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The Impact of Plastic Money Use on VAT Compliance: Evidence from EU Countries

Author

Listed:
  • Amakoe D. Alognon

    (Georgia State University)

  • Antonios M. Koumpias

    (University of Michigan-Dearborn)

  • Jorge Mart nez-V zquez

    (Georgia State University)

Abstract

This paper examines the impact of credit and debit card usage on VAT compliance using annual national level data for 26 European Union countries from 2000 to 2016. Exploiting spatiotemporal variation in plastic money use along with an instrumental variables approach, we find that a 1% increase in card payments reduces VAT gaps 0.51 percentage points whereas a 1% increase in cash withdrawals increases VAT gaps by 0.6 percentage points. Our contribution lies in using more adequate measures of VAT compliance gap and in accounting for potential confounders such as the ex-ante enforcement capacity of tax administrations.

Suggested Citation

  • Amakoe D. Alognon & Antonios M. Koumpias & Jorge Mart nez-V zquez, 2021. "The Impact of Plastic Money Use on VAT Compliance: Evidence from EU Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 239(4), pages 5-26, November.
    • Handle: RePEc:hpe:journl:y:2021:v:239:i:4:p:5-26
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    References listed on IDEAS

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    Cited by:

    1. Theodoros Kounadeas, 2023. "The Effectiveness of Digital Payments in Tackling Tax Evasion in Greece," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 3-21.
    2. Bohne, Albrecht & Koumpias, Antonios M. & Tassi, Annalisa, 2023. "Cashless payments and tax evasion: Evidence from VAT gaps in the EU," ZEW Discussion Papers 23-060, ZEW - Leibniz Centre for European Economic Research.
    3. Antón, Arturo & Hernández-Trillo, Fausto & Ventosa-Santaulària, Daniel, 2021. "(In)Effective tax enforcement and demand for cash," Journal of Macroeconomics, Elsevier, vol. 70(C).
    4. Iva Hasikova & Jan Hanousek, 2025. "VAT (non)compliance in the EU: Damaging corruption and shadow economy spillovers vs. government effectiveness and efficiency," MENDELU Working Papers in Business and Economics 2025-100, Mendel University in Brno, Faculty of Business and Economics.
    5. C sar P rez L pez & Mar a Jes s Delgado Rodr guez & Sonia de Lucas Santos, 2023. "Modelizaci n de los factores que afectan al fraude fiscal con t cnicas de miner a de datos: aplicaci n al Impuesto de la Renta en Espa a," Hacienda Pública Española / Review of Public Economics, IEF, vol. 246(3), pages 137-164, September.
    6. Christou Anna & Eriotis Nikolaos & Lomis Ioannis & Papadakis Spyros & Thalassinos Eleftherios, 2021. "The Greek VAT Gap: The Influence of Individual Economic Sectors," European Research Studies Journal, European Research Studies Journal, vol. 0(4 - Part ), pages 851-882.
    7. Amakoe D. Alognon & Antonios M. Koumpias & Jorge Martínez-Vázquez, 2021. "The Impact of Plastic Money Use on VAT Compliance: Evidence from EU Countries," Hacienda Pública Española / Review of Public Economics, IEF, vol. 239(4), pages 5-26, November.
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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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