New COMMONS, COOPERACTIVE ASSETS, must first be imagined and designed before being set up, tested, reworked and improved, before starting a new cycle of expansion and evolution. Proposals for new COOPERACTIVE ASSETS thus make it possible to create exchanges of views which will already serve to “improve” what is to be tested.
It is within this framework that this proposal for a National Digital Ledger is situated. Let’s make it clear from the outset that this notion of General Ledger is not the same as the notion of National Accounting. The latter, even if it is a good first step towards collective knowledge of economic activities, is, at the moment, a simple recording of global movements in order to have, mainly, the visibility of inputs-output. It does not correspond to the precise, real-time collection of each economic activity carried out by Companies in the broadest sense. Let’s therefore address the 7 main points that structure this new COMMONS:
- What is this National Digital Accounting Ledger?
- How is it created?
- What is its purpose?
- What are the possible developments in the use of this Digital Ledger?
- What are the barriers to deployment?
- Example of deployment
- The Digital General Ledger: an economic management tool
1) What? The Digital National Ledger
The classic form
In the same way that a Company Accounting Ledger records all the movements made in and by this same Company, this National Ledger records in the classic form of Accounting (double entry, input-output, nomenclature of charges and income) ALL the movements of payments, remittances, remuneration, between Companies in the country or Assimilated Companies, whether in the country or abroad. This recording is made under the control of the State (Public or assimilated body) or directly by the State (Ministry of Economy for example). As with the General Ledger of a company’s accounting system, its mission is to record all financial transactions occurring within the State. The entry will be made under the accounting concept known as double entry with the famous credit and debit concept to identify the resources used and the use of resources.
Technically speaking, we would include, at least, everything that concerns the purchases and sales of a Company, in the broadest sense (NASDAQ companies, SME, VSE, Sole Proprietorship, Association with employees …) Namely what is called accounting chart classes 4 & 5 (for enthusiasts, but not only, see here the diagram of the six classes of accounts). It is likely that this limited consideration is only a first step towards the full integration of all movements into a Digital National General Ledger. Simply, it is the “Companies” via their accounting software that will carry out, in real time, the declaration of movements.
1) Thus each time a company sells to another company, whether in the same country or abroad, a product/service or similar, the transaction is reported by the Company to this National Ledger. The declaration will, of course, specify not only the expected amount, but also the types of Goods/Services filled in according to an XML metadata type nomenclature that can be more precise and structured than the information currently filled in the accounting movements. The payment for this transaction will also be declared by the Company and recorded in the General Ledger. This declaration will include the identification of the Bank and the account that received the payment.
2) Similarly, when a purchase is made by a Company located in, UK or USA or your country, a declaration of movement is made. Always with the help of XMLor similar type Metadata to describe the Good/Service used. Also, the bank payment movement is declared and recorded.
3) For each movement carried out is declared by the 2 Companies in order to find, in another form, the logic and structuring habits of the double writing entry@preview.
The Digital form
This General Ledger is in digital form, managed and supervised by the State of the country in question. This management can be direct, with a specialized state service and civil servants opening it. Or a delegated service, which may be in the form of a COOPERACTIVE ASSET, with a cyclical call for tenders (3, 5, 7 years, etc.) to renew the holders of this delegation.
For which entities?
The legal entities concerned by this Ledger will depend on the choice of each country that will implement it. The minimum being that any form of individual or collective enterprise, for profit or not, must make these declarations. After the level of detail can go down to any structure employing at least one person or having an accounting to keep. Again, each country in the world can choose its level of detail. To begin with, there is no need to have the same level of recording accuracy in all countries. Eventually this is desirable in order to be able to trace leaks in the so-called tax havens. And at regional levels, such as the European Economic Community, the same level of reporting and recording accuracy could be adopted. What better way to trace the “optimizations”, the tax leakages of certain actors? And prevent them!
2) Creation of the Digital National Accounting Ledger
Such a project cannot be carried out without proper preparation, relevant analysis and task allocation. Because the Digital General Ledger is generated by the declarations of the Companies. This means that, in order not to add extra work to the Companies, the declarations to the General Ledger will be poured directly into the collective data. It is the same type of evolution of accounting or human resource management software when there is a novelty in taxes/taxes on payrolls and salary slips. It is the software publishers who are at the initiative of change and evolution. Initiatives based on clear standards, shared and imposed on all by laws or equivalent depending on the country.
