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Merchant internalization and tax evasion

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  • Aurazo, Jose

Abstract

Merchant internalization has been used to explain why merchants may accept high fees to accept card payments. However, merchants seem to be more resistant in some economic activities or countries; in particular, when the shadow economy is sizeable. Cash payments are usually associated with tax evasion, and therefore the analysis of card industry should take it in to consideration. This paper explores the role of tax evasion in the merchant internalization condition; first, considering it as exogenous, and then, as a strategic reason.

Suggested Citation

  • Aurazo, Jose, 2020. "Merchant internalization and tax evasion," Research in Economics, Elsevier, vol. 74(4), pages 273-276.
    • Handle: RePEc:eee:reecon:v:74:y:2020:i:4:p:273-276
    DOI: 10.1016/j.rie.2020.06.002
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    References listed on IDEAS

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    1. Leandro Medina & Mr. Friedrich Schneider, 2018. "Shadow Economies Around the World: What Did We Learn Over the Last 20 Years?," IMF Working Papers 2018/017, International Monetary Fund.
    2. Immordino, Giovanni & Russo, Francesco Flaviano, 2018. "Cashless payments and tax evasion," European Journal of Political Economy, Elsevier, vol. 55(C), pages 36-43.
    3. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    4. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-588, October.
    5. Wright Julian, 2010. "Why Do Merchants Accept Payment Cards?," Review of Network Economics, De Gruyter, vol. 9(3), pages 1-8, August.
    6. Jean‐Charles Rochet & Jean Tirole, 2011. "Must‐Take Cards: Merchant Discounts And Avoided Costs," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 462-495, June.
    7. Rong Ding & Julian Wright, 2017. "Payment Card Interchange Fees and Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 39-72, March.
    8. Ding, Rong, 2014. "Merchant internalization revisited," Economics Letters, Elsevier, vol. 125(3), pages 347-349.
    9. John Vickers, 2005. "Public policy and the invisible price : competition law, regulation, and the interchange fee," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 231-247.
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    Cited by:

    1. Jose Aurazo, 2024. "Interchange fees, access pricing and sub-acquirers in payment markets," BIS Working Papers 1163, Bank for International Settlements.

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