My prior article introduced the concept of digital intermediaries in compliance, software-based systems that can act as trusted bridges between taxpayers and tax authorities, handling complex rules and reporting obligations on behalf of businesses. These intermediaries hold the potential to dramatically simplify the compliance process, reduce errors, and build a more responsive, digitally enabled tax environment. In this article, we extend that concept by introducing a critical new dimension: verifiability – which we define as provable certainty in the accuracy of tax compliance results. Here’s how verifiable tax compliance delivers.
Verifiability moves us from simply automating compliance to proving that the automation is correct. It closes the loop between software execution and regulatory trust by making each step in the compliance process transparent, traceable, and defensible – thus offering both taxpayers and tax authorities a foundation for mutual confidence in digital compliance outcomes.
5 Key Takeaways
- Verifiable tax compliance transforms automation into provable trust: It shifts the focus from mere efficiency to demonstrable accuracy in every step of the compliance process.
- Tax authorities gain transparency, not just data: With cryptographically verifiable audit trails, regulators can validate not only what was reported but how it was computed.
- Businesses reduce audit risks through verified outputs: Proof-backed calculations offer protection from disputes, ensuring legal clarity and operational certainty.
- Truebit Verify closes the trust gap in automation: Its decentralized validation framework ensures that every result is independently confirmed and tamper-proof.
- Digital trade compliance becomes scalable, accurate, and fair: Verifiable systems support cross-border interoperability and fairness, aligning tax outcomes with global trade enforcement priorities.
Global Trade Dynamics and the Push for Automation
Global trade wars have ignited with US import taxes being the first shot fired – an unmistakable signal that the post-WW2 consensus around free trade is fracturing. Rather than pivoting toward multilateralism or modernization of trade frameworks, the US has instead embraced the principle of reciprocity—the idea that goods entering the United States should face the same treatment as US goods entering foreign markets. This shift reframes global trade as a scorecard of fairness, where imbalances must be addressed not just through negotiation, but through enforcement. In this new landscape, tariffs are just the beginning.
Consumption tax rate differentials, such as VAT in Europe versus Sales Tax in the US, play a critical role in shaping competitive advantage, while non-tariff barriers such as regulatory compliance requirements add another layer of complexity. Against this backdrop, enforcement takes center stage. US Commerce Secretary Howard Lutnick has discussed enforcement via a new external revenue service, one equipped with AI-powered software designed to root out fraud, enforce rules at scale, and ensure that every dollar due is collected. It looks like automation will be central to the next chapter of trade policy, not just as a tool for efficiency, but as a mechanism for control.
Verifiable Tax Compliance: The Software Opportunity
It’s this last element, new software, on which we focus. While policy decisions and trade rhetoric capture headlines, it is the technical infrastructure beneath them that determines long-term success or failure. Could this be more than just another enforcement tool? Might it represent a pivotal opportunity to usher in a new era of automation in trade taxation? One where compliance becomes not only more efficient, but also more accurate, transparent, and scalable?
If designed thoughtfully, such software could extend far beyond serving narrow domestic interests. A properly architected system, one built for verifiability, interoperability, and scalability, could serve as a model for adoption by other countries. The potential benefits are substantial: reduced compliance burden for businesses, lower administrative costs, increased fraud detection, and significant gains in revenue collection. The promise is there, but the pathway is not yet clear.
So how do we get from where we are to where we could be? What does the target state look like? And what design characteristics would define a system capable of delivering verifiable, frictionless tax compliance in cross-border trade?
Envisioning Frictionless Trade Compliance
With today’s technology, frictionless trade compliance is no longer a distant aspiration—it is a reasonable, even necessary, expectation. Advances in cloud infrastructure, API-driven architectures, and cryptographic verification have created the conditions for systems that can handle complex compliance processes end-to-end, without human bottlenecks or manual intervention. In this context, frictionless means that businesses can rely upon the system to intermediate the full compliance process with government authorities, from data entry to final reporting, and to do so in a manner that is both verifiably correct and operationally timely.
This is not a new idea. The foundational thinking dates back to the concept of “Tax Compliance by Design,” and has more recently evolved under the banner of “Tax Administration 3.0.” No matter what we call it, the vision is consistent: a digitally native compliance model where automation handles the heavy lifting, and verification adds trust in the outcome. The benefits could be massive: reduced time and cost of compliance for businesses, less fraud and waste for governments, efficiency gains relative to routes and supplier, and ultimately, increased accuracy and revenue. So, the path forward is practical, and increasingly within reach.
