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

Author

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  • Anne Brockmeyer
  • Magaly Sáenz Somarriba

Abstract

Does the digitization of transactions in an economy increase tax compliance? We study 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, we show that (i) consumer VAT rebates for credit and debit 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.

Suggested Citation

  • Anne Brockmeyer & Magaly Sáenz Somarriba, 2025. "Electronic Payment Technology and Tax Compliance: Evidence from Uruguay's Financial Inclusion Reform," American Economic Journal: Economic Policy, American Economic Association, vol. 17(1), pages 242-272, February.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:1:p:242-72
    DOI: 10.1257/pol.20220434
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    Citations

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    Cited by:

    1. Néstor Gandelman & Flavia Roldán & Sofía Viera, 2025. "The impact of multi-acquiring in the payment system: evidence from the Uruguayan financial inclusion program," Journal of Regulatory Economics, Springer, vol. 68(2), pages 146-172, October.
    2. Gandelman, Néstor & Lluberas, Rodrigo & Misail, Daniel, 2025. "Financial inclusion and its impact on payment, savings, and credit," International Review of Economics & Finance, Elsevier, vol. 100(C).
    3. Hagen Kruse & Franziska Lieselotte Ohnsorge & Gabriel Zenon Tourek & Zoe Leiyu Xie, 2025. "Bridging the Gap : Revenue Mobilization in South Asia," Policy Research Working Paper Series 11104, The World Bank.
    4. Wang, ShiTao & Li, Jing, 2025. "The impact of tax collection and administration system reform on local government debt: A perspective based on digital inclusive finance," Finance Research Letters, Elsevier, vol. 85(PD).
    5. Naritomi, Joana & Nyamdavaa, Tsogsag & Campbell, Stephanie, 2025. "Enlisting consumers in tax enforcement: a policy review," LSE Research Online Documents on Economics 127223, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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