Abstract

Tax evasion remains a major challenge for governments’ worldwide, undermining fiscal policy and revenue collection efforts. Traditional detection methods, including manual audits, are often inefficient, costly, and fail to address the growing complexity of financial transactions. This study introduces a blockchain-based system built on Hyperledger Fabric to enhance Value Added Tax (VAT) compliance detection. The system integrates permissioned blockchain technology with Monte Carlo simulations, leveraging smart contracts to automate real-time compliance checks, ensuring a secure and transparent ledger of VAT transactions. Evaluation results obtained shows a 100% detection accuracy, throughput of 1,200 transactions per second, and latency of 0.83 milliseconds. These findings underscore blockchain’s potential to transform tax enforcement, streamline compliance, and minimize fraud.