Electronic Payment Technology and Tax Compliance : Evidence from Uruguay’s Financial Inclusion Reform
Does the digitization of transactions in an economy increase tax compliance This paper studies the effect of financial incentives on the adoption of electronic payment technology and on tax compliance by firms. Exploiting administrative data and po...
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| Language: | English |
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Washington, DC: World Bank
2022
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| Online Access: | http://documents.worldbank.org/curated/en/559201645710893209/Electronic-Payment-Technology-and-Tax-Compliance-Evidence-from-Uruguay-s-Financial-Inclusion-Reform http://hdl.handle.net/10986/37055 |
| Summary: | Does the digitization of transactions
in an economy increase tax compliance This paper studies the
effect of financial incentives on the adoption of electronic
payment technology and on tax compliance by firms.
Exploiting administrative data and policy variation from
Uruguay, the paper shows that i) consumer value-added tax
rebates for credit and debit card transactions trigger an
immediate 50 percent increase in the number of card
transactions, ii) firms' use of card machines increases
only on the intensive margin, and iii) tax compliance is
unaffected. Endogenous card machine adoption and a low share
of card sales in total reported sales can rationalize the findings. |
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