3) The goals are multiple
1) The first goal is to KNOW what is going on economically. A State must be omniscient in terms of economic activities, not individual activities. To foresee, anticipate, organize, it is necessary to know, finely and precisely. It is not enough to keep up with the major economic indicators. In order to build a real economic policy, including in favor of Neoliberalism, it is necessary to be able to analyze in detail what is being experienced on the ground. This knowledge can be carried out at a national level (where are the companies that trade the most between different departments?) but also at a local level. Knowing what inter-company exchanges take place in the equivalent of a specialized companies group or in a geographical area that is very limited in surface area is essential for local support policies. Thus the equivalent of a General Council of a US state like Florida could know in depth the consequences of a temporary lack of support for a local company and its impacts on the entire local economic ecosystem.
2) The second purpose is to check the COHERENCE of the declarations. If Company A is reporting a sale of 100 Financial Units for Asset type X identification to Company B and Company B is reporting a purchase of Asset X for 90 Financial Units, it is suspected that there is at least one reporting problem. Possibly even several… In this case, it will be necessary to investigate why there is such a gap. Due to the digital records, first analyses or searches, based on referenced deviation processing algorithms, can be triggered automatically.
3) The hunt for Fraudis also, very clearly, one of the objectives. In this hunt, tax optimization audits will also be pursued.
4) It is time to change the dimension of accounting. Since the concept of public accounting, there has been no progress or advances in this area. As prosperous civilizations are made by advances that differentiate them from previous civilizations, it is appropriate to continue, in a masterful manner, the advance towards progress.
5) It is also essential to have a collective and GLOBAL approach now. And to be able to carry out an aggregation of the movements, to analyze by crossing the data, by cross-checking them, by verifying them.
Some may be legitimately surprised or concerned about the possibilities of in-depth knowledge that the State of their country might have. And of the means of control it might have. But the truth is that we must be aware that each of our actions has an impact on the Collective. We are responsible for our actions. And this responsibility must be based on a clear and undeniable identification of the actors involved. This is all the more true in the economic field, which has all the profound repercussions that we know about the social and human level of a country. It is a country’s economy that enables and conditions this social level.
We thus find all the relevance of a “strong” State representing the interests of the collective. A State is the representative of its citizens, but it is also the representative of the moral Values that the citizens of this State want to carry and live.
4) What are the possible developments in the use of this National Ledger?
Developments in recorded movements
As mentioned above, the recording of purchase and sale movements made by Companies should initially be based on the reporting of movements relating to accounts of accounting classes 4 and 5. But it will also be possible to collect all movements such as accounts concerning capital, finance, third parties and special operations (classes 1 to 3 and 6). There will thus be a global knowledge of the actions of Enterprises and similar. Knowledge that already exists in part in many countries like France with the obligation of the declaration of accounts for companies.
Integration with other tools
This National Digital General Ledger can also be connected to tools managing other COOPERACTIVE ASSETS such as the digital cash register receipts proposed in an article on ALPHARIS.
Deeper financial integration
It is also possible to imagine the direct and simultaneous payment of VAT or other taxes at the same time as the declaration of accounting movements. It is also necessary for the administrations concerned to transfer part of the sum paid as quickly as possible and to the right structures.
In order to fully understand the need for this complete and immediate control of the activities of Companies, which could legitimately frighten some people, we must go back to the source of the creation of Accounting.
The spirit of Accounting is to ensure the sincerity and legitimacy of an organization’s economic and financial operations.
This spirit is above the form, always temporary, that this ” embodiment ” takes at a moment M. In the early days of accounting, records were made on a single paper book. Gradually, new notions came to increase the number of accounting books needed and to standardize the entries. Computer technology was one of the greatest advances in this field. It is therefore logical that developments in IT will eventually affect accounting by creating a cloud accounting. In the same way, collective concerns such as forms of international cooperation also lead to an evolution in the conceptualization of new common tools.
5) What are the barriers to successful deployment?
There are. And there aren’t any!
