Does going cashless make you tax-rich?  Evidence from India’s demonetization experiment

Warwick, Ross; Nandi, Tushar K.; Gadenne, Lucie; Das, Satadru

doi:10.1920/wp.ifs.2022.0322

Cited by 5 publications

(3 citation statements)

References 25 publications

(33 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Finally, it is important to note that the sample of ghost firms and clients detected by SRI is the relevant sample for determining the implications of enforcement since tax authorities can only target detected tax fraud. In this respect, Ecuador is unlikely to be unique: tax authorities would generally be more likely to detect larger or more 12 These results speak more generally to ways in which transacting through the formal financial system limits evasion (Gordon and Li 2009) and to the question of whether outlawing cash can foster tax compliance (Rogoff 2017;Gadenne et al 2022). 13 Filing behavior is very similar for corporations and sole proprietorships (online Appendix Table A5).…”

Section: New Facts About Ghost Clients and Transactionsmentioning

confidence: 96%

Ghosting the Tax Authority: Fake Firms and Tax Fraud in Ecuador

Carrillo,

Donaldson,

Pomeranz

et al. 2023

American Economic Review: Insights

View full text Add to dashboard Cite

An important but poorly understood form of firm tax evasion arises from “ghost firms”—fake firms that issue fraudulent receipts so that their clients can claim false deductions. We provide a unique window into this global phenomenon using transaction-level tax data from Ecuador. Five percent of firms use ghost invoices annually. Among these firms, ghost transactions comprise 14 percent of purchases. Ghost transactions are prevalent among large firms and firms with high-income owners and exhibit suspicious patterns, such as bunching below financial system thresholds. An innovative enforcement intervention targeting ghost clients rather than ghosts themselves led to substantial tax recovery. (JEL D22, H25, H26, K34, L25, O14)

show abstract

Section: New Facts About Ghost Clients and Transactionsmentioning

confidence: 96%

Ghosting the Tax Authority: Fake Firms and Tax Fraud in Ecuador

Carrillo,

Donaldson,

Pomeranz

et al. 2023

American Economic Review: Insights

View full text Add to dashboard Cite

show abstract

“…Importantly, Aadhaar is also used to boost compliance with the Goods and Service Tax, for which buyers and sellers are unambiguously identified with their digital ID (Alonso et al 2023). 4 Research indicates that in India demonetisation policies aimed at fostering adoption of digital payments have similarly had positive impacts on tax revenue (Das et al 2022).…”

Section: Linking Digital Id Systems Digital Merchant Payments and Imp...mentioning

confidence: 99%

Digital IDs and Digital Payments – Opportunities and Challenges for Tax Administration

Santoro,

Prichard,

Mascagni

2024

View full text Add to dashboard Cite

Tax administrations in Africa and, more broadly, low-income countries (LICs), are increasingly investing in advanced digital technologies, in an effort to build more effective, rules-based and efficient tax systems. Those efforts fit within broader government efforts towards e-government and the establishment of digital public infrastructures (DPI). 1 While these efforts to digitalise tax administration are multi faceted, affecting all aspects of administration, recent years have seen growing attention to the potential impacts of digital ID systems (DIS) and digital merchant payments (DMP), both of which are linked closely to broader discussions of the potential of DPI to strengthen development outcomes. This growing attention has been driven by hopes that building such systems can contribute to significant improvements in tax systems and revenue collection as part of broader and ambitious digitalisation efforts undertaken by African governments (World Bank 2016; IMF 2020).

show abstract

“…Also in Mexico, Bachas et al (2020) evaluate the impact of punishing cash with a 2 per cent tax on cash deposits, finding cash deposits to be very elastic -a 1 per cent increase in tax led to a 60 per cent reduction in cash deposits. A similar successful demonetisation effort comes from India, where Gadenne et al (2022) find that limiting the availability of cash led to a large increase in the use of electronic forms of payment. This, in turn, translated into a strong positive impact on firms' sales reported to the tax authority.…”

mentioning

confidence: 98%

The E-Levy and Merchant Payment Exemption in Ghana

2024

View full text Add to dashboard Cite

In this paper we look into the increasing use of electronic payment technologies in low-income countries (LICs), with a particular focus on the use of mobile money in Ghana. Our study evaluates the effectiveness of tax exemptions for incentivising businesses and customers to adopt digital merchant payments, and shaping their perceptions of the tax system. Specifically, we investigate the impact of an exemption embedded in Ghana's electronic transfer levy (e-levy), implemented in May 2022. Through a mixed-methods approach, involving survey data from 1,065 businesses and focus group discussions with Ghanaian citizens, we explore the barriers and drivers to merchants' (businesses’) registration with mobile money for digital merchant payments. We assess the impact of the exemption on payment methods and customer preferences, as well as merchants' perceptions of the tax system. Our findings highlight that larger digitally- and financially-inclusive businesses are more likely to adopt digital merchant payments. The exemption appears to have encouraged the use of mobile money for merchant payments, leading to a shift away from personal accounts. However, cash remains prevalent among both users and non-users of mobile money. Merchants using the exempted service express more satisfaction with various aspects of the e-levy policy, and show greater trust in the government and the fairness of the tax system. Our study offers valuable insights into the adoption of digital merchant payments in LICs, and the impact of tax exemptions on merchants' behaviour and perceptions. We provide policy recommendations aimed at promoting the uptake of digital payments among merchants, and enhancing the effectiveness of the tax administration.

show abstract

Does going cashless make you tax-rich? Evidence from India’s demonetization experiment

Cited by 5 publications

References 25 publications

Ghosting the Tax Authority: Fake Firms and Tax Fraud in Ecuador

Ghosting the Tax Authority: Fake Firms and Tax Fraud in Ecuador

Digital IDs and Digital Payments – Opportunities and Challenges for Tax Administration

The E-Levy and Merchant Payment Exemption in Ghana

Contact Info

Product

Resources

About