The effect of card payments on VAT revenue in the euro area: evidence from a panel VECM

George Hondroyiannis and Dimitrios Papaoikonomou

Journal of Economic Studies, 2020, vol. 47, issue 6, 1281-1306

Abstract: Purpose - A growing amount of micro-data analyses has highlighted the importance of information trails, such as generated by card transactions, for improving tax compliance. Yet, time series evidence indicating a positive effect of card payments on VAT revenue performance has been scarce. This paper revisits the question of the effect of card payments on VAT revenue by using annual and quarterly panel data for the 19 euro area member states, covering the period 2000–2016. Design/methodology/approach - A panel VECM is employed in order to address endogeneity issues and to account for common stochastic trends, which, is shown to be crucial in revealing the anticipated positive effect of card use on the performance of VAT. Findings - The analysis confirms that a higher share of card payments in private consumption increases VAT revenue and the efficiency of revenue collection. Higher gains are estimated for countries with above average self-employment. Originality/value - The contribution of the paper is twofold. First, to our knowledge it provides the first confirmation of the well-established literature on information trails using aggregate macroeconomic time series in a multi-country setting. Second, it has very timely policy implications, as low-hanging fruit are identified in euro-area economies with much to gain from strengthening the credibility of their fiscal performance, such as Greece.

Keywords: VAT; Card payments; Tax compliance; Euro area; Panel VECM; H21; H25; H26 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-03-2019-0138

DOI: 10.1108/JES-03-2019-0138

Access Statistics for this article

Journal of Economic Studies is currently edited by Prof Mohsen Bahmani-Oskooee

More articles in Journal of Economic Studies from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().