There are obstacles, because there are points that will have to be overcome and resolved. Let’s start with the technical points:
- Designing the entire specifications of the tool
- To take into account, if they do not distort the spirit of the tool, before the computer realization, the technical and practical suggestions of the actors (companies, company accountants, chartered accountants, financial experts, editors of accounting software …).
- Making and testing prototypes
- Be able to listen to feedback from the trial deployment of prototypes in the real world.
- Designing the computer hardware structures necessary for data storage and processing
- Pedagogically communicate on the stakes and requirements for the deployment of the tool.
- Evolving the tool
There is also the problem of the integration of accounting movements to or from outside the practicing country. This could be a hole in the paddle for the sieve of tax supervision. But we can already retort that having half of the data would be a first step and would already give a minimum of information to collect, cross-check and verify. One could also retort that such an accounting system could be established at the level of economic cooperation zones such as the EECor the African Union(which plans to develop a Central Development Bank in the long term, so why not a General Ledger of Accounting). And in the worst case, we can recall the existence of knowledge models of autocratic deployment of authoritarian measures imposing the obligation for foreign private companies to comply with such and such a use under penalty of immediate and definitive exclusion from the local market.
But in fact there are no obstacles, because there is nothing insurmountable in deploying such a tool. It will require resources such as time, money, human energy and human values (listening, exchange, sharing) but nothing that cannot be found and deployed in a country that is sufficiently stable, voluntary and organized.
Because the National Digital General Ledger, from the point of view of an IT project, is not so complicated or complex to achieve. The complexity of the computer code to be created should not be confused with the complexity and richness of the data that will be produced by the General Ledger! Indeed the magnitude of the data, both in quantitative and qualitative terms will be exciting to analyze and dissect. It is the operations of cross-referencing and verification of the movements (all taxes have been paid or the declared tax base is in conformity with all the movements that have been made…) that will be complex to carry out. It will take time to be able to set up all the study, warning and corrective mechanisms on certain movements. But the strictly speaking part of the National Ledger is a “simple” recording part since it is based, in a first analysis phase, on the declarations of the “Companies”. It is up to them to declare correctly because with the General Ledger everything will be cross-checked and verified.In reality, the greatest difficulties will come from internal resistance and from international lobbies of various economic and financial representations which will not want, for X or Y reasons, the deployment of such a tool. There will be sincere opponents who will be against the project, because its deployment will require, as seen above, the release of different resources for its deployment. These sincere opponents will mainly be Companies. It will be imperative to listen to them. And there will be interested opponents. Interested in seeing their tax optimization
fraud maneuvers continue as before. They will recognize themselves by reading this paragraph. That is why the deployment of such a tool must be based on the interest of the greatest number, namely the citizens, and strengthen the means of the community, namely tax revenues, and favor the 99.999% of companies that play the game.
The solution to obstacles through Standards
And this National Ledger tool, while it is based on data and materials owned by the State or its designated representative, is also based on Standards. Reporting standards (what, how), transfer standards (in what computer form?), consistency standards (1 + 1 = 2). And these standards, which are public, are going to be deployed by the Publishers of accounting software. They are the ones who will offer their clients new versions or upgrades of their software whether locally or in the cloud@preview. And as initially (classes 4 & 5@preview) the Banks are not concerned by the deployment of the General Ledger at their customers’ premises (because they will not have to make bank transfers of taxes on the transactions declared by their customers, even if, of course, they will also have to make their own declarations to the General Ledger for their own buying and selling operations) the mobilization will not be general in full big-bang mode. This, based on knowledge models, increases the success of deploying a novelty by reducing the complexity of the task to be carried out by being less ambitious about the scale of the task to be accomplished. Moreover, by leaving room for the Marketplace, via Software Publishers, to implement General Ledger information obligations, an Ecosystem is given the opportunity to develop. Or even to diversify, because the introduction of new standards can lead to the arrival of new companies in a market with few players in place.
6) Deployment example & news
It is only after the first version of this article was written that the author learned, via an article on the net [which he cannot find again, which suggests that the national search engine solution@preview becomes a necessity to have a real memory of the Web] of the deployment of a similar approach which consists in Russia, if his memories are good, to make merchants pay directly the VAT due and to allow customers of its shops, via their receipt, to check whether this VAT has been paid by the merchant. With the introduction of this practice, we are also typically in the deployment of a COOPERACTIVE ASSET. Implementation which is, moreover, proving fruitful for the Russian State in view of the significant increase in tax revenues.