Verifiable Tax Compliance: The Problem with Today’s Systems
But today’s tariff and tax systems still operate much like they did in the 1990s. Back then, software companies relied on teams of legal and tax experts to read through regulations manually. Another set of experts then encoded these interpretations into commercial software products, and software companies sold them to businesses operating in complex environments that needed compliance support. The result was a fragile trust model. Users uncertain about the accuracy of the outputs, and tax administrators skeptical, often defaulting to audits as a safeguard.
Decades later, this model persists in many jurisdictions. We’ve advanced in computing power and connectivity, but the verification problem remains unsolved. Without a transparent, repeatable, and independently provable way to confirm that tax calculations are correct, uncertainty continues to dominate. But what if we could “verify” the results programmatically? What if each tax computation included proof that it followed the law exactly, leaving no room for misinterpretation or manipulation?
This is more than a technical curiosity. Verification is the missing link in the evolution toward fully automated, trustworthy compliance systems. It has the potential to eliminate ambiguity, reduce audit risk, and finally deliver the kind of digital confidence that both businesses and tax authorities have long needed.
Introducing Truebit Verify
With the advent of blockchain technology, trust and proof systems are evolving very rapidly. One of the latest is a verification framework called Truebit Verify, a purpose-built system designed to address the core trust gap in compliance automation. Truebit’s approach introduces a decentralized verification layer, where multiple parties in a shared network independently validate computations, rather than simply executing them. This system essentially turns the network into a set of robo-auditors that monitor all the work and report any discrepancies. At the heart of this architecture lies the “Truebit Certified Transcript”—an unforgeable, tamper-proof record that captures each step of a data processing workflow, from input to final output.
This isn’t just metadata. Regulators, businesses, or auditors can inspect the verifiable computation trail—a line-by-line audit history that reveals every step of the process. Tax authorities no longer take reported figures at face value or assume software outputs are trustworthy by default. Instead, they can now examine both the reported result and the full computational path that produced it, confident that the process followed the prescribed logic without deviation.
Truebit’s network operates through a system of redundant validation, where multiple independent servers perform the same calculation and reach consensus. The outcome is a human-readable, transparent audit trail, cryptographically signed and resistant to manipulation—an enforcement-grade compliance tool fit for a digital era. Truebit has been proven in the EU’s TRICK project, enabling verifiable supply chain traceability. It may be time to consider the implications for tax and trade.
Verifiable Tax Compliance: A New Transparency Paradigm
“The future of regulatory compliance depends on bridging the trust gap between automated systems and human oversight,” says Jason Teutsch, founder of Truebit. It’s a simple but far-reaching insight: no matter how advanced our automation becomes, it must be accountable to the people and institutions that rely on its outputs. Without that accountability, automation stalls at the very threshold of trust.
Truebit’s verification framework tackles this challenge directly by establishing a new paradigm of transparency—one where people trust systems not simply because they work, but because they can prove their work is correct. “Our verification technology enables a new transparency paradigm which only accepts verified data processing results,” Teutsch explains. Each computation generates a continuous, tamper-resistant trail of evidence, an explicit record that clearly shows how the system reached the result, replacing black-box logic and unverifiable outputs.
This changes the dynamics for both business and government. For enterprises, it offers protection from disputes, audits, or retroactive liability. For regulators, it brings precision and clarity, replacing assumptions with proof. The result is a new level of confidence in automated systems—one built not on blind faith, but on verifiable facts.
Broader Demand for Verifiability
Demand for this verification layer already exists across financial applications, especially in securely moving high-value, existing financial assets like government bonds onto blockchains. Similar principles apply to tax compliance which requires absolute trust in computations.
A practical implementation might look like this. Government authorities certify specific tax calculation software. This software is deployed as verified compute functions on the Truebit network. Businesses use these functions through simple APIs or integrations. Each execution produces both the tax calculation and a verification transcript. These transcripts serve as proof of correct calculation in case of audit.
In the next article we will take it a step further, discussing tax collectives and how taxpayers can band together to build and certify AI models for compliance while ensuring their data stays private and protected.
Finance and regulatory tax software professional with 30 years of industry experience. He focuses on the opportunities for blockchain and AI to reduce friction and fraud in trade and commerce.
