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Electronic Payment Technology and Tax Compliance : Evidence from Uruguay’s Financial Inclusion Reform

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  • Brockmeyer,Anne
  • Saenz Somarriba,Magaly Vanessa

Abstract

Does the digitization of transactions in an economy increase tax compliance This paper studies theeffect 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 taxrebates for credit and debit card transactions trigger an immediate 50 percent increase in the number of cardtransactions, ii) firms' use of card machines increases only on the intensive margin, and iii) tax compliance isunaffected. Endogenous card machine adoption and a low share of card sales in total reported sales can rationalize the findings.

Suggested Citation

  • Brockmeyer,Anne & Saenz Somarriba,Magaly Vanessa, 2022. "Electronic Payment Technology and Tax Compliance : Evidence from Uruguay’s Financial Inclusion Reform," Policy Research Working Paper Series 9947, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9947
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    References listed on IDEAS

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    Keywords

    Tax Administration; Tax Law; Public Sector Economics; Public Finance Decentralization and Poverty Reduction; Financial Sector Policy; Labor Markets; International Trade and Trade Rules;
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