Similarly, as the following point will show, the deployment of such a tool as the Digital National General Ledger in the event of an economic crisis is entirely appropriate, if not necessary and indispensable, for the continuation of national economies, and even of the world economy.
7 The General Ledger: an economic steering tool
Because in addition to the goals mentioned above, it must be recognized that the National General Ledger, especially in case of economic turbulence, and even more so in case of an unexpected global crisis (Covid-19), allows by its knowledge in real time, and by the history of the movements (comparison, analysis …), to be able to support and stimulate a failing economy. If we take the example of the measures announced on 17 March 2020 by the French government@preview, we can see that many of its measures, payment deadlines for social security payments, direct tax deferrals, rescheduling of bank loans, mobilization of Bpifranceto guarantee bank cash lines, support for the simplified and reinforced short-time working scheme, support in dealing with a conflict with customers or suppliers (with the General Ledger we know exactly who owes what to whom for how long and for what reasons), are easier, faster, more transparent and more ethical to implement.
Measures to support the self-employed, traders, micro-entrepreneurs and auto-entrepreneurs would also be greatly facilitated, or even automated, on the basis of recorded declarations. In fact, as all movements are recorded in the National General Ledger, it is very easy to take the average turnover or profits of the last three months as the basis for calculating the amount of support to be paid. As this way there is no bonus to the fraudster and companies which, in the broadest sense, have declared their activities during normal operating times, will be supported at the same level as their declarations. Let’s take the case of a hairdressing salon whose activity is not on the list of authorized businesses to be opened during Covid-19 crisis in France as of 17 March. As the closure of the store logically leads to a turnover of zero, compensation measures, whether partial, total, immediate or delayed, can be implemented on the basis of financial movements previously recorded in the Digital National Ledger.
Thus the reader has understood that there is no question here of saying that the plan presented by the French Government, or other governments, is the only one that is relevant or that it is the best. Each country has the latitude to design and deploy its own. And to develop it in one direction or another according to needs. But the key point is that the establishment of a National Ledger of Accounting enables us to help, steer, control and improve national economies. Whether in “normal” times or even more so in times of crisis. In this world of permanent and absolute immediacy (home delivery in 2 hours@preview), we can no longer wait months if this or that economic policy is good, insufficient, without impact or bad! Now the National Ledger, by its vocation, makes it possible to trace the various movements, the effects of the cascade, run-off (while recalling that in 99.9% of cases, there is no top-down run-off, but suction from the bottom-up), billiard ball rebounds, particle accelerator etc. Such a vision provides analysis and forecasting capabilities and support, including anticipatory support, to economic players of all kinds. Especially those who are the most fragile.
Moreover, national Economies that have gone beyond the simple deployment of the National Ledger by integrating a single National Bank or other financial movement mechanisms could thus have a whole arsenal of complementary measures at their disposal. Such as having the State assumes the debt of one company in relation to another, having the State pay only interest or partial amounts on a debt, transferring a particular credit or subsidy to a particular company… In short, to manage the economy of one’s country in the best possible way in real time.
This is a succinct and not complete range of reasons for setting up a Digital National Ledger. And of the possibilities that such an implementation can bring. But make no mistake about it. It is not a question of glorifying or praising this or that technical or technological action that the establishment of such a Ledger would constitute. No, it is not. What is most important, once again, are the values that support and sustain the establishment of such a National Ledger. It is the values of control (possibility of action), knowledge (visibility of individual actions that affect the entire Collective), justice (no bonus for fraudsters), equity (the honest are not disadvantaged vis-à-vis the dishonest) that preside over its deployment and operation. For COOPERACTIVE ASSETS are only means and tools for the citizens of the world to live, exalt and exult in Human values. Notably those of Creation and Cooperation. The National Ledger of Accounting is one of these possible means. It is up to each country and its citizens to decide on its implementation, its speed of deployment, its depth of implementation. But the General Ledger is an extremely powerful tool at the service of the Collective!
And who knows? When an active majority of us will recognize that in some way, we are all connected to each other on this Earth, there may one day be a Universal Ledger of Accounting regrouping all the activities of each country 🙂
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Last updated: December 02, 2019
This post is also available in: Français (French)