Blockchain and Tax Administration: Disruptive Innovations for Compliance and Revenue Collection

Abstract

Tax evasion and administrative inefficiency continue to be significant constraints on the stability of Nigeria's public finances. In this research, the authors explore how blockchain technology can accelerate tax compliance and revenue mobilization using simulation-based modeling. With a calibrated mathematical behavioral framework and Nigerian fiscal data, they evaluate the impact of adopting blockchain technology on the probability of compliance, under-reporting behavior, and detection probability. On a Monte Carlo simulation-paired-sample t-test comparison, the research quantifies fiscal impacts at different levels of adoption. It finds that blockchain-enabled tax systems have the potential to cut the national tax gap by as much as 90%, enhance compliance levels from 55% to 80%, and boost effective VAT collections by up to 25% with a possible ROI of up to 16.7 at mid-range levels of adoption. Sensitivity analysis further indicates that fiscal performance is fundamentally determined by responsiveness of behavior and cost-effectiveness. However, only effective implementation relies on institutional ability, legal backing, and digital preparedness. The research concludes that blockchain is not an isolated solution but a governance enabler whose potential, in conjunction with taxpayer education and governance reforms, can significantly reshape Nigeria's tax administration and revenue.