958,72Stat.1423;Pub.L.89–44,TtleV,§ 502(b)(9),June21,1965,79Stat.151;Pub.L.94–455,TtleXXI,§ 2128(c),Oct.4,1976,90Stat.1921;Pub.L.111–3,TtleVII,§ 702(a)(3),Feb.4,2009,123Stat.108.)

IntotheCloud[1]

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

IRS

Supplies

IntotheCloud[2]

Mfg

FederallyBonded

WarehouseImportedCigare5es

ExportedCigare5es

IRS

StampingAgent

AcquisiTonRe-supply

IRS

IntotheCloud[3]

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

IRS

StampingAgent


IRS State

AcquisiTon

Re-Supply

IntotheCloud[4]

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

IRS

StampingAgent


IRS

AcquisiTon

State State

AcquisiTon

Re-Supply

ChainStoreRetailer

IndividualRetailer

IntotheCloud[5]

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

IRS

StampingAgent


IRS State State

ChainStoreRetailer

IndividualRetailer

FinalSale

AcquisiTon

Consumer

State

Consumer’sDirectInquiry

IntotheCloud[6]

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

IRS

StampingAgent


Supplies

IRS

AcquisiTon

Re-Supply

State

AcquisiTon

Re-Supply

State

AcquisiTon

Re-Supply

ChainStoreRetailer

IndividualRetailer

FinalSale

AcquisiTon

Consumer

State

Consumer’sDirectInquiry

Mfg

FederallyBonded

Warehouse

Cigare5es

ImportedCigare5es

ExportedCigare5es

IRS

StampingAgent


IRS State State

ChainStoreRetailer

IndividualRetailer

Consumer

State

IRS VA NYC RI CiTzensWithSmartCloud,Inc.typeofarTficialintelligence(AI)

FinalDetails•  Wheredoyougettheblockchainplavorm?–  SawtoothLake…see:HyperLedgerProject(itsfree)–  h5p://intelledger.github.io/introducTon.html

•  Howdoyousecurelyencryptdata,andgetittothecloud?–  TrytheINTELchip(forahardwaresoluTon)

•  h5p://www.intel.com/content/dam/www/public/emea/xe/en/documents/soluTon-briefs/iot-fiscal-plavorm-soluTon-brief.pdf

•  h5p://www.intel.com/content/www/us/en/retail/soluTons/videos/fiscal-compliance-soluTon-video.html

–  TryafullydigitalsoluTon[DataTechInternaTonal]afreeappforiPhone,ortablet.

•  Howdoyoumonitorthecommercialflows?–  AdopttheFed.EnergyReg.Comm.unifieddata-base&visualizaTonsystemsetupbySmartCloud,Inc.

FaisalZahoorAhmad36yearsold&€58million

FinalExample•  VektorEnergieGmbH

•  Foundedby29y/oUKnaTonalonMarch31,2009•  One-manrentedoffice–onlybought&soldCO2•  TransacTonsfromSeptember28,2009–April27,2010

–  UKzero-rateAugust1,2009–  GermanraidonDeutscheBankApril28,2010

•  PurchasedCO2(mostlyfromfraudsters)inGermany•  SoldCO293.79%(24,385,000units)toDB-Frankfurt• @€15/unitthisis€365,775,000•  Mostdayshavesingle(rarelymorethan5)transacTons•  Surrendered(voluntarily)in2016(currentlyinjail)

IfyouknewthatCO2fraudwascommon,andifSmartCloudInc.gaveyouthefollowingreport…whatwouldyoudoinOctober?

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Sep Oct Nov Dec Jan Feb Mar Apr

2009 2010

VolumeofSales(ByMonth)-VektorEnergieGmbHi.I.vertr.durchdenIVArnoWolf(VektorEnergie)-DE

Total

Thanks

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Blockchain - Tax Admin nyu... · Blockchain is coming • At the World Economic Forum more than 800 execuTve and technology experts were asked when a parTcular “Tpping point”

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