Australian Government

A world-first Australian blockchain pilot could be the answer to Australia’s lost excise tax revenue issue. The collaboration between the federal government and consulting company Convergence.Tech will mark the first radical tax system overhaul in a century, addressing the hundreds of millions of dollars lost in uncollected excise each year.

Alcohol on the Blockchain

The pilot targets one of Australia’s significantly haemorrhaging industries: alcohol. According to Australian Taxation Office (ATO) estimates, alcohol excise duty should bring in A$6.5 billion annually for the government. However, the ATO estimates that 9 percent of this figure currently cannot be collected – equating to A$582 million in lost revenue.

The Pilot Grants Program has tasked Convergence.Tech with leading exploration into reducing regulatory compliance burdens for businesses via blockchain tech, according to Australia’s new National Blockchain Roadmap.

The resulting pilot Blockchain Excise Program can track excisable goods from production through the supply chain to their eventual sale. The platform will use a private blockchain to allow the industry to provide a real-time ledger of alcohol transactions directly to the regulator.

This type of technology … allows us to focus our efforts, have a differentiated approach and hopefully reduce compliance costs for the legitimate operators.
Anthony Barnard, director, Excise Centre, ATO

According to analysis by KPMG, this tax system overhaul could potentially recover A$45 million in lost excise revenue each year. Anthony Barnard, director of the ATO’s Excise Centre, says that the “prospect of being able to trace goods through the supply chain is very exciting for the ATO”.

A$DC Powers the Pilot

However, a relationship with fiat currency must be established prior to the implementation of any of this technology. Thus Convergence.Tech and the Australia and New Zealand Banking Group (ANZ) have been working together to integrate the platform with A$DC – ANZ’s Australian dollar stablecoin. Doing so will provide digital assets with financial liquidity and enable automatically triggered remittance of the excise duty liability to the regulator as alcohol moves through the supply chain:

https://bluenotes.anz.com/posts/2022/06/anz-institutional-news-stablecoin-tax-excise-blockchain — How the pilot functions. Source: ANZ Bluenotes

ANZ will also be able to offer wholesalers and distillers digitised inventory via custodian services, alongside remittance and refunds through highly secure digital wallets and immediate transfers.

The pilot is currently trialling this innovation with spirits; however, it could be extended to beer and ultimately real estate, hydrogen, fuel and tobacco, thereby reaping larger benefits for the relevant industries, taxpayers and regulators alike.

Blockchain and the Aussie Government

In July 2021, the Australian government’s Blockchain Grants Program allocated A$5.6 million towards supply chain pilots. The goal was to explore how blockchain could positively influence Aussie supply chains by aiding companies to navigate regulatory hurdles. Everledger, a digital transparency company, received A$3 million, and Convergence.Tech A$2.6 million.

In additional positive news, the federal government included blockchain in its co-called ‘Blueprint for Critical Technologies’ in November 2021. The blueprint is a strategy to both protect and promote essential technology, and the inclusion of blockchain has signposted the government’s position on the matter.

Liberal Senator Andrew Bragg has urged the Australian blockchain industry to pick up the pace or risk falling behind other developed nations, saying Australia is likely to miss an opportunity to become a world leader in cryptocurrency if the government is not given more power to prioritise digital asset reform.

Australia will be a crypto hub. Jobs and choice will be the dividend. I’ll support @JoshFrydenberg to get the job done.https://t.co/svKtDNiuAB pic.twitter.com/OfdsIDqnL2
— Senator Andrew Bragg (@ajamesbragg) December 8, 2021

According to a report titled ‘Cryptocurrency and the Distributed Digital Economy in Australia’, cryptocurrency and related digital assets could generate A$68.4 billion for the Australian economy and create jobs for 205,700 people by 2030. The central issue is that Australia does not currently regulate crypto use and could potentially let this opportunity slip by.

Regulatory Framework a Long Time Coming

Federal Treasurer Josh Frydenberg has announced intentions to establish a regulatory framework to guide crypto’s future growth. However, such a plan will not be ready before the year’s end.

NSW Senator Bragg, a pro-crypto politician ranked #82 in the Cointelegraph Top 100 of People in Blockchain and Crypto 2021, has stated he would prefer this framework be put in place much sooner, despite acknowledging that “governments move slowly”.

NSW Senator Andrew Bragg, #82 on Cointelegraph’s Top 100 People in Blockchain and Crypto 2021. Source: ioandc.com

Bragg intends to call for increased treasury funding so dedicated units can work on these reforms. He is also set to insist on “broad, principle-based, regulation-making power delegated by law to a minister”, and is expected to request these changes prior to the release of the federal budget on March 29.

The Current State of Australian Crypto

Last October, the Australian Senate Committee finalised its 12-point crypto reform plan. The successful implementation of the long-awaited plan should alter the nation’s regulatory approach to the digital asset ecosystem. Bragg is a champion of this reform.

Before finalising the plan, the Australian Senate Committee hosted several hearings with domestic crypto-related businesses who shared their struggles with financial institutions denying or terminating banking services without notice – a practice known as ‘debanking’. The 12-point reform plan has a step dedicated to addressing this issue.