Does going cashless make you tax-rich? Evidence from India’s demonetization experiment

S Das, Lucie Gadenne, T Nandi and R Warwick
Additional contact information
S Das: Reserve Bank of India
T Nandi: Indian Institute of Science Education and Research (IISER), Kolkata
R Warwick: Institute for Fiscal Studies

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: This paper investigates the effect of electronic payments technology on firms’ tax compliance in a large developing economy. We consider India’s demonetization policy which, by limiting the availability of cash, led to a large increase in the use of electronic forms of payments. Using administrative data on firms’ tax returns and variation in the strength of the demonetization shock across local areas, we find that greater use of electronic payments leads to firms reporting more sales to the tax authorities. This effect is strong enough to explain roughly half of the large (11%) increase in reported sales observed during demonetization.

Keywords: tax compliance; electronic payments; demonetization JEL Classification:H26; O23; H25 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-iue and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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