Chinese internet giant Tencent has partnered with the tax authority of the city of Shenzhen to use blockchain in the fight against tax evasion.

Announced Thursday, the Shenzhen National Taxation Bureau and Tencent have jointly set up an "Intelligent Tax" innovation lab, that aims to promote technological innovation around taxation processes.

The lab will combine theoretical research with nascent technologies, such as cloud computing, artificial intelligence, blockchain, and Big Data, for taxation management and electronic invoice applications, a release states.

Shenzhen reportedly has a sizable underground economy, with, for example, peddlers openly hawking bogus receipts, according to The New York Times. Buyers use the the fake paperwork to evade taxes and defraud employers, and detecting forged or doctored receipts is a challenge for tax collectors, small businesses and China's state-run enterprises.

According to Ma Huateng, Tencent's CEO and chairman of the board, the Intelligent Tax lab is already working on a new digital invoice based on blockchain technology – a legally valid digital receipt that serves as proof of purchase for goods and services. The blockchain-based solution will be the first product incubated at the lab, he added.

The product will be based on Tencent's blockchain platform, which was announced in April, and is the nation's first research into the application of blockchain for invoicing, the release claims.

Li Wei, deputy director of the Shenzhen Municipal Bureau of State Taxation, said that the key features of the digital invoice include complete traceability and data security that will help to effectively combat fake invoices and "improve the invoice supervision process."

Going forward, the deputy director said, "We will promote tax modernization, optimize the taxation and business environment, and help improve Shenzhen's economic quality."

Shenzhen image via Shutterstock