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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFS Working Paper ; No. W22/03

Classification and Topics

• Classification: Wirtschaft ; Tax Evasion and Avoidance ; Fiscal and Monetary Policy in Development ; Business Taxes and Subsidies including sales and value-added (VAT)
• Subject: tax compliance ; electronic payments ; demonetization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Das, Satadru ; Gadenne, Lucie ; Nandi, Tushar K. ; Warwick, Ross
• Event: Veröffentlichung
• (who): Institute for Fiscal Studies (IFS)
• (where): London
• (when): 2022

Further information

• DOI: doi:10.1920/wp.ifs.2022.0322
• Handle: http://hdl.handle.net/10419/254253
• Last update: 10.03.2025, 11:44 AM CET