Digital reality, indirect taxation and international trends

Abstract

Digitalization is reshaping global consumption patterns and exposing the limits of value-added tax (VAT) regimes designed for an analogue economy. While Brazilian tax-reform proposals focus on merging six cascading levies into a single VAT-style tax, this structural simplification alone will not align the system with the realities of cross-border electronic commerce. Drawing on OECD guidelines and the BEPS Action 1 report, this article reviews two decades of international debate on destination-based VAT, especially for business-to-consumer supplies of intangibles. It highlights the practical impasse surrounding customer identification, jurisdictional allocation and collection in high-volume, real-time digital marketplaces. The paper argues that recent suggestions to shift liability to dominant e-commerce platforms, although politically feasible, still rely on “verified self-identification” and fragmented registration procedures that are ill-suited to the velocity of automated transactions. As a forward-looking alternative, the study explores how distributed-ledger technology—particularly smart-contract-enabled split-payment mechanisms executed on blockchain networks and settled with central-bank digital currencies—could embed compliance by design, enhance traceability, and lower administrative costs for both taxpayers and revenue authorities. Implementation prerequisites (digital identities, standardized e-invoicing, regulatory sandboxes) and technological hurdles (scalability, interoperability, tokenization) are mapped, providing a research agenda for a VAT 4.0 architecture. The conclusion contends that harnessing blockchain’s immutability and programmability is essential for a resilient, fraud-resistant indirect-tax system capable of addressing the borderless nature of 21st-century commerce.